Ever since Bing’s release, Microsoft (NASDAQ: MSFT) has been losing money in its online services division. In its latest quarterly filing, the company reported an operating loss of approximately $218 million for its Online Services Division, continuing a long-standing losing streak. Microsoft’s efforts to turn the segment around have largely been futile, but recently Microsoft has gained market share in the search engine segment.  In its efforts to further improve its search platform, Microsoft is testing social and community search which could improve its market share and turnaround the struggling division.
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One of the primary reasons that Bing has had lower market share than Google is because of the prevalent view that Bing produces inferior search results. However, Microsoft is testing new social and community search service to improve the quality of its search results. For example, Microsoft Bing is testing with incorporating information from friends and recognized experts into its search results that will enhance a user’s search experience. Continuing its efforts to improve the Bing platform through social search, Microsoft is now testing Bing Board that produces curated search results.
According to Microsoft, Bing Boards are visual collections of images, videos and links, and are created by people who are passionate about the topics that the user is searching on.  These search boards will supplement the regular search result and appear in Bing’s middle column. Currently, Microsoft is working with a small group of food and lifestyle bloggers, experts and social influencers to create these boards. However, if more people interact with Bing Board, Microsoft plans to broaden and evolve this offering.
Bing’s market share in search engine has increased to 17.4% in May 2013 from 15.4% last year.  We think that these initiatives in social and community search, if successful, could help Microsoft increase Bing market share further. While the segment is not a material part of Microsoft’s value currently, an increase in Bing’s popularity could entice advertisers to shell out more advertising dollars to target a growing audience. This would consequently increase Bing’s revenue per search and provide the company with a substantial foothold in the online search market.
We currently have a $41 price estimate for Microsoft, which is approximately 22% over the current market price.Notes:
- comScore Releases May 2013 U.S. Search Engine Rankings, June 12 2013, www.comscore.com [↩] [↩]
- Trying New Approaches to Social and Community Search, June 2013, www.bing.com [↩]