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Bing & Windows 8 - Market Share Data

January 14, 2013 | About:
The Science of Hitting

The Science of Hitting

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In my most recent article, I made the following statement in the comments when discussing the importance of Microsoft (MSFT)'s new OS, Windows 8, to the company as a whole.

“I believe that as a long term strategy, this is the best way to drive Win8 phone and tablet adoption - which becomes a game changer for other MSFT businesses along the way, namely Bing (take a look at Bing market share on Win8 devices vs. the overall PC universe - the data is a bit questionable, but I've seen numbers indexing at 2-5X above the overall PC space for Win8 users).”

I think this is a point that’s often overlooked, and deserves further discussion. First, let’s take a second to consider what the opportunity might be if Microsoft can simply breakeven in search (using the Online Services Division as a proxy for Bing):

Fiscal Year Operating Profit (Loss)
2010 $2.4 billion
2011 $2.65 billion
2012 $8.1 billion


In the most recent fiscal year, the company took a $6.2 billion impairment charge related to aQuantive; adjusting for that charge, the operating loss for OSD was $1.9 billion. With that said, the point is clear – this has been a big headwind to Microsoft’s underlying profitability over the past three years, with a $2 billion loss equal to a headwind of roughly a quarter per share.

Let’s also take a look at another measurable and relevant factor for Bing – market share (from Comscore):

Year End (Dec) U.S. Market Share
2010 12.0%
2011 15.1%
2012 16.3%


There has been slow and steady progress on this front. As I noted in the above comment, I believe the release of Windows 8 will go a long way in causing that trend to continue – and likely accelerate.

The reason becomes apparent when you boot up a machine running Windows 8: In the tile format (with “Metro” gone, I’m not too sure what this is called anymore), you are presented with multiple applications that direct you to utilize Bing’s services, including core search, news, maps, finance, etc. As I’ve noted previously, Microsoft has been less than successful with convincing the vast majority of users to make the switch in the past, despite the fact that they prefer it 2:1 over Google (GOOG) in blind tests (granted, by Microsoft’s numbers), as well as the fact that Microsoft is essentially paying you to use its service (via Rewards credits to buy Amazon gift cards, Redbox movies, etc). For some reason, this isn’t enough to cause people to change their behavior; however, it looks like Bing’s placement in Win8 might be a bit more successful.

According to Marketshare.Hitslink.com (here), Bing has about 12% market share in the U.S. across all PCs, while Google holds a six-fold lead at 73% (these numbers are off compared to Comscore, but I still think they hold weight for this discussion). If we narrow our criteria to Windows desktop users (which obviously doesn’t slim the universe too much considering the company’s commanding lead in the space), the gap decreases slightly: Bing jumps to 14%, and Google falls to around 70%. However, the real change occurs when we focus on Windows 8: For users running this OS in the U.S., Bing’s market share approaches 25% (with Google around 64%). On the site’s separate measure for Windows 8 with touch, Bing does much more than inch closer: Under those parameters, this site estimates 41% market share for Microsoft’s search engine, compared to just 48% for Google.

I want to be very clear about one thing: I put almost no weight on the specificity of these numbers. I have no way of confirming the accuracy of this site’s measures beyond its core search figures (which are roughly comparable to commonly cited industry figures, namely Comscore data). With that being said, I think the direction and magnitude of the shift in search share shows something that is commonly overlooked at this point in time; when you think about the fact that roughly 350 million PCs will be sold around the world in the coming 12 months (by industry estimates), and more than 300 million of them will be running Windows, it quickly becomes apparent why this could cause big changes in Microsoft’s Online Services division.

Bing’s market share has more than doubled in the past 36 months; if you ask me, there’s a good chance that the search engine could replicate that absolute performance (meaning eight to ten points of organic market share gains) in the next three years and, for the first time, create some serious buzz about the long-term potential for Bing to unseat the king of search.

About the author:

The Science of Hitting
I'm a value investor, with a focus on patience; I look to buy great companies that are suffering from short term issues, and hope to load up when these opportunities present themselves. As this would suggest, I run a fairly concentrated portfolio by most standards, usually with 8-10 names; from the perspective of a businessman rather than a market participant / stock trader, I believe this is more than sufficient diversification.

I hope to own a collection of great businesses; to ever sell one, I would demand a substantial premium to the average market valuation due to what I believe are the understated benefits to the long term investor of superior fundamentals and time on intrinsic value. I don't have a target when I purchase a stock; my goal is to replicate the underlying returns of the business in question - which if I've done my job properly, should be very attractive over many years.

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Comments

mocheng
Mocheng premium member - 1 year ago
This stock has been hated so much, we all know msft is a huge cash cow, the worry is where will they be 10 years from now when market share are being taken away from them.

I bet if they replace steve baller, the stop will jump 10% in no time.
The Science of Hitting
The Science of Hitting premium member - 1 year ago
Mocheng,

Agreed - hated in the financial community and by the media in general.

Cornelius Chan
Cornelius Chan - 1 year ago
I just heard from Komo 4 News that Microsoft is spending 30 - 90 million on their new email ad campaign. Microsoft is launching Outlook.com which will replace Hotmail.

This is obviously going to (slowly however it may be) take market share from Gmail.

I look forward to your next article on Microsoft and your possible comments on this new development.
The Science of Hitting
The Science of Hitting premium member - 1 year ago
16.9% at the end of March according to comscore, from 16.3% at year end 2012; adding roughly 20 BPS per month at this rate, and nearly in line with my three year estimate from this article (midpoint was 25% market share by year end 2015)...

ryerasi
Ryerasi - 1 year ago
Any update on the #s, specifically for Win 8? It didn't surprise me that Bing increased market share on Win8, since Bing was preinstalled and people have to manually install Google. I know when I switched over to a Mac from Windows, I ended up using Safari for several months but eventually switched to Chrome. So what would be interesting is the pattern a few months after users have bought Win8. Directionally, at least, we might get some clues by now.

Thanks,

Raj
The Science of Hitting
The Science of Hitting premium member - 1 year ago
Ryerasi,

Sorry about the delay, I don't get any update when comments are made on old articles. Unfortunately, NetMarketShare (used for this article) has changed their policy, and now charges for specific data (like Windows 8 specific Bing search share data). What you're looking for would be great data to have; sadly, I don't know where to find it.

However, the Comscore data continues to be encouraging; from 16.3% in December 2012, Bing has added more than 100 basis points in share year to date (to 17.4%).

Thanks for the comment Raj!

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