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2.4 Billion Reasons Google Is Afraid of Bing


Bing is still growing after Microsoft discontinued the popular cashback program, which implies that it's gained organic traction in the marketplace.

Google (GOOG) CEO Eric Schmidt made waves on Friday when he said in a Wall Street Journal article that Microsoft's (MSFT) Bing is the biggest threat to Google's dominance -- not Facebook, as I have opined.

Nielsen's numbers indicate that Bing is the fastest-growing search engine, posting August market share of 13.9%, up from 10.7% the year before. Google's search share is up fractionally over the same period.

It's worth noting that Bing is still growing after Microsoft discontinued the popular Bing cashback program, which gave consumers cash rewards for shopping through Bing. That implies that Bing has gained organic traction in the marketplace, no doubt helped by Microsoft's aggressive marketing.

Now if you go through Microsoft's fiscal-2010 10-K report, you'll see the one figure that matters most in Microsoft's battle against Google: $2.355 billion.

That's the operating loss Microsoft's online-services division posted for fiscal 2010 (ended in June), a time period containing 12 of Bing's first 13 months of life.

In 2009, Microsoft's online business lost $1.652 billion. In 2008, $578 million. That's a total of $4.6 billion. Google, on the other hand, posted an operating profit of $2.4 billion in the June quarter alone.

Last July, I compared Microsoft to the Terminator during a discussion of the video-game industry:

"Microsoft isn't afraid to lose money. It can't be bargained with. It can't be reasoned with. It doesn't feel pity, or remorse, or fear. And it absolutely will not stop, ever -- until you are dead."

It's that mentality that Google's Schmidt likely fears. Once it sets its mind to something, Microsoft simply doesn't care about losing money. Steve Ballmer's crew can wait years and years and years if it sees a pot of gold at the end of the rainbow.

Think about it. Microsoft's been online for over a decade without financial success; it last made money on the Web in 2005. But it's still going.

Google has never been in a down-and-dirty war of attrition. One could argue that Google employs some of the smartest engineers on planet Earth. But Microsoft is countering that brilliance with good old-fashioned dollars.

That's not to sell Bing short. Bing is a very good product, but it's obvious that Microsoft's aggressive marketing is playing a major factor in Bing's success.

One of Google's biggest advantages as an advertising platform is scale. Since Google is so big, it has mounds of data that competitors don't have, and its bigger base of users means it can accommodate a larger and more diverse set of advertisers.

And again, Bing is spending money to close the gap.

It's been obvious for a long time that Google's disruptive products like the Android OS and Google Apps are giving Microsoft a lot of headaches.

But the underdog with a lot of money and the willingness to spend it is starting to put up a fight.

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