Yesterday we had the announcement that Bing would become the default Search and Mapping solution for the next generation of RIM’s Blackberry. Over the previous year we’ve seen Microsoft introduce excellent Bing apps for the iPhone and more recently iPad, work with Apple to add Bing as a search option for Safari on IOS devices, ship Windows Phone 7 with Bing search well-integrated, and even ship a Bing app for Android. In fact Microsoft has been so aggressive in taking Bing to mobile platforms that otherwise compete with Microsoft offerings, that it has Windows Phone enthusiasts scratching their heads over why they aren’t getting the new Bing features first. I think Microsoft’s strategy is pretty obvious and will try to explain it.
Historically Microsoft has tried to have each of its businesses focus primarily on supporting one another. So, for example, Microsoft SQL Server only runs on Microsoft Windows and most of Microsoft’s marketing and sales activities focus on a “better together” theme. If Microsoft wanted to purely go for SQL Server market share they would port it to Linux and thus dramatically improve their chances for being declared the corporate standard database solution in large enterprises. Instead Oracle is usually the corporate standard with SQL Server permitted for use should a project choose Windows Server as its OS. Not exactly a ringing corporate endorsement. On the client side most products are Windows-only, although occasionally something makes its way to the Mac (e.g., Office). But have you ever seen an end-user product from Microsoft released on Linux? No, the Bing for Android (which is a Linux variant) App is the first.
Every now and then Microsoft decides that winning in a particular business is more important than reinforcing the Windows franchise. Gaming with the XBox was the last big one. Search with Bing is the current one. While most teams at Microsoft would be under severe pressure to support the Windows franchise, the Bing team pretty much has a single marching order: grow search share. And you can’t grow search share by focusing purely on users of Internet Explorer on Windows and Windows Phone.
Finding ways to compete with an entrenched competitor like Google is not easy. Charging directly at them, that is playing their own game, is at best a strategy that slowly garners you small improvements in market share and at worst is suicidal (meaning you lose so much money you have to abandon the attempt). The preferred way of competing against such a competitor is to change the game. Putting the shoe on the other foot, the main reason that Linux has had so little success against Windows in the PC business is that all the desktop Linux attempts tried to do was copy Windows. The only people who wanted a Windows Copy-Cat were the technologists who could appreciate the differences under the covers. Typical end-users just knew that their apps didn’t run there, none of their friends and relatives could help when they had a problem, documents sent to them from users of Microsoft Word (and other apps) wouldn’t print properly in Open Office, etc. Ignoring the PC market Microsoft dominates and changing the game as Apple did with IOS and Google is doing with Android, has made it possible for both of these company’s to sidestep Microsoft’s PC OS dominance. Indeed, if Microsoft doesn’t react quickly enough to what is going on with IOS and Android they will find Windows marginalized and turned into a legacy business. So how should Bing compete with Google Search?
Bing is apparently pursuing a 3 pronged approach to competing with Google Search. Prong one is that head on charge with PC browser-based searching: improving search results, doing deals for search defaults and toolbar installation, etc. This is just the price of entry stuff. Prong two is trying to change the browser-based searching experience. This one is important to Microsoft’s overall success, but doesn’t seem to me to be enough of a game changer to ensure Microsoft’s success. Still, they have to be more than just a clone of Google Search if they want to chip away at Google’s market share on the PC. The third and most important Prong is to aggressively stake out Bing’s position in a rapidly growing, and so far unclaimed, part of the search market: Mobile.
Search on mobile devices is still an open area with no real “owner”. Google was so worried about this that they purchased a company making a mobile operating system, Android, on the theory that mobile phones running a Google OS would also use Google Search. Given Android’s growth that isn’t a bad theory, however Google’s open source licensing approach doesn’t lock Android phones into having Google as their default Search. Depending on market and carrier some Android phones ship with Bing as the default search. Still, Google’s strategy is mostly working. More importantly, Microsoft sees the opportunity as so important that they are clearly out to capture the majority of search share on all non-Android smartphones (and other mobile devices)!
If we could see into Bing’s finances I bet we would find that investment on the PC Browser search part of the battle is flat or even declining. Most likely engineering investment is flat while marketing spend is declining. For example, would Microsoft prefer to pay $500M to a PC manufacturer to make Bing the search default and install the Bing Toolbar, or $500M to a major mobile carrier or device maker to make Bing the default search on its smartphones? Microsoft can’t afford every deal, and I’m betting that most of the spend going forward is on the mobile side of the house. On the engineering side, doing great jobs with Nokia and RIM, writing great search apps for IOS and Android, and of course doing a fantastic job with Windows Phone 7, takes a lot of money and that is where the spending growth must be going. But the payoff could be huge. Imagine a world in which Microsoft and Google were neck-and-neck is the Search market. Because Microsoft has diversified revenue streams and Google is almost completely dependent on Search Advertising that would throw the game to Microsoft. That’s exactly what I think Microsoft is trying to do with its Mobile activities.
The big wildcard I see right now is what is Apple’s long-term play? Right now they are more aligned with Google than Microsoft on the search front, something that started prior to Android hitting the market. If Android continues to gain market share I can’t imagine Apple will want to continue to add to Google’s success in the mobile space. So does Apple more fully jump on board with Bing, or do they introduce their own Search Engine? Apple is certainly arrogant enough to think they could successfully jump into the search engine fray. On the other hand, given their surprisingly low R&D spend rate one has to wonder if they really are up to absorbing the expense of the search wars. Recognizing that Microsoft and Apple have learned how to work well together (e.g., with Microsoft Office) despite being mortal enemies it wouldn’t be at all unreasonable for Apple to do a “deep” deal around Bing as their primary search engine.
Should Apple eventually jump into Bing with both feet I also wonder if that says something about Bing’s future as part of Microsoft. Right now Bing is benefiting mightily from Microsoft’s deep pockets and wouldn’t be able to succeed as a standalone entity. But at some point it has to be able to sink or swim on its own as a business (even inside Microsoft). With Nokia, RIM, Yahoo, Microsoft, and (speculatively) Apple involved one wonders if it wouldn’t make sense to create a Bing Inc. owned by all five firms. If that is what Apple demanded as its price for betting on Bing, would Microsoft go along? Or, like the other companies would Apple be happier knowing it was reaping the benefits while Microsoft spent all the money? It’s fun to speculate on these things, but I don’t really expect anything about Bing’s organizaional structure to change over the next couple of years.