Bing's Paid Clicks Up 8% - Has Microsoft Cracked the Search Nut?

Much has been said about Bing getting a bump in search and impression usage since its launch. But Efficient Frontier has taken it further, claiming that paid clicks on Bing is up 8.1% since its launch versus the previous week.

Importantly, the company believes that if the paid clicks growth holds, then advertisers are likely to shift ad budgets to Microsoft (MSFT), the ultimate desired outcome.

Has Microsoft finally cracked the search nut? Let’s all wait and see, but if this holds, then both Google (GOOG) and Yahoo!’s (YHOO) multiple has to contract.

In a post several months ago I listed a number of items Microsoft should do to build their search business. See it here Closing the 3 to 65% Gap. Bing, in my view, has addressed a few of my suggestions.

Here is part of the post:

There are a few organic strategies Microsoft could employ that would help it grow share:

1. Change the mindset about search. The focus has been too much on generating revenues when the goal should be on improving the user experience and providing a differentiated product. MSFT’s number one problem is volume. If they improve the user experience then users will come. If users come then advertisers will come. If both users and advertisers come then monetization improves and revenues and profits grow. It is that simple.

Stated differently, to make headway in online advertising, then MSFT will need to significantly penetrate online search. To do so, they will need a steadfast commitment to online search from the CEO on down.

2. More Effective Marketing Strategy Centered on Search. This should be done to convince users that the online search experience and relevance is on par with Google’s. No cute ads like Ask.com which was ineffective and confusing. Just a plain ad that has the aim that search relevancy is on par with Google (provided the claim is true). Several ways to do this: 1) through word of mouth – this can be filtered through the press by attending more search related industry trade functions; 2) through a viral outlet like YouTube; 3) through banner ads on Facebook and other web properties; 4) go straight to MSFT users, which already has the number 2 web property in the world. The aim is to convince users that they do not need to jump off the MSFT pages to Google to conduct searches. In a nutshell, change user behavior through knowledge that their search engine is as relevant to Google and that the user experience is as compelling.

3. Need To Focus On Search Innovation. For the past 4 quarters, Google released 100 search monetization improvements each quarter. Point is they are constantly improving the search product and is letting the world know that or shows it to the world. MSFT should do the same.

4. Change the Brand. “Live” confuses everyone and is difficult to find. Plus the marketing effort behind Live Search was ineffective. Change the Live name to something else. Use either MSN or Microsoft Search as the brand. No need to deviate from the solid brands of those two.

5. Develop More Relationships But Be Careful Not To Overspend. Agreements with Sun (JAVA), Dell (DELL) and HP (HPQ) to include the Live Search Toolbar on new PCs, and the much-ballyhooed Live Search Cashback, which gives Web users rebates for purchasing products from participating Microsoft vendor partners through the Live Search site, are good examples. Others like Verizon (VZ) and Facebook are important in that they create brand recognition. Management should go after MySpace if Google drops it. But management must be careful not to overspend or enter into deals that are uneconomical.

In all, if Microsoft buys Yahoo and in addition follows the recommendations above to grow organically, they will develop meaningful share in online search and as consequence develop a meaningful presence in online advertising.

This is the first in a series of discussions on Microsoft’s Online Services Business (OSB). In subsequent posts, I will discuss strategies for the company in branded advertising/ad agency/ad networks or what they describe as their online advertising platform or the newly created PubCenter, portal and information content products, communications and social networking, and cloud computing efforts.

My reasoning for focusing on Microsoft is because I believe they do have a competitive presence in the Internet space and it needs to be documented, given that it is largely ignored by Wall Street analysts in favor of other parts of the business model.

Comments

[MarcoP123:]

This is an interesting time for search engines. Bing is center stage with Microsoft's huge marketing budget, but in the last few weeks there have been a number of new search engine announcements, all of which have the potential to affect us online marketers. More at domusinc.blogspot.com/....

Jun 23 12:46 PM

[vassar:]

Bing's Cash Back is nice. I search for stuff on Google and then check Bing to see if they have a cash back deal for the item.

My take: if they did hit 8%, it cost them a lot!

Jun 24 08:32 AM

[WillC7:]

For the most part, it seems as though Microsoft went through with the suggestions you made months ago. Obviously, the re-branding of the search was huge in leaving behind the past failures of Live, etc. Number one is ultimately what is putting Bing on the right road to being a online advertising player for years to come.
Bing has created a positive and effective user experience for its users and they are responding by going back and continuing to use it. Otherwise, the near 100 million dollars spend on their own ads would be a waste if they can not retain users.
The deals with Dell and Java and the like are continued steps in a positive direction towards putting Microsoft where it could be based on its overwhelming resources. There are also smaller-tier search engines that are perfecting search and online advertising in their own way such as eZanga, which continues to grow and improve its online services. It's worth checking out at eZanga.com

Jun 24 12:32 PM