Bing Chips Away at Google's Growth (MSFT, GOOG)

Since its début, Microsoft’s (NASDAQ: MSFT) Bing search engine has proven itself to be a credible threat to Google’s (NASDAQ: GOOG) dominance of the United States search market.  Bing claimed 10.7% of the 14.7 billion searches conducted in the United States in December, up more than 33% since Bing’s launch in June.  Bing’s rise has called into question Google’s firm grip on the search industry, although Google’s is still ahead by a wide margin.  In December more than 65% of searches in the United States went through Google.  While Microsoft’s deal to take over Yahoo!’s search business will more than double Bing’s reach, the number one spot almost out of reach. But, how close can Microsoft come?

Numbers aside, Bing’s design and functionality has surprised search enthusiasts.  Its sleek and appealing website has drawn accolades from critics comparing it to Google’s sterile, utilitarian page.  Bing has also won points with critics with its video search which allow users to preview videos on the search page before viewing them.

Some of its biggest kudos have been for its air fare search feature that advises users on when to buy a ticket to get the best price.  In terms of pure search, however, Google still has the lead.  While Bing has some great features for refining search result, a number of blind experiments show that Google still has a slight edge in terms of getting users the information that they need the first time that they conduct a search on any given subject. Bing’s improvement over Microsoft’s earlier search efforts is clearly allowing it to chip away at Google’s growth in the search market.

Google’s Year Over Year Growth In Search Market Share, December ’08 through December ’09:

Source: comScore

Overall search activity in the United States was up 16.5% in December over the same period last year.  Google’s search traffic was up 20.5% while Microsoft’s search traffic (using Microsoft’s pre-Bing search platforms for comparison) was up 49.3%.  With both search engine outpacing growth of the overall search market it is clear that they are both taking market share from the competition.  However, Bing has undeniably checked Google expansion.  Google’s year-over-year growth in market share has dropped from 5.69% during the month of Bing’s release to 3.46% in December of 2009 (see chart above).

Microsoft’s approach to entering the search market with Bing has not been all that different from its forays into other areas.  As with gaming and web browsing, Microsoft has been willing to bleed cash for as long as it takes to establish itself and outspend its competition.  Microsoft offers a Cashback program with rebates for some items purchased through Bing searches.  Microsoft has also spent upwards of $100 million on advertising Bing.  So far these efforts seem to have worked.  If you ask Steve Ballmer he is sure to tell you that Microsoft intends to be number one in search.  It is unclear if any amount of money can ever get him there.  Google spends next to nothing advertise its own search because its has the benefit of being a cultural phenomenon.  Given the impact that Bing has had already it is not inconceivable that Microsoft will go from hindering Google’s growth to grabbing its market share.  That would be remarkable based on the history of the search engine business over the last five years.

Garrett W. McIntyre