Original URL: http://www.theregister.co.uk/2010/03/02/ballmer_on_bing/

Ballmer: One day, Bing will actually make money

Big Steve on Firefox, the iPhone, and search bribery

By Cade Metz

Posted in Media, 2nd March 2010 19:51 GMT

Microsoft chief executive Steve Ballmer has insisted that one day, the company's Google-battling Bing search engine will actually make money.

"Search is going to be an ever-growing share of Microsoft's profits," the big man bellowed - literally bellowed - during a wide-ranging question and answer keynote this morning at the search-obsessed SMX West conference in Silicon Valley. "First, we've got to get to break even. And then we're got to get to profitability. And then we've got to grow share. That's how I do my math."

Reports indicate that Redmond has spent as much as $5bn on its nine-month-old search revamp, and the company continues to pour cash into the would-be Google killer - not only through continued development of the platform but also through its Bing Cashback program, a shameless effort to bribe people into using the thing.

If you use Bing search ads to find and buy certain stuff, Redmond will return a portion of the purchase price.

Asked how successful the Cashback program has been, Ballmer indicated it wasn't quite as successful as he would like. But he said the company will continue the program - and continue to tweak it. "I would say that it has worked, but it hasn't worked fantastically - in the sense that it has not completely changed the economic structure of the business, for the user or anyone else," Ballmer said.

"I expect we will continue Cashback, continue to rethink it, to try to do things around basic Cashback concepts to make it a more important thing for the merchant as well as the user."

A big part of Microsoft's push for Bing profitability is of course the Redmond software giant's search pact with Yahoo!, which was recently approved by European regulators. Bing will provide "organic" search results on Yahoo! by the end of the year, and Microsoft-generated search ads will likely follow sometime after. The primary aim of the pact, Ballmer said, is to improve the "relevance" of Bing's search ads, which are purchased via a "second price" online auction, as they are at Google.

"The quality - both from a marketer and a user's experience - of a search engine depends heavily on the relevance of advertising, and the relevance of advertising depends heavily on the density of bids," Ballmer explained. "The ability to put together Yahoo!'s volumes and Microsoft's volumes and use that in a way that improves the experience for what we call all-involved parties we think is absolutely fantastic."

Advertisers will be able to reach more "eyeballs" with a single ad campaign, and netizens will be more likely to, um, see ads they want to see. "We think there's a huge advantage to scale, just in terms of our ability to get more signals, do more tests, improve relevance, all those things."

iPhone-Bing rumor 'wild stuff'

At the same time, Microsoft will also push Bing to new users through certain carefully-chosen distribution partnerships, most notably in the mobile market. But Ballmer downplayed reports that Microsoft is locked in talks with Apple and an increasingly anti-Google Steve Jobs over the possibility of Bing powering search on the Jesus Phone.

"I read that rumor. I was in Europe someplace and I read it - after some journalist has asked me about it. It's weird how these rumors spread," he said. "That's sort of wild stuff. What we want to do is make sure we do a very good job of Bing on the iPhone."

Ballmer was equally coy when asked if Microsoft would pursue a Bing partnership with traditional rival Mozilla on its Firefox browser. Mozilla has deals to provide access to Google and Yahoo! search - especially Google search - through its open source browser, but Bing is still conspicuously missing from the Firefox search box.

"We'd love to have more distribution partners," Ballmer said. "You can talk to them about their perspective. We're having all the right dialogues with all the right people, on all the right distribution deals."

He also indicated that Microsoft would be interested in bringing Bing to the Safari search box on Apple Macs, but he was, well, less bullish about a possible deal to put Bing on Google's Android mobile OS. "That's a little more complicated," he said. "Android without [Google] isn't Android. We're going to have to see where the Android market develops."

Microsoft currently has a pact with Verizon Wireless to push Bing on certain BlackBerries. And it's offering a dedicated Bing application for the iPhone. On such mobile platforms, Ballmer said, Microsoft is seeing more traffic - and more valuable traffic - than expected.

"We're seeing good commercially valuable queries on the iPhone, but we're getting better queries than we anticipated across all mobile platforms," he said. "It is an interesting mix. Some of the most valuable commercial queries, people are less likely to do from the phone. And yet the volume of queries is likely to be higher... But the average value of the queries is better on mobile than we expected."

But he still questions how important search will be years down the road. "The one thing that's interesting to ask is: 'What's going to happen overall with the economics of search engines in the future?' In the tech business, one of the interesting things that happens is that you have a business and people try to remake it," he said. "Five years from now, we may have a greater share, but maybe search engines are somehow less profitable."

And yet Bing will be profitable. According to Steve Ballmer. ®