Bing Bungle Won't Faze Google

BING, which is the third iteration of Microsoft Search, includes a number of helpful search features. However, we do not believe that the launch of Bing will result in a sustainable material shift in search market share for a number of reasons: None of Bing's features are highly differentiated, Google has a meaningful library of proprietary data, particularly in Maps, which would likely take Microsoft several years to replicate; Google has an estimated 8 times more search traffic than Bing, which gives the company an advantage in improving the relevancy of results; Google has a larger advertiser base, allowing it to deliver better targeted ads; Google is outspending Microsoft's online business in research and development; and the previous marketing initiatives of Microsoft Search fizzled after an initial bump in traffic. Google's last 12 months R&D is $2.6 billion, compared to $1.4 billion for Microsoft's Online Services Business. Google invests 70% of resources on its core business, which includes search, AdWords (Google's search-advertising platform), and related products. Microsoft's total fiscal-2009 R&D budget is estimated at $9.3 billion and the company could choose to invest additional resources in search. However, we think it would be hard to justify transferring R&D dollars from its core business into the online division, given that Microsoft OSB is generating a run-rate operating loss of $2 billion.