Microsoft’s online properties have always been a bit of a joke with MSN losing cash year after year. But who would have thought that Microsoft could even lose money in the lucrative search market?

Analysts reviewed information about Microsoft’s internal re-shuffling, exposing information about its search business in the process. It’s not clear whether the data is pertinent to the new Bing search engine, though the efforts are likely related.

In Microsoft’s fiscal year of 2009, Bing lost $560 million on revenues of $520 million. That means that for every dollar the product received from advertisers, two were spent on improving or marketing the search engine.

That number would be crippling for other companies, but Microsoft makes billions per year in revenue and has a strong cash position. However it’s quite telling that it takes that much cash to challenge Google and that Microsoft is so willing to spend it.

Microsoft Live was the number three horse in the search market right up until it paid Yahoo to take over its search queries. That move and the Bing re-branding effort have finally given Microsoft some momentum in the search market.

Now it’s possible that the massive ad campaign that Microsoft has been splashing across television screens pumping Bing resulted in deeper losses for the unit. But there’s no lasting business model in Bing if it cannot sustain itself.

Microsoft has started focusing more on search revenue as it jettisons its Razorfish display advertising agency to Publilcis. Instead, Microsoft will partner with Yahoo to serve ads on its digital properties as part of the two companies’ search pact.

That deal is still under scrutiny as the DOJ is seeking more information about the terms. Losing the Yahoo partnership could jeopardize Bing’s momentum along with a ton of cash from the deal.

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Entry was posted on Wednesday, September 23rd, 2009 at 9:49 am under Microsoft.

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