Microsoft Q2 Earnings: AI Optimism and Search Reality

On January 30th, 2024 Microsoft released its latest 10-Q. The report, with 44 mentions of AI, underscores the profound impact of this technology on the company’s strategies and investments. But what was missing was how AI impacted revenue from Microsoft’s search platform. As a professional with a keen understanding of the digital marketing landscape, I analyze the specifics to discern what the report reveals about the changes AI is having on this advertising channel. Is AI positively impacting search revenue? Read on to find out more.

Bing Chat: Optimism vs. Reality

Bing Chat, initially touted as a game-changer upon its release in February 2023, has now been rebranded as Copilot. Despite the initial excitement, the real impact on Bing’s competitiveness against Google remains uncertain. With 100 million daily active users as of March 8, 2023, Bing was poised to take market share from Google. The anticipated boost in monetization seemed all but certain.

Google Trends Unveil Bing’s Trajectory

A compelling narrative emerges when examining Google Trends data. In February 2023, Bing Chat experienced a surge in popularity, a noteworthy feat considering Microsoft’s historical 2nd place to Google in search engine market share. However, the subsequent months revealed a drop in Bing Chat’s popularity, while interest in Google Bard has increased since the beginning of the year. The question arises: has Bing Chat, truly lived up to the initial promise?

Source: Google Trends

Microsoft’s Search Revenue Insights

Examining search revenue trends, the earnings report highlights a $11 million quarterly year-over-year growth in paid search revenue, covering acquisition costs. However, over the past six months, this figure increased by $151 million. So in three months, the increase in revenue went from $140 million to $11 million. This prompts a crucial question – is Bing struggling to retain new customers, or are acquisition costs on the rise? Insights from Google Trends point towards the latter, indicating that Bing might face challenges in maintaining growth amidst current market dynamics.

Source: 10-Q for Microsoft Corp.

Market Share Realities

According to Stat Counter, Bing’s market share rose to 7.8% in January 2024, marking a notable increase from 6.3% in February 2023, coinciding with the introduction of AI-assisted search. While this growth represents an almost 24% increase, Google’s dominance in the search landscape remains unchallenged. Despite Microsoft’s considerable investment in Bing and its touted AI capabilities, the actual impact on search results seems more restrained. The modest uptick in search revenue and market share prompts questions about the efficacy of their AI integration. I am looking forward to Microsoft’s forthcoming 10-K report for deeper insights into Bing’s performance and their evolving AI strategy, to see what it portends for search marketers in the future.

Source: Stat Counter

What do you think about Bing’s use of AI for conversational search, does it have the long-term potential to increase market share and revenue? Leave a comment below.