Every once in a while a tech rumor pops up that sounds so bizarre you expect it to be an April Fool's joke. Here's the latest: Microsoft will swap Bing to Facebook for shares when Facebook goes public. The rumor is wrong in every way.
When I first read the rumor, I had to check my calendar. Was this April Fool's or Friday the 13th? Given that it's Friday the 13th I had to assume that this rumor is no joke. It's not, and is being talked about by big-name media outlets, including Forbes and Barron's.
Here's the thinking behind it: Microsoft loses billions of dollars a year in Bing, which will never make money, and so if Microsoft swaps it for Facebook stock, Microsoft's stock will jump and Microsoft will gain a closer partnership with Facebook. Facebook then gets a search engine it can use to fight Google.
Rick Sherlund with Nomura Equity Research is one believer. He told Barron's:
"Microsoft loses $2.5 billion a year with Bing, and that's a 7-percentage-point hit to operating margin, so it's huge."
In Sherlund's view, Bing isn't important to Microsoft, and so the company should unload it, and give ammunition to Facebook to take on Google:
"It's in Microsoft's relative advantage to arm Facebook to go after Google more effectively than they could on their own."
To his way of thinking, Facebook would power Bing with social networking smarts, and deliver highly customized search to people, based on their likes, disklikes, interests, friends, and so on.
Just about everything about the idea is wrong. Bing is more than a standalone search engine for Microsoft; it's an engine that Microsoft expects will power many of its products. Back in August of last year, Frank X. Shaw, Corporate Vice President of Corporate Communications for Microsoft wrote in a blog post, The Future of the Living Room:
"Integration of products and services like Xbox, Kinect and Bing is at the heart of our strategy. This is just one more example of how Bing is more than just Microsoft's search engine, competing to win against Google -- Bing is also a strategic asset that makes many other Microsoft products better and more attractive to our customers."
That means that even if Bing does lose money forever -- not a given -- it's still a central part of Microsoft's strategic direction. And Microsoft doesn't expect Bing to lose money forever. It's slowly gaining market share, and is central to Microsoft's mobile strategy. It's the default search engine for Windows Phone, and if that struggling operating system ever gets off the ground, Bing will reap significant benefits.
So Microsoft swapping Bing for Facebook shares is a nice fantasy. But that's all it is -- fantasy.
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