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What Microsoft gets for $2 billion

scottberkun.com

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Re: What Microsoft gets for $2 billion

#11

Post by checoivan »

natmaster wrote: post #2

Disclaimer: I do not speak for Microsoft, I am simply an employee - these opinions are mine and mine alone. As someone working in the online services division I have to say that this analysis is extremely simplistic. Would they be saying the same thing about Facebook? It was in the red for many years before it became profitable. That was the plan.

I wonder how much of this money is spent on advertisement,probably most of it. I keep seeing tons and tons of TV ads.

It's hard for me to believe that amount of loss comes just from datacenter/development costs of Bing and Msn.

Re: What Microsoft gets for $2 billion

#12

Post by raganwald »

qeorge wrote: post #8
samratjp wrote: post #5

Earlier quoted context omitted.

But facebook is an independent entity - it's not quite the same comparison. Regardless, Microsoft's online strategy from day one hasn't been on par with the rest of the 600 pound gorillas. If anything, I wish they had the same force behind online services as they have with the Xbox division. They really got Xbox Live right!

It also took them 10 years of hemorrhaging money to get Xbox/XBL right. Many people also thought they were stupid for doing so, but now it seems prescient.

I haven't been looking at the numbers recently. What is the overall ROI after ten years of sinking stupendous amounts of money into Xbox/XBL?

Or are we hand waving and saying that Microsoft has technically lost more money than grains of sand on the beach, but has executed a brilliant strategic plan to keep Sony from taking the lead in the market for set top boxes?

Re: What Microsoft gets for $2 billion

#13

Post by mwerty »

I think the infuriating logic goes something like this:

1. If the shareholders held a gun to my head, can I make this profitable? Answer is probably yes but for some tiny profit.

2. Do I see any other big prizes I can spend money on given I'm running a company with this skillset? Ans: Yes, but I still have lots left so what the heck.

Plus, if they return money to shareholders in dividends, its waaaay less fun.

Re: What Microsoft gets for $2 billion

#14

Post by jbellis »

samratjp wrote: post #5
natmaster wrote: post #2

Disclaimer: I do not speak for Microsoft, I am simply an employee - these opinions are mine and mine alone. As someone working in the online services division I have to say that this analysis is extremely simplistic. Would they be saying the same thing about Facebook? It was in the red for many years before it became profitable. That was the plan.

But facebook is an independent entity - it's not quite the same comparison. Regardless, Microsoft's online strategy from day one hasn't been on par with the rest of the 600 pound gorillas. If anything, I wish they had the same force behind online services as they have with the Xbox division. They really got Xbox Live right!

> facebook is an independent entity - it's not quite the same comparison

qualitatively, I don't see much difference between investing VC cash vs investing parent company cash.

Re: What Microsoft gets for $2 billion

#15

Post by [deleted] »

dotcoma wrote: post #4
natmaster wrote: post #2

Disclaimer: I do not speak for Microsoft, I am simply an employee - these opinions are mine and mine alone. As someone working in the online services division I have to say that this analysis is extremely simplistic. Would they be saying the same thing about Facebook? It was in the red for many years before it became profitable. That was the plan.

yes, but it was NOT in the red at the tune of 2 billion USD a year...

[deleted]

Re: What Microsoft gets for $2 billion

#16

Post by dstein »

natmaster wrote: post #2

Disclaimer: I do not speak for Microsoft, I am simply an employee - these opinions are mine and mine alone. As someone working in the online services division I have to say that this analysis is extremely simplistic. Would they be saying the same thing about Facebook? It was in the red for many years before it became profitable. That was the plan.

According to http://www.crunchbase.com/company/facebook Facebook has only even had $836M invested in TOTAL. And they have a lot more to show for it.

Re: What Microsoft gets for $2 billion

#17

Post by brudgers »

The chart doesn't account for the operational value of Bing for Microsoft.

If you want to search MSDN, Google doesn't get to sell advertising or skew the search results to fit their business model or for that matter track what you're searching. Likewise, searches from MicroSoft IP addresses using Bing aren't tracked by Google either.

Re: What Microsoft gets for $2 billion

#18

Post by qeorge »

raganwald wrote: post #12
qeorge wrote: post #8

Earlier quoted context omitted.

It also took them 10 years of hemorrhaging money to get Xbox/XBL right. Many people also thought they were stupid for doing so, but now it seems prescient.

I haven't been looking at the numbers recently. What is the overall ROI after ten years of sinking stupendous amounts of money into Xbox/XBL? Or are we hand waving and saying that Microsoft has technically lost more money than grains of sand on the beach, but has executed a brilliant strategic plan to keep Sony from taking the lead in the market for set top boxes?

I don't follow the XBOX numbers closely either, but as I understand it, it is profitable and growing. [1]

Regardless, what's more interesting to me is that ten years ago I would have said "what the hell does MS want to make a game console for?" Now that things have shaken out, XBOX has given them a strong foothold not only in gaming, but in home media in general. That's the more compelling ROI to me.

[1] http://www.businessweek.com/news/2010-07-07/microsoft-xbox-l...

Re: What Microsoft gets for $2 billion

#19

Post by nopinsight »

It's not the absolute amount that matters most, especially for a company with Microsoft's size and cash flow.

Google's 2009 revenue is over 23 billion dollars and its operating income is over 8 billion. Considering the market size, two billion is not over the top. Not to mention online is a growth market and its strategic value is paramount. They're not a startup and they can invest really long-term to capture part of a market this significant.

Re: What Microsoft gets for $2 billion

#20

Post by raganwald »

qeorge wrote: post #18
raganwald wrote: post #12

Earlier quoted context omitted.

I haven't been looking at the numbers recently. What is the overall ROI after ten years of sinking stupendous amounts of money into Xbox/XBL? Or are we hand waving and saying that Microsoft has technically lost more money than grains of sand on the beach, but has executed a brilliant strategic plan to keep Sony from taking the lead in the market for set top boxes?

I don't follow the XBOX numbers closely either, but as I understand it, it is profitable and growing. [1] Regardless, what's more interesting to me is that ten years ago I would have said "what the hell does MS want to make a game console for?" Now that things have shaken out, XBOX has given them a strong foothold not only in gaming, but in home media in general. That's the more compelling ROI to me. [1] http://www.b…

I'm not arguing with you personally, but I have a question the general form of the explanation you cite. If the choice were between losing billions to have a foothold in home media or having no foothold in home media, their strategy would be expensive but interesting.

However, if you look over in Cupertino, you see a company with a foothold in home media that made money while grabbing their foothold. Therefore, I wonder if what we have is mediocre execution of a bad plan to grab a good market?

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