Reuters reports that Ballmer said Microsoft is willing to invest from 5 to 10 percent of its operating income over the next five years in Bing. Here's what he said, according to Reuters:
"Our shareholders, I told them we were willing to spend 5 to 10 percent of operating income for up to five years in this business, and we feel like we can get an economic return."But the Xbox is one thing, and the Internet is something else entirely. Microsoft certainly didn't invest up to 10 percent of its income over five years in the gaming system, and it also didn't have a dominant competitor like Google to contend with.
"We invested in Xbox for years and now it generates nice economic returns for us."
According to Nicholas Carlson of the Silicon Valley Insider, Microsoft's investment would come to between $5.5 and $11 billion --- not chump change, even for a software giant like Microsoft that has plenty of cash on hand.
In fact, the company has already spent billions on its Internet business, and has yet to see any return on it. Henry Blodget of the Silicon Valley Insider says that Microsoft has already invested $8 billion in its Internet businesses, "and that investment has yet to generate a single dollar of return."
By investing up to $11 billion of company money in search over the next five years, Microsoft may starve other efforts that could pay more sure benefits. And it's not just money that's at stake --- it's company mindshare and resources as well. Then there are the opportunity costs --- opportunities the company misses because it's so focused on throwing away money on search.
Ballmer is hyper-competitive, but this is one instance where that trait is hurting Microsoft. He should just admit that he's lost the search battle to Google, and move on. There are plenty of other tech opportunities out there, but Microsoft may miss them because of its misguided attempt to beat Google.