Microsoft Posts Higher Advertising Revenue, But Lack Of Display Ads In Outlook.com Is Hurting Them

outlook_cover_640x360Microsoft reported its financial quarter results yesterday with record 1st quarter revenue beating expectations. They are now reporting under new financial segments. The most part of the former Online Services Division is now part of Devices & Consumer Other segment. It includes Bing, Xbox Live, Office 365 Home premium and few others. While this division has not started making money, they are now losing money less than before.
Here are the highlights of the results,
  • Search advertising revenue up 47%
  • Driven by continued revenue per search improvements and query volume growth
  • Bing U.S. market share at 18.0% up 210 basis points
  • Xbox LIVE transactional revenue, up >25%
  • Over 2 million Office 365 Home Premium subscribers

D&C Other revenue increased $235 million or 17% mainly due to higher advertising revenue, which increased $106 million or 13%. While the growth was due to search advertising revenue, display advertising revenue decreased 31%. Microsoft cited that lower display advertising revenue is due to decline in Outlook.com advertising revenue. Outlook.com is now only serving search ads instead of display ads as we used have in Hotmail. With the launch of Bing Apps and Smart Search for Windows 8.1 devices, I expect the advertising of Microsoft revenue to go up in the upcoming quarter.

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