The rumour That Won't Die: Facebook To Buy Bing From Microsoft

Steve Ballmer Mark Zuckerberg

Photo: AP/Getty Images

There’s a rumour going around that Facebook wants to buy Bing from Microsoft.The rumour is the result of a magnificent game of telephone.

Here’s the blow-by-blow:

  • Some Internet marketing exec has a great idea: he dashes off a Kindle e-book about Facebook’s IPO and calls himself “anonymous” thus adding mysterious credibility. In this book, he predicts that Facebook would buy Bing from Microsoft.
  • CNBC, which like the rest of us in the business media, can’t report enough on the Facebook IPO, makes a big deal about this anonymously-authored report. CNBC’s Gary Kaminsky, perhaps forgetting himself, casually tosses out Facebook’s interest in Bing as a fact, not a prediction.
  • Spotting a report from a credible source, CNBC, Rick Sherlund of Nomura Equity Research writes a report explaining why Microsoft should sell Bing to Facebook.
  • Forbes and Barron’s pick up Sherlund’s analysis and say it was inspired by a “report” on CNBC. Barron’s asks Sherlund about the idea, noting he “has no information himself on any pending deals or talks.”
  • Bloomberg Radio has Sherlund on today. The Bing to Facebook idea is described as a “rumour” going around – probably because Bloomberg doesn’t love to cite CNBC for much. 
  • My boss hears this radio report, and says Bloomberg is reporting on Facebook’s plans to buy Bing from Microsoft.

So here’s the truth: Facebook may or may not have designs on the search business. (Long term, it probably does). It may or may not want to buy Bing from Microsoft (it probably doesn’t). But no one with any inside connections to Facebook or Microsoft has floated this as a rumour. It’s only been a prediction from a clever marketing exec.

That this rumour is a bogus rumour does not mean it wouldn’t be a smart idea for Microsoft to sell Bing to Facebook, by the way. It might be.

Here’s Sherlund’s argument for why Microsoft should do it, via 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,” Sherlund observes in a phone call.

Moreover, “Investors have not been a fan of that line of business for a long time. They just don’t see the rewards.”

As Sherlund sees it, why does Microsoft even need to be in search, when opportunities with touch-screen technologies and tablet operating systems and the like all seem so much more integral to Microsoft’s strengths and goals?

Sherlund further posits that if Microsoft unloaded Bing on Facebook, it would still be able tomonetise its services, such as “Xbox Live” and “Skype” through its arrangement with Facebook.

“In order for Microsoft to have monetization through search or display ads, they could just turn over the work, the costs to Facebook, and get it back in TAC [traffic acquisition costs],” says Sherlund.

They would still get 80% to 90% of the revenue returned through TAC, they would end up getting most of the revenue anyway,” and without all the headaches.

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