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Microsoft’s Online Advertising Revenue Drops 16%, Time to Give Up?



Microsoft reported its first ever year-over-year quarterly drop in revenue, in its entire 30-year history!

I’ll let that sink in for a second.

In its three decades of existence, Microsoft had never before seen a year-over-year quarterly drop, so if you needed a sign of just how bad this recession is, this is it!

Here are the official numbers:

…revenue of $13.65 billion for the third quarter ended March 31, 2009, a 6% decline from the same period of the prior year. Operating income, net income and diluted earnings per share for the quarter were $4.44 billion, $2.98 billion and $0.33 per share, which represented an increase of 3% and declines of 32% and 30%, respectively, when compared with the prior year period.

Perhaps even more significant is the 16% decline in online advertising revenue (just $521 million) with its overall online services posting a loss of $575 million.

Which makes you wonder–why doesn’t Microsoft just give up on online advertising?

Seriously, with all the attention it’s spending on trying to get its search product any kind of traction, and the continued infatuation with Yahoo, you’d think that the online services side of the business was a huge part of what makes-up Microsoft. Clearly it isn’t.

Aside from the investment in R&D and promotion, Microsoft’s online services are weighing down its bottom line–net income for the quarter fell 32% compared to last year.

Perhaps Microsoft needs to concede the battle to Google. Maybe, instead of acquiring Yahoo to bolster its online offerings, it should be begging Yahoo to take its own online services off of its hands. Maybe it’s time for Microsoft to go back to being a software company.

What do you think? Should Microsoft press on? Is there a greater risk in not trying to compete in the online space?

PS. Bonus points, if you get the connection between the image above and this post. ;-)

PPS. WebbyThoughts correctly identified the cover for Rush’s “Exit Stage Left” album.

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