In its first quarter results of fiscal year 2018, ending September 30, 2017, Microsoft reported search advertising revenue grew by 15 percent year over year, excluding traffic acquisition costs (TAC). Gross revenue from search advertising rose by $210 million, compared to $124 million the previous quarter. The majority of Microsoft’s search advertising revenue comes from its Bing search engine.
The bump is surprising after four stagnant quarters. Last quarter, Microsoft CFO Amy Hood said total search revenue growth would slow with the renegotiated Yahoo deal and associated change in revenue recognition having passed the one-year mark.
As it has for the previous five quarters, Microsoft cited “increased revenue per search and search volume” for the revenue growth.
LinkedIn generated $1.1 billion in revenue for the quarter, with sessions up more than 20 percent year over year. Both metrics are on par with the previous quarter. Microsoft acquired LinkedIn in December 2016 for $27 billion, nearly all of that in cash. In September, Corporate VP of Microsoft Search Advertising Rik van der Kooi said the company has begun work integrating the LinkedIn Graph with Microsoft’s Audience Intelligence Graph, which includes search history. Advertisers are keen to synthesize LinkedIn’s professional user data with Microsoft’s audience and intent data. In addition to building on LinkedIn’s business, Microsoft is focusing on using the acquisition to grow Office 365 and Dynamics 365 products. Office 365 revenue rose 42 percent over last year.
Microsoft CEO Satya Nadella told analysts on the earnings call, “You’ll see more product integration in fiscal 2018 as we continue to accelerate our innovation to connect the world’s leading professional cloud with the world’s leading professional network.”
Overall, Microsoft reported $6.58 billion in net income, or 84 cents per share, beating analysts’ expectations. That compares to $5.67 billion in profit, or $0.72 per share, the previous year.
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