Microsoft’s Bing Cuts Ties with Major Advertisers Affecting Perion’s Revenue Dramatically

Microsoft’s Advertising Policy Shift Rocks Perion’s Revenue
In a significant turn of events, Microsoft’s Bing has updated its advertising rules, leading to the outright removal of several advertisers from its network. This move has notably impacted Perion, a company that heavily depended on its collaboration with Microsoft for a large portion of its income. As a result, Perion anticipates a drastic reduction in revenue from Microsoft, expecting it to constitute less than 5% of its total revenue in the latter half of 2024, a steep fall from the previous 50%. The market responded unfavorably to this news, with Perion’s stock plummeting 30%, adding to a 40% drop experienced in April following Microsoft’s initial policy changes.
Perion’s CEO, Tal Jacobson, communicated that similar advisories have been issued to other Bing distribution partners, acknowledging the significant negative impact these changes have had on Perion’s search-based advertising operations. Despite these challenges, Perion is determined to pivot towards expanding AI-based advertising solutions, emphasizing innovation and partnerships.
The company is bracing for a substantial hit to its financials, with second-quarter revenue projections ranging between $106-108 million and a predicted annual revenue halving to around half a billion dollars. This comes after a severe profit warning issued in April due to the deleterious effects of changes in Microsoft’s Bing search engine on the RPM index and, consequently, on Perion and its clientele.
Perion, a digital advertising specialist, has historically facilitated connections between search engine advertisers and consumers, sharing referral revenues with Microsoft. In 2023, search activities made up 46% of Perion’s revenue, 85% of which was generated by Microsoft. Despite the expected sharp decline in revenue and profitability, Perion is not planning cuts but is instead focusing on new developments to diversify its revenue streams and reduce its dependence on Microsoft.
This is not Perion’s first encounter with such a situation, though it is a first under CEO Tal Jacobson. The company had previously navigated challenges posed by Google’s policy changes. Perion had managed to reinvent itself post the toolbar crisis, leading to a period of significant growth and a market value nearing $2 billion in 2023. However, the latest shifts have led to a weakened investor forecast and a declining stock price, despite a notable 16% revenue growth and high profitability in the last annual reports.
Jacobson, aware of the risks associated with reliance on Microsoft, has been proactively diversifying the company’s revenue sources. This includes a $100 million acquisition of Canadian firm Hivestack to break into the out-of-home advertising market. Perion is also exploring further acquisitions to decrease its dependency on search-related revenue, signaling a strategic pivot in the face of challenging industry dynamics.