How Does Microsoft Make Money?

About Microsoft 

Microsoft is a highly diversified company in the field of computer science. It was established in the year 1975. Bill Gates & Paul Allen were founders of Microsoft. The first successful product of Microsoft was operating system known as Windows.  After Windows, Microsoft launched it’s software for office works in the year 1989. This software is known as MS Office. By mid nineties, Windows became the most popular Graphical User Interface (GUI).  Let us know ‘How Does Microsoft Make Money?’.

How Does Microsoft Make Money?

How Does Microsoft Make Money?

Diversification of Microsoft

Microsoft has grown exponentially after launching Windows & MS Office. Microsoft has grown by developing new products & acquisition of companies. Microsoft developed new games, Azure platform for cloud computing & cloud storage, web browser & search engine. Microsoft is a diversified company that generates it’s revenue from variety of sources. Microsoft makes money through sale of its products & services.

Operating systems:

Microsoft’s most famous product is Windows operating system that is used on most personal computers. Operating system translates our command into machine language or binary language of 0 & 1. Microsoft gets revenue by sale of Windows operating system license to original equipment manufacturers (OEM).

Original equipment manufacturers (OEM) pre-install Windows on the devices they sell. Microsoft gets revenue for Windows operating system by directly selling it’s license to consumers & businesses.

The company also sells the Microsoft Office suite of productivity software, including Excel, Word and PowerPoint.

Hardware:

Microsoft manufactures & sells a range of hardware products, including Surface laptops and tablets, Xbox gaming consoles, and HoloLens mixed reality headsets. HoloLens provides augmented reality experience. 

Microsoft Office:

It is a collection of software like Excel, Word, Access and PowerPoint. Excel is a software for spreadsheet applications. It can also be used for data analysis. Word is a software used for word processing. Power point is a software used for creating presentations or slide. Various users purchase this software. Users of personal computer (PC), macintosh, android, iPhone & windows phone purchase this software. Cheapest subscription for 1 year & for 1 person costs US $ 60.

Outlook:

It is a software that provides facilities for email. Outlook also acts as aggregator for different email. Various users purchase this software. Users of personal computer (PC), macintosh, android, iPhone & windows phone purchase this software. Outlook is available as a standalone application or as a part of Microsoft Office suite of applications. Outlook has features such as email, calendar, task management, & contact management, support for third-party add-ins & integration with other Microsoft services & products. Price of Outlook varies depending on edition & type of purchase. Microsoft generates revenue from sale of cloud-based versions for Outlook, e.g. Microsoft Outlook 365, that are available on subscription basis. Outlook.com gets revenue by salling data & insights to businesses that use this information to target & understand the customers in a better way. Outlook.com generates it’s revenue by advertising.

Cloud services:

Microsoft Azure is a platform for cloud computing that gives a range of services, including storage, virtual machines, and networking. The company also offers cloud-based versions for its productivity software, e.g. Microsoft 365 that includes Office & other tools. Microsoft Azure cloud platform offers cloud computing services like infrastructure as a service (IaaS), platform as a service (PaaS), & software as a service (SaaS). These services are used by organisations & businesses. Microsoft earns revenue through Azure cloud platform. These services enable to earn revenue by 2 different models i.e. subscription & pay as you go.

Microsoft Office 365 is cloud based productivity platform that provides applications & services, e.g. Word, PowerPoint, Excel, Outlook, &  OneDrive. Microsoft earns revenue from Microsoft Office 365 by annual subscription, monthly subscription or pay as you go basis.

Advertising:

Microsoft also generates revenue from advertising, with help of Bing search engine & other products. Microsoft reported greater than $10 billion through advertising revenue in the year 2021 with its news & search offerings recording a 32% annual increase in spend during the mentioned period.

OneDrive:

OneDrive is  a File hosting & cloud storage service by Microsoft. OneDrive is available as standalone service or as part of Microsoft 365 subscription service, that includes range of applications & tools, such as Excel, Word, & PowerPoint. It enables the registered users to share & synchronize their files. Cost of storing 100 GB on One drive for 1 year is US $ 19.99. Microsoft earns revenue through OneDrive  by sale of subscriptions & pay as you go pricing.

Microsoft Teams:

Microsoft earns money from it’s software Microsoft Teams. This software is used for workspace chat & video conferencing. Files can be stored on Microsoft Teams. Other applications of Microsoft can be also integrated with Microsoft Teams. Microsoft earns money from Microsoft Teams by sale of subscriptions, premium features & services to business users. Microsoft also gets revenue from sale of phone system integration & audio conferencing to business users of Microsoft Teams. In the year 2021, Microsoft Teams had about $11 billion in revenue.

Overall, Microsoft’s business model is based on providing products & services that help individuals & organizations be more productive, smart working and successful.

Skype

Microsoft purchased Skype in the year 2011 for US $ 8.5 billion. If users of Skype call from Skype to a landline phone or a mobile that does not have Skype then the users will be charged. Skype earns money by advertising, subscription fees for it’s premium services, and the sale of credit regarding international calls.

LinkedIn:  

Microsoft purchased LinkedIn in the year 2016 for US $ 26.2 billion. LinkedIn earns money from news, advertising, premium memberships, sale of recruitment & sales solutions to companies, Talent Solutions, Marketing Solutions business & search. Talent Solutions helps the companies to hire appropriate employees. LinkedIn generates revenue from sale of data & insights to businesses that use this information to understand & target their customers in a better way.

Microsoft Store:

Microsoft Store is an online & physical retail chain of Microsoft. It sells various products like computer, games, gaming consoles, app, accessories, consumer electronics, software & movies. Microsoft gets revenue from Microsoft Store by sale of these products. 

MSN:

It is a portal of Microsoft that offers national news & world news. MSN earns money by advertising. 

Bing:

It is the search engine of Microsoft. Revenue earned through Bing is continuously increasing. If users of Bing click on the link for advertisement then Microsoft charges money. Charge for advertisement is directly proportional to the number of times link for advertisement has been clicked. It is an example of PAY PER CLICK (PPC).

Conclusion

Microsoft has grown to become highly diversified company in the field of computer science. It started the business from operating system. At present Microsoft is active in several business related to computer science. Microsoft is involved in hardware & online & offline software for word processing, data analysis, presentation, email, search engine, web browser, news, cloud computing, cloud storage and video conferencing.  Microsoft is involved in devices like surface PC & console. 

Present market capitalisation of Microsoft is US $ 1.75 trillion.

How Does Microsoft Make Money?

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