August 20, 2003

Google, the ingenious Internet search service with a silly name, is front-running a three-way race in the red-hot Web search arena. Its biggest customer, Yahoo, is about to become its biggest competitor in the wake of Yahoo's acquisition of search engines Inktomi and Overture. And rival Microsoft MSN has been injected with a dose of competitive urgency.

Analysts say the software giant has been backed into a corner and must weigh whether acquiring Google or Yahoo might be the surest way to remain a contender in the crucial Web search space. "Google has the cake, Yahoo at least is able to open up the instant cake mix and start putting the ingredients together, and Microsoft is just opening up the cookbook," says Danny Sullivan, industry analyst for Web site SearchEngine.com.

The stakes are lofty. Search has emerged as a promising Web business. Google, Yahoo and Microsoft each wants to make search more intelligent and useful. The goal: Produce more germane results and thereby boost user loyalty. And each is exploring how to combine Web searching with new tools to scour not just Web pages, but word documents, spreadsheets, e-mail and other desktop files.

The first to popularize such a service — and make finding something on a PC hard drive as easy as finding something on the Web — could command the loyalty of a vast clientele of users and, thus, advertisers. With Google as the king of Web searches and Microsoft dominant on the desktop, Yahoo is about to jump into the fray against both.

"The question boils down to who can move into the other's territory first," says Chris LeTocq, tech industry strategist at Guernsey Research. A practitioner of minimalist marketing, Google boasts fans ranging from former president Jimmy Carter to Gwyneth Paltrow. In one recent survey, Google was named the world's highest impact brand, ahead of Apple and Coca-Cola. It continually refreshes an index of some 3 billion Web pages, responding to most search queries in one second, and consistently delivering relevant results in a simple text format.

Having recently added digital images and news story searches, as well as an Amazon.com-like shopping page, called Froogle, Google's secret weapon may be its add-on toolbar, analysts say. By downloading a small bit of free code, users embed a narrow window at the top of a Web browser, enabling Google searches without going to Google's home page. This saves time and promotes more frequent use of Google. Last month, Google added a pop-up ad blocker and a feature that lets users easily post "blog" entries to Web journals. Google could equip its toolbar to run queries against a user's desktop applications, elbowing into Microsoft's jealously guarded turf. A user could Google search across Word, PowerPoint and Outlook for a keyword or phrase.

"If there was a Google search for my desktop today, I'd use it in a heartbeat," says LeTocq. Google declined interview requests. "Google's very useful toolbar add-on is a perfect medium to deliver desktop search," says David Hallerman, senior analyst at eMarketer. "The fact that it's already out there, and the fact that people tend to trust Google more than they trust Microsoft, gives Google a definite lead in the integrated search race."

Yahoo was among the first to assign editors to compile directories of popular Web pages, then let users query its directories. But search engines such as Inktomi and Google took the lead by using "spider" programs to crawl the Web and pull down page links automatically. Yahoo still maintains directories, but prominently features Google's search engine on its Web pages. Yahoo has since branched into news, e-mail, shopping and personal ads. By acquiring Inktomi and Overture, it is returning to its search roots, and company watchers expect it to stop using Google. CEO Terry Semel recently said in a conference call he plans to "vertically integrate" search functions throughout Yahoo.

"Yahoo will now own all the crucial elements of an end-to-end search offering," noted Semel. "We'll be better equipped to create customized and innovative solutions for advertisers and enhance the consumer experience to increase relevancy and ease of use."

Synergies from its acquisitions could take a year or more. "They face a big task absorbing all that technology in house," says analyst Sullivan.

Pressure on Microsoft
Shortly after Yahoo announced its acquisitions, Microsoft quietly released its own spiders to crawl the Web and began building its own searchable index of Web pages. The software giant passed up the chance to buy Inktomi and Overture, from whom it contracts search services. With the two now under rival Yahoo's wing, Microsoft is forced to build or buy its own search services. MSN product manager Lisa Gurry says the company plans to move aggressively to develop its in-house search expertise while continuing to rely on Yahoo as a supplier. "We will make the right investments to stay competitive in this space," says Gurry.

Meanwhile, there's not much left to buy. Microsoft could grab a smaller search engine, such as Ask Jeeves, which two years ago bought Teoma, but it would still lag years behind the first-tier players, says Bruce Clay, president of search engine consultancy Bruce Clay LLC. Microsoft could make a play for Yahoo or Google. But with Yahoo anticipating big growth from its acquisitions, and Google widely anticipated to go public in 2004, neither may want to be bought.

For the record, Gurry says Microsoft is not considering buying Yahoo or Google "at this time." "Two years from now Microsoft will still be two years behind, because Yahoo and Google are not going to stand still and, in fact, you can expect that they will be moving forward fast," Clay says.

Source: USA Today

        

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