September 16, 2003

The little Mountain View, California company called Google soared to fame after Netizens fell in love with its simple, efficient search engine.

Google has since stumbled on a huge pile of cash - flowing from a revolution shaking the online advertising industry - that few industry observers could have foreseen just two years ago. And that has ignited an all-out competitive war from other internet giants - Yahoo, Microsoft and even eBay - to capture the new online advertising.

Online advertisers have realised that placing ads beside search results reap better results than the banner ads that many internet users find annoying. Advertising sales from internet searches are estimated to be more than US$2 billion (NZ$3.4 billion) this year, and are predicted to grow 35 per cent annually - hitting nearly $US7 billion (NZ$11.9 billion) by 2007, according to US Bancorp Piper Jaffray.

Google fell upon the goldmine along with another company, called Overture. Overture has since agreed to be swallowed by Yahoo. Now the competition between Google, Yahoo, software giant Microsoft - and even eBay - is in full swing. The good news: It could to lead to a better internet experience for the web visitor. Google is so far considered the leader in the fast-growing industry of online search. It's also one of the only large Silicon Valley companies hiring workers as fast as it can.

In its effort to stay on top - and grow as a destination for online advertising - Google has unleashed a wave of new offerings:

     Froogle, which allows price comparison shopping
     A revamped tool-bar

And that's not all- more recently, the "tilde operator", a sign that allows a user to search for related phrases and synonyms (by placing the tilde sign in front of the search term).

And lastly, the new mathematical calculator. It recognises words, and also handles conversions like "quarter cup in teaspoons" or "What is one furlong per fortnight in miles per second?"

Still, for Google co-founder Sergey Brin, none of these are enough. "If you're headed downwind in a sailboat, it feels like you're going nowhere," he said last month at a San Jose search engine industry conference, referring to the tough competition.

The conference, organised by a site called SearchEngineWatch.com, was itself a hype indicator. More than 1,200 attendees showed for the first three days of the four-day event.

Still, in its haste, Google has slipped on occasion. One of Google's new services offers ads that match the content of articles appearing on news websites. Recently, the New York Post ran an article about a murder in which the victim's body parts were packed in a suitcase. Google put a suitcase ad beside the online version of the Post article.

Susan Wojcicki, director of product management for Google's content-advertising program, said Google continues to make improvements on its technology, and has beefed up filters that instantly pull ads from troubling content.

Meanwhile, other sites aren't standing still. Yahoo has announced it will acquire search ad-listing company Overture in an effort to up the ante. Microsoft, too, has started hiring mathematicians to create its own sophisticated search technology and has already started crawling the web with its "MSNbot", so that it can one day match the three and four billion web pages that Google searches. Yahoo hopes that earlier acquisition of search technology company Inktomi, matched up with Overture's properties - such as Fast and Alta Vista - will push it ahead of Google in search experience. But it will take some time to integrate those properties, and so far Yahoo has relied on Google, a former ally, to conduct a good deal of its searches.

Now that Yahoo is competing for users with Google - for advertising dollars - Yahoo wants to drop dependence on Google's technology and replace it with a revamped Inktomi, but the rollout is happening slowly. Every day Yahoo waits, though, it seems like a win for Google: T-Online, the German web access provider with 12.7 million subscribers, in July said it has dropped Overture in favour of Google for providing sponsored search listings. Last year, Overture filed a suit against Google for infringing on some of its patented auction technology. Yahoo said that it's too early to say whether Yahoo will continue to press the suit after it takes over Overture.

The competition is spurring the market into new directions - and could spawn new rivalries. Some vendors find search advertising so compelling that they're abandoning auction companies like eBay. The development is worth watching, says Safa Rashtchy, analyst at US Bancorp Piper Jaffray, adding that the market created by search could rival the efficiency created by eBay in the long-term.

However, he concludes: "It's not an immediate threat." The habits of some advertisers underscore the threat to eBay. Todd Morris, owner of Candy Crate, a business in the Southern California city of Hesperia, pays a small amount to have his products listed on eBay. He spends 90 per cent of advertising money on Google: "Google ranks up there as top dog," he says. "EBay is a crap shoot. You can spend money to put your item on there, but they can't guarantee that you're going to get hits."

James Shannon, owner of TCS in Arlington, Texas, said he started his computer periphery business five months ago, and tried advertising with eBay. He, too, didn't get much of a response. He then tried comparing Yahoo and Overture. In June, he said, he got three times the amount of business from Google as he did from Overture, with the same budget allocated to each. He now spends about US$1,200 (NZ$2,043) a month, mostly on Google.

Source: Technology nZoom

        

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