Is there room for Accoona?

December 9, 2004

How much money do you think it might take to compete with Google, Yahoo or MSN?

The market for search is currently so hot that another search engine, Accoona, tossed its hat into the ring. Bill Clinton presided over the launch and hoped everyone involved would "make lots of money."

Apparently, Accoona, using its infinity sign to either disguise or enhance its Google-esque double Os, is ready to dethrone Google as the Internet search king. Before you start wondering when the IPO is coming, let's take a moment to think about what's really going on here.

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First, Accoona is trying to use a two-pronged attack against Google, coupling its own artificial intelligence technology and exclusive content through a partnership with the Chinese government to allow Accoona to search the database of Chinese businesses.

Combining Slick Willy and the potential to get inside the huge Chinese economy isn't a bad publicity stunt. Without traffic, the revenue won't flow.

Second, the technology doesn't work very well. Try it for yourself. I did a search on Nike (NYSE: NKE), given Phil Knight's recent announcement that he is retiring. After scrolling through 50 listings, I never got to the Nike website.

Does that seem like a relevant search? It's a young technology, so I will give it the benefit of the doubt for now. But even if the technology is better, what if it takes too long for it to become useful and never catches on?

Third, Google should not be Accoona's sole focus. Between Google, Yahoo! (Nasdaq: YHOO), A9 from Amazon.com (Nasdaq: AMZN), and the new MSN Search from Microsoft (Nasdaq: MSFT), there is $407 billion of market capitalization and $70 billion in cash for Accoona to contend with.

That's a lot of incremental capital that will be spent refining and creating search technologies, creating complementary products, and marketing the heck out of them. Seems like Accoona is bringing a knife to a gunfight.

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I'm also skeptical of the Chinese government. The Chinese government knows how to use its leverage to get what it wants, and what it wants is foreign investment capital and a place to ship its products. So who's to say that the government agency's database isn't just a bunch of hype to market the Chinese economy? Always remember, caveat emptor.

Even if you offered me $70 billion, I am not sure I could effectively break into the search engine business. To me, Accoona's late entry is a sign that the teams headed for the playoffs have been named and the competition will now begin in earnest.

But maybe I'm wrong. As Rick Aristotle Munarriz pointed out, maybe it's just starting to boom. Either way, there's some tough competition down the road from the big guys in the search engine business.

Article by David Meier
Source: Motley Fool

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