In Search of…. Profits

Since American universities spawned Lycos and Yahoo in 1994, the Internet as been a navigable system. Back then it was a curiosity and no one expected that the Yahoo, which began as a hobby, would grow to be worth $8.5 billion in just 5 years.

Other indexes and directories arrived soon after. Their layouts were uncomplicated and pleasant to use. Each of these search engines had a look and feel that made it individual, each engine had a personality. They received funds from carrying a banner advertisement at the top of each page, but they all ran at a loss.

Entrepreneur Steve Kirschafter, inventor of the optical mouse, founded Infoseek in January 1994.  Best known as a search engine, Infoseek also developed the technology that measures the number of times visitors click on a banner advertisement. With click-through rates measurable, advertising grew, and so did the Internet. Which created more advertising space - and it continues to feed on itself in this manner today.

With this expansion surfers relied more and more on search engines, which today make up five of the top ten visited web sites. That translates into a lot of advertising money for the search engines.

Take a look at the front pages of AltaVista, Yahoo or Excite. You'll be wondering why I'm even mentioning the advertising, for there is only the occasional little ad, nothing like a banner in sight. Infoseek has no ads. But the front page is merely a smokescreen.

Unable to make a profit from banner ads, the new search portals are milking their popularity in other ways. Yahoo began by adding a range of peripheral products such as news, chat and free e-mail. And in early 1998 it became the first major directory to post a profit, albeit only two cents per $184 share.

Onto a good thing they then added auctions, calendar management, credit cards and flight reservations. However, to create each page of content costs them more than the ad revenue they receive. So later that year Yahoo added shops to their site. Since then, their annual revenue has skyrocketed to $500 million - a rise of over 1000% in two years, and profits have become more common than losses.

Thirty percent of their revenue now comes from their merchant partners, so this year Yahoo has already added more than a thousand new stores to its Shopping channel. They spent $5.7 billion purchasing streaming media provider Broadcast.com. And for $3.3 billion bought Geocities which, with it's banner ad based revenue, is yet to make a profit.

Yahoo's rivals have already taken similar steps: Disney and Infoseek joined forces to create Go.com; America Online bought Netscape and @Home bought Excite. Lycos bought companies like WhoWhere, Wired Digital (who in turn own Hotbot) and Geocities clone Tripod.

The search portals have become labyrinth-like department stores that hope you will get lost inside and buy more. The deeper you go into Yahoo, the bigger the ads become and more and more opportunities to buy something pop up. You will forget what you were originally searching for - because the search engine aspect is just a loss leader to get you into the store.

So, just as all the search portals are becoming copycat behemoths, there are the inevitable newcomers offering new ways of doing things.
In May, as the Internet surged to an estimated 800 million pages, and the coverage of the biggest search engine slipped to 16%, FAST Search of Norway emerged. They announced plans to index the entire Web, something that seemed unlikely to ever happen. On launch day they had 80 million pages indexed, and surpassed 200 million in August.

The race was back on. Of all the others Excite has been the only one so far to take up the challenge - they are presently indexing an extra million sites a day. As well as buying Britney Spears memorabilia, playing Fantasy Football and watching the Dow Jones, people still need to search the Internet. And they might defect to whoever can provide better results.

Google emerged last year from Stanford University, the same place that gave us Yahoo and Excite. Google rates sites by how many important sites link to them, a process that currently works very well, despite the obvious recursive aspects. Hotbot soon followed suit by incorporating Direct Hit technology, which does a similar thing.

Then there is Ask Jeeves - the star of natural language queries and a hit with children. AltaVista have already incorporated the same database of seven million questions into their own results. Others are bound to follow.

So what does the future hold? Like newspapers, there will a natural limit to the content that people want. And, except for possible political leanings, all search portals will become gigantic, similar and lacking personality. They will offer foreign language translations. They will incorporate the technology that makes Google tick, pass on proper questions to Ask Jeeves and interpret the FAST database in similar ways.

News content will be a major component, and sites like CNN will fail or be purchased. They will have their own radio stations to listen to while you browse, something that Lycos is already onto.
 

The dominant two or three will win, and even if you don't set one of these sites as your home page, you will end up there. The major portals are now offering us three or four cents per click-through to have little search boxes on our own sites. The only choice we will have is what to type into the search boxes.

 Try these:

Ask Jeeves
 Answers your natural language questions, the kids will love it.

Lycos Radio
Five channels of sounds to search by

Systran
The translation service used by AltaVista and Infoseek

FAST Search
 The biggest engine on the web, useful for when the others come up blank, but mostly irrelevant for popular queries