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Business Week: "Google's Gaggle of Problems"

 3:10 pm on Jan 14, 2003 (gmt 0)

Analysis from Business Week.

Full-Text of Article [businessweek.com]

From the article: 1) "Now, it may be facing one of the oldest maxims in business: Once you make it to the top, it can be mighty hard to stay there."

2) "More Web giants are concluding that buying search results from Google is no bargain if Google.com is competing with them as a Web destination."

3)"...Meanwhile, in the corporate-search market, sector leader Verity (VRTY ) is turning up the heat."

4)"Other potential problems for Google abound. While it remains the leader in producing quality search results, a host of other search engines, including WiseNut, Teoma, and FAST, produce searches that are almost as good -- and in certain categories maybe even a bit better, according to users."

5) "Twenty out of the 30 links Google is presenting on each page is not earning them money. That's an ad break of only 33%," points out Danny Sullivan, editor of newsletter SearchEngine Watch. That may be fine as long as Google remains a private company, but it's under increasing pressure to go public -- two of its key shareholders are Silicon Valley venture-capital firms Kleiner Perkins and Sequoia Partners -- and shareholders would likely want more bang for their buck."



 4:05 pm on Jan 14, 2003 (gmt 0)

"Twenty out of the 30 links Google is presenting on each page is not earning them money. That's an ad break of only 33%," points out Danny Sullivan, editor of newsletter SearchEngine Watch.

That's about the same ratio of content to advertising that you'd see on a prime-time TV show.

IMHO, it's a mistake to measure a Web site's profitability by what percentage of its space is devoted to advertising. On the Web, a high ratio of advertising to content is usually a sign of desperation.


 4:11 pm on Jan 14, 2003 (gmt 0)

Well, if that's the case then, you are not going to like Google much in the coming months.... :)

Yahoo buying Inktomi is a clear indication they view Google as a competitor, not a "search results" provider. If AOL and Yahoo both drop Google, Google is forced to "Portalize", and try and wedge out one of the "Big 3" for a spot at the top.

I feel Google is more "Pro-Active", than "Re-Active", and won't wait until they "get the boot"... I think the start page at Google today, will become a lot more "cluttered" in the not so distant future... :)


 4:17 pm on Jan 14, 2003 (gmt 0)

The things I picked up from the article was;

a) They seemed to think that Yahoo/Google being non-exclusive was a major thing.

Surely as long as google provides the best results then it pretty much forces yahoo's hand as far as the results they will be using... If they start using results which are worse than google's, people will go elsewhere and that doesn't benefit yahoo one bit.

If google ceases to give the best results then the least of their worries is that yahoo aren't using them as a primary...

Besides as long as Yahoo paid Google for this partnership why should Google give a hoot what their results are used for?

b) Portal's are getting jealous at losing out to google as the users first port of call and so want to do their own thing.

The nature of most non-niche portals is that they just link out to other people's stuff. Now while this is great for the less web-savvy a good search engine will normally beat a non-niche portal hands down if the user realises an alternative is available.

c) Google won't give enough space over to advertisers, wont do paid results etc.

Isn't this exactly the same thing which the article listed as helping them rise to the top spot several paragraphs earlier, not to mention saying that their adverts (as-is) produce better rates than regular adverts.

- Tony


 4:21 pm on Jan 14, 2003 (gmt 0)

Google is forced to "Portalize"

Some people do learn from history, however. Why on earth would Google amble of, lemming-like, to the exact same fate that awaited Excite, Infoseek, AV, et al?

Pretty blinkered view, I'd say, and G, to date, have been anything but that.


 4:22 pm on Jan 14, 2003 (gmt 0)

Mat, because it's all about the Benjamins.... :)


 4:26 pm on Jan 14, 2003 (gmt 0)

If you mean Dollars, then yes, of course that's what it'll come down to, but you seem to be looking at everything but the punter/surfer. Good results - why does everyone think emphasising good results is being naive?


 4:56 pm on Jan 14, 2003 (gmt 0)

If google does change to be more yahoo-like or altavista-like. I will definitely drop them.

I highly value their simple interface, and extreme usability.

I think the IPO idea is a complete waste of time, and usually causes more problems.

I'd rather be a small company that is successful over the long haul, then be so interested in IPOing.

It's a proven factor towards long term failure.


 5:00 pm on Jan 14, 2003 (gmt 0)


An IPO may be a waste of time in your eyes, but if you were an executive there a 20 million dollar+ paycheck may be a nice incentive, regardless of the long term implications to the company.


 5:00 pm on Jan 14, 2003 (gmt 0)

there were errors in this article...

1. "Ditto for Froogle, a service Google launched in December that allows users to type in shopping search terms and receive rankings based on prices."

** Results are not based on price.

2. "Google provides most of the portal's Web-search capabilities. And AOL is included in Google's AdWords advertising network, so anyone who buys a keyword at Google.com will be included in the paid search results on the right side of the screen on AOL, as well."

** I don't see AdWords results to the right...

Point - don't belive everything you read


 5:08 pm on Jan 14, 2003 (gmt 0)

Believing that good results are driving a particular search engines success is partially naive. Heres a sample of why I believe this...

About 3 years ago, I gave a computer to my father-in-law... he is not afraid of new technology and is a very intelligent man...

at any rate, I placed Metacrawler in his favorites section of IE... he came to my house the other day and asked me to search for something... when I pulled up google, he asked why it looked so different... I said what looked so different(my confusion was obvious) he said the thing that you search on... he had used metacrawler for 3 years and never thought of switching to another search engine... In fact, I have doubts as to whether he even know there were other engines out there...

My point is that it is assumed by most non techies that all search engines are created egual... given that premise, brand regognition and familiarity is much more important to a SE's success than relevant results.

[edited by: mat_bastian at 5:10 pm (utc) on Jan. 14, 2003]


 5:10 pm on Jan 14, 2003 (gmt 0)

>don't belive everything you read

I don't. But every point of significance in that article has been made here --over and over and over. ....some of them more than a year ago.

Good article, IMO, about as well-put as I've seen in articles meant for mainstream US businessmen. And, make no mistake, BW still holds authority in that market.


 5:34 pm on Jan 14, 2003 (gmt 0)

jpavery, they comments are kind of correct but not clarified completely:

1) rankings based on price, not quite true, should have been rankings influenced by price :)

2) Google AdWords do appear on AOL, but not regional variations and not at the right ;)


 5:36 pm on Jan 14, 2003 (gmt 0)

I think the IPO idea is a complete waste of time, and usually causes more problems.

I'd rather be a small company that is successful over the long haul, then be so interested in IPOing.

It's a proven factor towards long term failure.

The problem is Google needed money to buy all those boxes and keep up with their growth.
The VCs that gave them money are not likely to just sit there and wait for them to have a long prosperous future as a small company making 10% profit.
They want to drive them public and sell their shares to make 10000% in one year.

After that, they won't care much for Google.

That's all oversimplified, but that is what Google's founders have to deal with.


 5:40 pm on Jan 14, 2003 (gmt 0)

We've seen it time and again, an engine sells all its listings, or attempt to "portalize" and loses focus in the attempt to grab cash and then ends up in the scrap heap. They should just stay the course and keep doing what they are doing. It's no accident they've grabbed so much of the search market and command a nice chunk of change for their advertising spots.

jeremy goodrich

 5:51 pm on Jan 14, 2003 (gmt 0)

That article is talking about threats that don't exist, imho.

"Overture won a series of contracts...including CNN".

Sorry, but as an advertiser CNN is NOT on my list of web properties that I'd like to be listed on.

The interesting thing about that 'series of contracts' that Overture 'won' instead of Google to me, is that CNN is the *only one* that was mentioned here. So the others are likely so small that Overture was only scraping the bottom of the barrel...

Funny read, but I think our group has it right - sure, Google might have some trouble soon - but this article is pitching it all the wrong way.


 5:55 pm on Jan 14, 2003 (gmt 0)

It's an interesting article. It's a bit melodramatic on the title they choose. The content isn't there to back up that title.

The only bump in the road, has been Yahoo, and that may turn out to be a pothole - they make it sound like bridge-out-ahead. I still think, Yahoo did them a favor.


 5:57 pm on Jan 14, 2003 (gmt 0)

Very stupid article. Why would Google want to change their business model which up until now has made them the most successful search engine on the web. Maybe some companies are more bothered about the service they provide rather than the profit sheet.


 6:06 pm on Jan 14, 2003 (gmt 0)

If I were Sergei Brinn [sic], I'd PR0 BusinessWeek immediately.


 6:08 pm on Jan 14, 2003 (gmt 0)

>PR0 BusinessWeek immediately

Heh! I've been wondering what the phone calls and emails to the plex from the VCs have been saying about it. BW isn't some scrawny little newsletter.

jeremy goodrich

 6:13 pm on Jan 14, 2003 (gmt 0)

Now that would be interesting...PR0 BusinessWeek, just for the article.

They could call it a 'server glitch'...and think of the free press they'd get for that...it would make everybody wonder. :)


 6:15 pm on Jan 14, 2003 (gmt 0)

The writers are making the same mistake as others before... a far too narrow view of how search engines can make revenue and a lack of seeing innovative models for a new media. 66% of clicks don't make revenue.. so? heh if tv or newspapers go more than that people will stop using them - and the same is already being proven for search engines.

And as for people being "stuck" on the major portals such as Y!, increasing sophistication will accompany the web becoming more mainstream. Slowly users will become more savvy, it wont be fast, but it is an inevitable that browsers will become more savvy and demanding in what they get for their connection fees and 40% to 50% of ads aint it. Thats the quickest way to get people away from the Web and back to reading newspapers, magazines and watching TV..

Mind you.. that may be the idea ;)

[edited by: chiyo at 6:33 pm (utc) on Jan. 14, 2003]


 6:17 pm on Jan 14, 2003 (gmt 0)

Businessweek has made trade telling stories about businesses. Their role isn't so much to judge as it is to tell what is going on and point out potential bumps in the road. They aren't panning Google so much as simply telling the reader what they are about, what directions they may go in and what potential pitfalls they may face. Publications like this usually title their articles to get people to read them not to make a statement. Given Businessweek's genre, I think this article is a good one. There hasn't been very much interesting stuff published in traditional media about the internet of late. Maybe there will be more now that BW has done an article.

IMHO inventors and entrepreneurs never end up running the businesses they start. Also businesses aren't so much valued for their original product as they are for how they handle adversity. Every business that makes money will eventually be challenged. How they react to the challenge is what frames their future. There just have to be some kids in sotware thinktanks who are developing the next generations. Google will be judged over a longer perspective than the past three or next three years. BW is just framing the issues by which they will be judged.


 6:25 pm on Jan 14, 2003 (gmt 0)

> PR0 BusinessWeek, just for the article.

Come on, i did not mean a PR0 for the article but for misspelling the name not once but twice. Don't get me into any trouble here. ;)


 6:26 pm on Jan 14, 2003 (gmt 0)


Not GeekWeek

Don't expect the "buzz" to be the same. If google keeps moving forward with the IPO direction, you can expect a lot more analysis of their business and it won't be all favorable.

<added> You might be hard pressed to find any wall street analysts reccomending an internet IPO, most of wall street just wants the whole "hot internet company" concept to "go away".


 6:42 pm on Jan 14, 2003 (gmt 0)

That's not a bad article, given that it's mainstream press. The author has it all lined up nicely, must have researched someplace...


 6:47 pm on Jan 14, 2003 (gmt 0)

Google will not come in trouble if they just keep there search simple and layout like it is, they dont need those millions, because the user will stay at Google because of there good results and every one has a chance in Google not only the big companies and who want to search other SE when you see the same companies in the top everytime, you want other result and iven if it is the little man selling books in brooklin, we want to see what hes offering to.



 6:47 pm on Jan 14, 2003 (gmt 0)

>Not GeekWeek
>Don't expect the "buzz" to be the same.

Nor NewsWeek

It's written to their audience, not ours. The bulk of their readers are scanning, picking up the basics of where search is heading because search is showing up on their bottom line or at least on their radarscope.


 9:42 pm on Jan 14, 2003 (gmt 0)

Although Google is currently the best SE out there, I would not underestimate the power of Yahoo with the addition of Inktomi.

I would also almsot "guarantee" you will see more ads on Google after IPO. The first thing the board will do is say "how can we better maximize our ad revenue. One of the main choices since they already dominate search is to get more ads on their pages or attempt to achieve more click throughs by changing the ads.


 11:29 pm on Jan 14, 2003 (gmt 0)

Twenty out of the 30 links Google is presenting on each page is not earning them money.

100% of the links on Google are earning them money! If it wasn't for the 70% free links, there wouldn't be any visitors and consequently no advertisers!

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