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Wednesday, November 12th, 2003

Google's New Deskbar

Google has recently released Google Deskbar, a search tool that allows you to search all of Google’s various databases (Google, Google News, Froogle, Google Groups, etc…), without opening your browser. When installed, Google Deskbar operates in the lower tray and automatically opens an Internet Explorer window to display results. Google has introduced this tool in response to rumours that Microsoft will be bulking search directly into its new operating system Longhorn.

Overture and NBC have signed a deal in which NBC will display paid-results from Overture in returns from the search feature on the TV network’s website. NBC joins other large media outlets such as the New York Post and CNN in introducing sponsored advertisements to search results in a bid to cash in on the growing contextual advertising market. Whenever a site user performs a search from NBC, the results returned will include advertisements that have bid on specific keyword phrases in an auction-like format. Under the two year deal, the top 3 bidded sites at Overture will appear as Sponsored Links above the traditional listings.

Major retraction and apologies folks… I just got off the phone with Google’s Communications Director, David Krane. It seems that the rumours of Google’s pending IPO have been greatly exaggerated by hundreds of writers, including myself, who are following Google. The story, which first broke in the Wall Street Journal Digest last Friday, has developed long legs and has been reported in most major business journals around the world. After reading literally dozens of articles and analysis, we decided to run with it too. Sometimes running with what appears to be the real story can be like running with scissors, a rather dangerous thing to do. It would seem I stumbled.

Here’s the story as we see it today. Google has NOT made a formal announcement regarding the issuance of an IPO. I made a foolish mistake in reporting this based on articles from several sources, all of which named “unnamed sources” as their informants. Google has been in talks with several investment banks, several of which are jockeying for position on floating the IPO. This was reported in Tuesday’s Oakland Tribune and Seattle Post-Intelligencer, to name a few. When issued, it will likely be in the $15-25Billion range, as reported here and in most other publications.

I believe the analysis in my article to be, for the most part accurate, assuming Google does issue their long-expected IPO. Several people I’ve spoken with today still believe that a formal announcement is imminent however; Google’s communications department has refused comment on the issue.

Google announced it will make its first Initial Public Offering (IPO) of shares last Friday. The IPO, which is slated to be issued in late February or early March marks a major turning point in Google’s history and will likely cause changes at Google as shareholder demands will become part of Google’s operating strategies. Google has been privately owned since its inception in a Stanford University dorm just over 5 years ago. In the past 5 years, Google has grown into the largest and most used search tool on the Internet and is considered the largest catalogue of information in human history, akin to the world’s greatest librarian. It is also considered a money-making machine with rumored profits of upwards of $700Million last year based on estimated annual revenues exceeding $2.5Billion. The total IPO is valued between $15Billion and $25Billion.

One of the most interesting facets to this story is the innovative method Google will use to issue the offering. In a bid to distance itself from the scandal ridden world of Wall Street, Google will use an online auction format to allow investors to bid on the value of the shares they purchase. This move will save Google and its investors hundreds of millions in brokerage fees and should insulate Google against unscrupulous financial analysis and investment managers. On the other hand, it might also leave many investors without the benefit and security of professional advice when making their stock purchases.

Big questions about this IPO remain to be answered and in many cases remain to be asked. 1) Why is Google doing this at this time? 2) How will this effect the current version of Google? 3) How will a Google IPO effect the rest of the technology world? 4) Will Google’s announcement effect SEO strategies in the near to mid-term future?

1) Google is issuing the IPO for several reasons. First of all, it needs to bulk up its cash-holdings in order to fend off rivals MSN and Yahoo through improvements in its technologies and extra advertising of new services. 2004 will see a rise in search engine advertising as the big three introduce new services and compete for clients. We will also see the introduction of several new features that are currently being beta-tested such as geographic targeting of search results and contextual matching of information contained in various documents and advertising sources. In order to improve its public face and let the public know it is introducing new technologies, Google is going to have to spend a good deal of money, especially in light of the tremendous advertising budgets wielded by Yahoo and MSN.

2) It is difficult to say how the current version of Google’s traditional, (free) listings will be effected by an IPO. It is likely we will see more paid-content finding its way into the Top10 as investors will expect to see some sort of dividend from what is considered the most successful Internet property of all time. While the addition of paid-content in the traditional listings might seem way out of step for Google, many of the sites that are placing in the Top10 today are there because they paid someone to put them there, but not the folks at Google. Google’s PageRank formula had proven easy to manipulate in the past, causing Google’s engineers to tinker with the algorithm over the past 12 months. The “current” version of Google has been undergoing changes for much of the past year and should be considered, in actuality, several versions of Google. These changes have mostly been happening in the background with the introduction of what was supposed to be new spam-fighting algorithms and the integration of new services such as Blogger, Froogle and AdSense. The clean and extremely simple interface has remained the same but the results that Google has been returning lately have been laden with spammy SEO techniques such as hidden text, link-farms and keyword stuffing. We’re hoping the issuance of an IPO will help Google’s engineers focus on re-creating a product that end-users love to use without the inclusion of irrelevant and highly manipulated sites.

3) A Google IPO could have an invigorating effect on the rest of the technology sector if it is successful. Firms from the Silicone Valley to New Delhi have several new and innovative products to bring to market but most great ideas in development today will never be seen by the public as investors are justifiably wary of putting their money into the tech-sector. Google’s IPO might have a positive effect on a highly jittery investment community. At the same time however, like other tech-stocks from past and present, Google’s perceived value of $15 – $25Billion seems somewhat overstated and could mark the beginning of a new tech-bubble based on an unproven but fiscally feasible revenue model, contextual advertising. This is an area we should all watch very closely as we’ve been lulled into a false sense of security based on hubris before, with disastrous effects. Here’s to hoping the investment world keeps its collective heads on its collective shoulders before the collective collection agencies come-a-calling.

4) Lastly, will a Google IPO effect SEO strategies? In a word, absolutely. Google has consistently led the search engine sector over the past years with new innovations and customer-loyalty. Where Google goes, the rest of the field tends to follow. Google getting larger and more powerful leads us to believe that the days of the search engine spiders have returned in force. While bulking up on our Paid-performance services, mainstream SEO companies will be breathing sighs of relief this week as the realization that our market will not be fully dominated by AdWords and Content Match programs but will likely be split between specifically targeted advertising through contextual matching and traditional search engine return pages, just like in the old days. With the introduction of MSN’s new spider based search tool and the inclusion of Inktomi results in the Yahoo search returns, it is fairly easy to see that SEO techniques designed to please spiders are going to be in very high demand in the next few years. At the same time however, SEO firms will need to be far more precise in handling paid-advertisments through AdWords and Content Match programs as these revenue generators will be pushed heavily by the accounting departments of the big three firms.

Google’s IPO will have major implications for the entire tech-sector. How it plays out remains to be seen but the one certainty is that search, as an industry, has become a mainstream sector in both the global and Internet economies.

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Monday, October 27th, 2003

Google Going Public

This announcement was actully made last Friday but I was blissfully away from any and all computers.

Google announced that they will be issuing their first IPO in late February or early March. This will be one of the largest IPOs in history, valued somewhere between $15Billion and $20Billion! Google is likely going to issue the IPO in an auction format, allowing investors to bid on the value of their shares directly.

More information as it becomes available.

Search is the gateway and guidepost to the Internet. Over the past five years, the business of search has changed from a model resembling a friendly but very well built lemonade stand to the current state of monolithic but often dysfunctional empires built by and around today’s big three (MSN, Google and Yahoo). With tens of billions of dollars at stake, competition between the big three has turned into an all-out business war, the casualties of which are jobs, cool technologies, and ultimately, the current wild-west atmosphere of the Internet. When the dust settles, finding what you are looking for may be a bit more difficult and expensive. There will likely be a major decrease in search options by this time next year and what does exist will likely cost you, unless you are interested in finding information that has been pre-paid for by the supplier (advertiser) as opposed to the consumer (searcher). Google is likely to retain non-paid listings as a priority but that may change if Google issues public shares through a widely expected spring-time IPO. That, however, is then and this is now. Today’s battle takes place between engineers at Overture and Google, with Overture landing a solid upper-cut in the form of Local Search proficiency. Read more…

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Thursday, October 16th, 2003

IBM WebFountain Splash

IBM has introduced its new search tool, WebFountain to rave reviews from the IT community. WebFountain is the result of three years of research and development from engineers at Big Blue and may be the most well developed analytical search and data-mining tool to emerge to date. The search engine itself is housed on an IBM custom built super-computer containing over a petabyte (1024 Terabytes or over 1000 trillion bytes) of storage space with over 3-billion pages indexed, 2-billion pages stored and the ability to mine and analyze data from over 20-million pages a day! WebFountain has been designed for business and research use rather than home or interest surfing and could become a very powerful tool for managers, post-secondary students, researchers and entrepreneurs. Through several of the analysis features, users can find relational data between several sources at the same time while compiling results in a separate search-window for rapid access. IBM has invested an enormous amount of money into developing WebFountain. The tool is representative of the newest class of information applications which won’t just draw relevant information but will actually find facts and patterns amongst documents, analyzing and compiling the data while the searches are being conducted. Google is also working with applied information analysis tools as witnessed by last month’s purchase of Applied Semantics.

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Thursday, October 16th, 2003

Consumer Product Sites Grow

Consumer comparison websites such as Froogle, BizRate, Shopping.Com and PriceGrabber.Com are beginning to attract huge numbers of users each month. In the past year, PriceGrabber has seen an 81% growth rate! These types of sites allow consumers to examine and compare products based on price, user reviews, features and functionality. With the ability to find information on almost any product advertised on the Web, online consumers are demanding more specific details about potential purchases before deciding which specific widget to buy. Online advertisers are urged to use consumer comparison search tools and to develop short but highly informative product descriptions detailing cost, benefits, merchant reviews and user reports. As with any form of advertising or marketing, the more people are exposed to your product, the better the chance of them purchasing your product. These days though, consumers are demanding to know as much as you do about these products before spending and it is the merchant’s job to make the process as simple as possible by providing the product information their customers expect.

Google’s CEO, Eric Schmidt revealed today that Google will focus on the personalization of search as its main tool to fend off rivals MSN and Yahoo. In a bid to improve the lagging relevancy of its search results, Google purchased a Stanford University startup search engine, Kaltix that was designed to track user’s searches and compile user/computer-specific search databases.

As a search technology concept, personalization will likely evolve over time starting with basic context matching and moving to unique user personalization as software and user data matures. As a start, we are strongly recommending webmasters be certain to add specific geographic information on their contact pages (as well as a well-defined text link to their contact pages) including; street address, city or cities in which the business is located, state or province, nation and zip or postal codes. To be safe, it is likely wise to include geographic modifiers in the description meta tags as well.

MSN dealt a predictable, yet massive blow to the Australian search directory LookSmart yesterday with the announcement that MSN search will not renew an agreement to display results from the LookSmart directory. The current agreement which ends in mid January 2004, is LookSmart’s largest revenue stream, accounting for over 65% of the already beleaguered company’s $140Million annual income. LookSmart, which recently announced a move towards the paid-contextual advertising market, will almost certainly be fatally damaged by this move with LookSmart shares down 52 percent at $1.44 by the close of trading yesterday. Investors fled the company so quickly that trading on LookSmart’s stocks was closed shortly after the announcement.

Our analysis: MSN has dropped LookSmart for three main reasons:

1) First of all, LookSmart was entering the paid, contextual advertising sector, a market MSN wishes to dominate in the coming years. The last thing MSN needs is another rival to contend with on top of Yahoo and Google. By dropping LookSmart at this time, MSN is effectively consolidating its competition by eliminating the smallest.

2) Secondly, MSN doesn’t need to draw results LookSmart as it can now compile its own results from a mixture of Inktomi listings and sites spidered by the new MSNBot.

3) Thirdly, Microsoft needs to dominate the multi-billion dollar search market as its traditional markets are either flattening or shrinking as Linux romances the desktop market and Apple’s Unix driven Mac OS X continues it’s drive into the micro-product market. Microsoft’s signature product, Windows has proven to be a constant security risk as viruses and worms continue to penetrate and MS continues to issue patches, leading many IT decision makers towards UNIX and Linux based systems.

Microsoft is clearly aiming to take paid-advertising market share away from current industry leader Google and second runner Yahoo (Overture) however the imminent demise of LookSmart might actually come back to haunt MSN in a few months as LookSmart may have just become a more attractive take-over target for Google or Yahoo. LookSmart’s technology is sound and its newly announced paid-placement business model could generate revenues if LookSmart has learned to treat its customers with greater respect than they have in the past. While Yahoo has already been on a purchasing spree this year with the acquisition of AltaVista, AlltheWeb and Inktomi, Google has yet to take over another major search player, instead targeting smaller companies who’s technology could improve their current product.

Whatever happens to LookSmart in the coming months, MSN’s move has definitely moved the goalposts on the search engine playing field and escalated the business war between the big-three.

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