Google refuses to sell out but how long can that last?
Google is pursuing the mighty mission of organizing the Webs information, and it intends to carry out the feat by maintaining the integrity of its product.
For Google, that means not requiring or even allowing companies to pay to get into its highly respected index. "We think if were the only ones out there with a reputation for integrity in our search results, that can only be good for us," says Craig Silverstein, Googles director of technology.
With its holier-than-thou pose, Google stands alone from other major search companies, including Ask Jeeves, GoTo.com, Inktomi, LookSmart and Yahoo!. There are generally two kinds of fees they charge: paid listings, in which customers pay for their sites to be included in a search providers directory or index, and paid placements, in which sites are guaranteed the top spots in searches that contain specific keywords.
Each of those players claims its search results improve when businesses have some paid input. But many have also adopted the payment schemes because theyre desperately seeking cash. The search companies have been hammered by the decline in online advertising, and theyve spent the last year trying to rely less on banner ads and earning more revenue by capitalizing on their search assets.
"When you look at the online marketing value of search, 90 percent is in the search results themselves," says LookSmart CEO Evan Thornley. "The search industry has been giving away the value for free and trying to make money by the billboards on the side of the road, and that has to stop."
Thornley and other proponents of "monetizing" search results say Web search is now evolving the same way telephone directories did: First, there were white pages, which simply listed addresses and phone numbers; then came yellow pages, in which businesses could buy premium placement. "Someone realized that if advertisers paid for appearing in directories, they would exist for all time," says Ted Meisel, president and CEO of GoTo. "Were in the early stages of the development of the yellow pages part of search."
Those search providers that let businesses pay to be included in search results say their efforts have been successful. Under GoTos pricing structure, for example, advertisers bid for top spots on a results page and pay GoTo only when users click their listings. GoTo reported 42,000 advertisers in the first quarter of 2001, up 13.5 percent from the previous quarter. The company is still unprofitable GoTos net loss for the quarter was $6.7 million on revenue of $52.0 million but its losses have narrowed. Consequently, Wall Street has become more bullish about GoTo.
LookSmart is quickly following suit. Thornley says the fees Look-Smart receives from businesses that want to be included in its syndicated directory will soon be the companys largest revenue stream.
Meanwhile, Inktomi puts a positive spin on its paid inclusion program. Troy Toman, vice president and general manager of the companys search engine division, says the fee-based listings let Inktomi build out its infrastructure and update its index more often, without having to rely on revenue from ads. Businesses can pay Inktomi to crawl pages more regularly or index parts of their sites that Inktomi may otherwise miss, though Toman says payment does not influence placement in search results.
Ultimately, its users who win, say the search companies that charge for listings. Paid inclusion, they say, provides users a more extensive index, and paid placement gives users links most relevant to their interests.
"Theres a Holy Grail here, which is users dont want advertising thats not relevant to them, and advertisers dont want to reach users that arent interested in them," Thornley says.
Google counters that it already offers extensive listings and targeted marketing. "We think the solution to the legitimate problem of [a site] not being crawled frequently enough is our responsibility, and not something people should pay for," Googles Silverstein says.
As for targeting, Google offers two ad programs on its destination site, www.google.com, that let advertisers buy text-based ads tied to particular keywords. "Premium Sponsorships" appear in a shaded box atop the search results and "AdWords" appear in a shaded box to the right of them; both are labeled "sponsored links."
Inktomis Toman contends that the Google AdWords program is not very different from paid submission. "The AdWords program is a paid listing with search results as a way of monetizing what theyre doing in searching," he says. "You cant say theyre not doing anything in this area."
Google derives about half of its revenue from advertising and the rest from powering Web searches for hundreds of sites, as well as "deep" searches within the sites of about 120 companies. Its also quickly expanding into the wireless world, recently inking deals to provide search ser-vices for Sprint PCS and Handsprings Palm OS-based Web browser.
Industry analysts predict that Google will eventually adopt fee-based listing services as the privately held company becomes more focused on revenue growth and profit. Silverstein is adamant that Google will not let paid listings into the index. But he doesnt rule out the possibility of Google adding a GoTo-like component in which the highest bidder takes the top spot, though he says such links would continue to be set off from the main search results and clearly labeled as sponsored links.
Whit Andrews, an analyst at Gartner, says it is possible Google will choose to refresh its index regularly only if it is compensated. "If they can index everything so fast if they can spider CNN every 10 minutes and they dont have to use paid inclusion, thats great," Andrews says. "However, they might choose to do so ultimately only in concert with a business relationship with CNN."
Danny Sullivan, editor at online newsletter Search Engine Watch, says he thinks Google will eventually adopt a paid inclusion model like Inktomis. First, he agrees with the argument that content sites can make a search engine better by helping it know which pages to crawl and how often. Furthermore, he says, Google may decide that as long as it is performing deep site searches for customers like Cisco Systems and Martha Stewart Living Omnimedia, it should include those results in its larger index. If Google does that, Sullivan says, thats essentially paid inclusion.
Finally, he argues, Google may find itself at a competitive disadvantage with sites that buy its ser-vice to power Web search. In the current tight market, partners may choose to go with a company like Inktomi, which offers portals a revenue-sharing option related to its paid inclusion program. He adds, however, that "it may be that companies decide it is worth paying a premium for Googles results."
But in the end, theres the question of whether the supposed taint of paid-for search results even matters. Ironically, the good will in Googles refusal to offer paid submissions into its index may be lost on many Web users.
"To some extent," Sullivan says, "what weve been seeing [with paid listings] is what people have thought has always been done."