I have always kept up with search technology and sites on the internet, it’s what I have always thought of as the backbone to the internet. When I was working as a venture capitalist I dove deep into search. It was our firms idea that search was a hot space that was only going to expand. I think I saw and talked with almost every search company out there in 2004-2005 and nothing ever really blew my socks off except for one company in the Netherlands which we got to a term sheet with, but could never closed due to what I would call cultural differences in investment philosophy, style and expectations. Everyone is still buzzing about the Microsoft – Yahoo search deal, I say, great, means some guaranteed revenue for Yahoo and Microsoft gets more market share. Frankly I think it was a dumb move by Yahoo; done more by CEO who had to show she was going to do something. I call it investor management. In the end Yahoo will pay and Microsoft is laughing all the way to the bank and market share. Yahoo gave up its roots, it basically invented search, it was not even called that, it was termed in the early years a “internet phone book”. Now Facebook and Twitter are moving into the area. In Facebook’s case, if you have by some estimates to have north of 20% of internet traffic, you’re going to have an opportunity to cash in on search somehow. Twitter is moving into that area as well and has some big opportunities.
Search really is the backbone to the internet, no two ways about it, you either own that backbone or rent a solution. If you rent it you’re not that strong if that is what your business relies on. I am not saying Yahoo will fail, at the end of they day I think they are now more a media company then search, but being a media company has some problems if you do not have the traffic or audience in the first place. What’s their fate? Well, I worked at AOL, everyone said we were a media company and we liked that, it was cool. Truth is we were a connectivity service, i.e. dial up access provider. That is where we made our money, honestly, we printed money from the dial up service. Why? Simple, we owned the backbone. Once we tried to get into the broadband business we were dead. Why? Because we had to rent the backbone. While we had a media business which had nice margins that was only facilitated because we had the dial up service and the customers used our “net gateway”, ie our browser, where we provided media and sold those ads. Where is AOL now that it’s dial up business is all but dead; they are a “media company”. Nice margins, but you still need traffic and their traffic left with the death of their backbone. Many of us saw it coming, some of us left early, some people rode out the harvest while it lasted. Will they survive, sure, but it will be a much smaller business. So where is this rant going, well, think of what happened to AOL when you think what might happen to Yahoo. If they lose search will people still go there or use their “media”? Or will they simply go to Bing who not only has the search but is also adding the media to surround it. It will be interesting to see how it plays out.
Now back to search. I still find it amazing that while Google and now Bing are decent at finding information on internet sites, they still stink at finding the best sites for different categories. The technology driving search today has Continue reading