ON END OF THE SEARCH FOR SEARCH

NEVER SAY NEVER

BIll Burnham has a provocative, new post worth reading titled "Search Startups are dead, long live Search Startups ".  As he explains it:

"Any start-up trying to displace Google, Yahoo, or even MSN or Ask (or for that matter any VC trying to fund them) should just get in their car (or hop on a plane) and go look at Google’s new server farms at The Dales in Oregon. And if that doesn’t convince them they should head up the Columbia river a bit and check out Microsoft and Yahoo’s digs.   The costs to compete in core search , are now simply to high."

He goes on to argue that:

"One can imagine a world in the not to distant future in which an application designer can easily leverage the billions of dollars being spent by Google, Yahoo et. al., by having programmatic access to what is essentially a custom crawl list and a highly filtered index. 

In this way search engines, in some respects, may become an infrastructure layer not too dissimilar from the telecommunications networks and internet standards that they themselves are built upon."

In a foll0w-up comment to the post, he goes on to outline why even with the on-going improvement in the price-performance in hardware/bandwidth infrastructure costs, the price of entry into search is high, and will likely remain high.  I summarize his five points here...read the full comment for exposition.

"What has changed since 1999 that has made entry into core search so much more expensive? I would say five main things but others may have more. These include:

1. Size of the web.
2. Frequency of crawl.
3. Size of index.
4. Complexity of indexing algorithms.
5. Query response."

He makes a very persuasive case that's worth reading, along with the various insightful comments by readers.

However, it does remind me a bit of the time Francis Fukuyama proclaimed "The End of History" in his controversial book at the end of the 20th century, predicting a world of global, liberal democracies in the 21st century following the end of the cold war.

As insurmountable the obstacles seem to a new company being able to do search with the kind of pervasive adoption and economic success of a Google, I can't help but feel that someone can find a way.

After all, it wasn't long when the tech world proclaimed that startups focused on productivity applications on the PC were dead.

I mean who would invest the hundreds of millions or billions it would take to go up against Microsoft?

And for a long time, no one did.

But technology continued to evolve, changing the current realities and future possibilities.

And now, many believe the formerly impossible may be possible after all.

Bill may very well be right in his thesis for quite some time. 

But "never' is a long time.

To paraphrase fictional mathematician Ian Malcolm from Crichton's Jurassic Park, "Technology will find a way", with a little help from technologists, entrepreneurs, and investors.

Comments

[Yaser Anwar]

Michael I think you and your readers will agree with me that when it comes to technology and web 2.0 "impossible is nothing."

History is full of examples such as Dell taking on the giants IBM and HP, Google going up against Yahoo and MSFT.

Although it may not be impossible, the search business is scalable but at very high cost. Look at Looksmart and SEO companies such as Find What, they used to make a lot of money a couple of years back.

But ever since Google has gone public, over 3bn in spending by MSFT to gain a foothold in search and other exorbitant amounts spent by Yahoo, Ask etc. it has become very tough to gain market share, maybe even impossible.

[Rolly Rouse]

Hi Michael -

Your gut reaction seems spot on to me. There's always room for disruption.

Google itself is a prime example.

In 1999, "search portals" (especially Yahoo) were king. Experts predicted that the next phase of search would be a refinement of the portal business model (human editors, CPM banner ads).

So vertical portals were the rage. Funding flowed. Pundits opined that the evolution of search was over. Portals - and vertical portals - had won, they said.

At the time, few were willing to bet on "search engines" as a viable business model. Indeed, a top-tier VC I know (who was brave enough to admit turning down participation in Google's $25 million round in 1999) told them, "Why in the world do we need another search engine?"

Powered by unwavering conviction, the Google founders beat the odds and blazed a new trail. They defied consensus. They created a unique vision. They built unique technology. They forged a unique market position. They did this at a time when the market for text search was moribund.

Google's VC investors of 1999 apparently turned sceptical and scared in 2000. Rumor has it that they wanted out of Google in 2000. After all, the Company didn't yet have a viable revenue model. They didn't discover and implement their now-ubiquitous text ads until 2001.

In the five years since, Google has grown like gangbusters. Advertiser spending on their text ads went from essentially nothing in mid-2001 to $10 billion per year as of mid-2006. That's some kind of "up from under the radar."

Today, Google is the clear winner in the search engine space (and is likely insurmountable).

But Google itself shows the disruptive power of new business models. Search portals were not the final phase in the evolution of search. The same may well be true of search engines, as well.

All the best -

Rolly Rouse
Founder & CEO
HomePortfolio Inc.