Friday, October 27, 2006


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.

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