Yahoo! to Buy Inktomi

  |  January 29, 2003   |  Comments

What will the deal mean for searchers, marketers... and Google?

If all goes as planned, Yahoo will become the proud owner of Inktomi by the end of March or earlier. The company announced its intention to buy Inktomi for $235 million last month.

"Given how important search is to our businesses, we really needed to control our own destiny in this space and not be dependent on any one third-party provider," said Jeff Weiner, Yahoo's senior vice president of search and marketplace.

Of course, the current third-party provider Yahoo uses is Google. Though Yahoo denies it, the impending acquisition is a sign to me that Yahoo's long-time partnership with Google is about to break out into open warfare.

Now fully aware that search can be a major money maker, "Yahoo the Portal" wants to regain its former stature as "Yahoo the Search Engine" and bring in more searchers. Inktomi's crawler-based technology is likely to be a key in both helping Yahoo attract those searchers and, important, earning more from its search results pages.

Regaining Its Crown

Despite Google's growth, Yahoo remains a popular search engine. In terms of search audience reach, according to Nielsen//NetRatings, it's just short of tying Google for first place. In "search hours," Yahoo is the third most used search engine. Yahoo arguably survived the growth of Google very well, so far.

Yahoo's real loss may have been one of perception. There was a time when Yahoo was seen as a top place to go for searching the Web. "Start your searches with Yahoo," some search professionals once advised. These days, Google gets the nod. Yahoo is regarded as an important second-choice alternative.

To compete with Google, Yahoo must reassert it's a first-choice search engine. The first step toward that end was made in October, when Yahoo dropped the "directory-listings first" model that has always sustained it. The move was long overdue, given crawler-based results now deliver far greater relevancy than they once did.

Ironically, the change meant Google began powering nearly all Yahoo's Web search results, rather than only some of them as was previously the case. Yahoo made it clear when announcing its renewal with Google the deal was "nonexclusive," giving every indication other partners would be sought.

At the time, Yahoo promised to bring new and innovative changes to its search results. The company renewed those promises when announcing the Inktomi deal. Although specifics are undefined, owning rather than leasing crawler-based technology is deemed essential to making those improvements.

"When licensing technology, there are limitations in what you can do and in the ability to differentiate and be flexible," Weiner said. "By owning your own technology, you are able to eliminate some of those issues and concerns."

Why Buy Inktomi?

If owning crawler technology is important, why own Inktomi's? Yahoo wouldn't provide specifics about other companies it might have considered, including Google, but instead reaffirmed it felt Inktomi was the right fit for its needs.

"We think Inktomi has world-class technology, a scalable infrastructure, a fantastic team of engineers. We think they have improved the quality of their results," Weiner said. "In blind tests, we see Inktomi doing extremely well against any algorithmic [crawler-based] provider."

It's certainly true Inktomi's relevancy greatly improved in recent months. Another key factor is probably that Inktomi has the longest track record with paid inclusion of any other crawler Yahoo would have considered, having run such a program successfully since autumn 2000.

Inktomi has 10 million paid URLs in its database, half of which produce recurring cost-per-click income. Integrating those paid inclusion listings into its search results would allow Yahoo to earn more from each search results page it serves. It's certainly something the company is considering.

"We're committed to providing users the best experience, and to the extent that paid inclusion is improving the relevancy of query results, I think that's a distinct possibility we'd be open to it," Weiner said.

What About Google?

As mentioned, I see Yahoo's desire to acquire Inktomi tantamount to declaring war on Google. I asked Yahoo if Google is the enemy. If it is, no one will say it bluntly.

"Google's one part of our current solution, and we've been pleased with them as a partner," said Weiner.

Weiner also stressed Yahoo's "flexible" and "nonexclusive" relationship with Google, which leaves it open that Google may continue to provide Yahoo results in some way, if and when the Inktomi deal goes through.

Google spokesperson David Krane responded with what Google is telling everyone, "We look forward to continuing to provide Yahoo with our award-winning search technology."

Yahoo's Search Future

What search improvements can we expect from Yahoo Weiner talks of enhancing the directory "blending" process and a mix of actual answers along with search results (for example, do a search for "san francisco weather," and the actual forecast is embedded in the search results page).

Yahoo has lots of specialty search resources that, if correctly combined, could provide relevant results beyond Web page listings, Weiner says.

"People are quick to compare Yahoo Search to other search engines. I think people come to all of Yahoo.com for various reasons. We have 25 or more different options, such as yellow pages, news, finance, and travel. In a way, those are vertical properties that enable people to find what they are looking for. When you combine them, it's an extremely valuable compilation of assets."

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ABOUT THE AUTHOR

Danny Sullivan

Danny Sullivan left Search Engine Watch as of Dec. 1, 2006.

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