The Long-Term Strategy for Survival Continues

Part Two

Last week I took a look back at 1995 through 1997 so we could gain some perspective on how the future may unfold for search engines. Could it really be the end for them?

Well, something critical happened at the beginning of 1998, the year when we were supposed to have only two or three search engines remaining. A new search engine — GoTo — was launched in February. It dared to do what no search engine wanted to do since Open Text’s failed experiment in 1996: sell paid listings. GoTo’s business model was absolutely counter to everything the portals had evolved into. Instead of trying to keep people at GoTo, the service wanted them to leave, because outbound departures were how GoTo earned its money.

It was easy for GoTo to gamble with paid listings. It had no reputation to lose. The major search engines — oops, portals — were more conservative. They didn’t want a backlash from attempting paid links, nor did they really need to attempt paid links. After all (the thinking went), We’re big, we’re strong, we’re the portals. We’ve got advertisers coming out of our ears and no need to scrape for pennies per click.

Then, a funny thing happened in April 1999. Jupiter warned that the big retailing deals with portals weren’t so hot. “Despite the huge volume of traffic portal sites offer commerce players, revenue expectations for portal tenancy deals are often overly ambitious and are destined to be unrealized,” Jupiter advised commerce sites. It was a first shot that would begin to haunt portals in early 2000, when articles began appearing about the demise of portal deals.

“In addition to these bet-the-farm deals, countless more start-ups have signed smaller contracts — worth $2 million to more than $10 million — for placement on portal pages, the most expensive real estate on the Net. Now that many e-commerce companies are struggling to stay alive, the future of these deals is in doubt. If they fall apart, or are renegotiated on more lenient terms, it would force portals to replace the lost income with new sources of revenue,” wrote The Industry Standard in April 2000.

In addition to the loss of big retailing deals, portals also suffered from the decline in more ordinary banner advertising, as a result in the crash of dot-com stocks in 2000. That’s two strikes against them, with the third being that it is expensive to run a portal. If you don’t have the traffic, you need to get it — which some portals went after by spending millions on television ads. Or, if you do have the traffic, you still have problems providing all of these features for free. As a result, players started dropping out of the portal game. Both Go and AltaVista pulled back from wanting to be all-purpose portals in September 2000, for example. The consolidation that was long predicted was finally here.

Perhaps. The consolidation predictions initially focused on search engines, and I’ve repeatedly said each time they’ve been made that I don’t believe that we must have only two or three major search engines. Not portals — search engines. Yes, maybe we are going to be left with AOL, MSN, and Yahoo as the major portal players. However, that doesn’t mean other players can’t survive and thrive as focused search services. People have very different views about relevancy, and I think it is entirely possible for us to have several major search engines serving the incredibly huge Web audience. The key is monetization. The services have to find new ways of making money that don’t require users to stay at their sites.

I’ve written before, in some depth, of the new methods being explored, such as paid-listings, paid-submission, and paid-inclusion programs. One or more of these revenue streams has been implemented by every major search engine you care to name — yes, even at Google. To date, there’s been little outcry against the programs, and, in fact, the searching public needs to continue to support such moves. Failure to do so means that the search engines will indeed face losing one of the last lifelines they have for staying afloat. This isn’t 1996; the portal model doesn’t work and wasn’t pleasing to searchers anyway, so the various paid options I’ve named are now the leading ways for search engines to continue providing search capabilities for free.

In return for public support, the search engine industry needs to ensure it doesn’t become a free-for-all. Players such as Netscape Search, Lycos, and HotBot need to cease calling paid links “Featured Listings” or “Partner Search Results” and begin using what has become the more common and more honest terminology used by services such as AOL Search, Google, and AltaVista — “Sponsored Links.” Meta search engines that are overloading their results with too many paid links need to re-evaluate what they are doing or face users going elsewhere.

LookSmart, which has a chokehold on the paid-submission and paid-inclusion models, needs to loosen up a bit and figure out a guaranteed way for quality nonprofit sites to get listed, perhaps by charging a low token fee to eliminate spam but not make nonprofit submission unaffordable. Visit the LookSmart site today, and you’ll only find the nonprofit submission form after a struggle — it ought to be listed prominently alongside LookSmart’s other submission options. In contrast, Yahoo’s system of limiting mandatory fees to commercial categories makes sense. Perhaps we’ll see a hybrid approach — some categories may cost more than others, allowing nonprofits to pay a smaller fee while letting search engines better capitalize on what they charge to appear in popular commercial categories.

Similarly, Inktomi has suggested that it will figure out some mechanism to ensure that nonprofit sites are better included in its index, as a response in kind to the deeper indexing it does of some sites that pay. Let’s see some action on this, rather than reassurances that it will happen sometime “soon.”

Webmasters, who are being asked to foot the bill these days, also need some greater benefits in return. Too many complaints are coming in about decent descriptions being rewritten when submitted through the paid submission systems at LookSmart and Yahoo Perhaps the editors need to take more of the site owners’ concerns into account, while still trying to maintain editorial quality. The two can meet.

As for GoTo, which is the big winner these days, distributing its links far and wide, it needs to now consider a way for Webmasters to control exactly which search engines may carry their links. For instance, I might find that AOL Search converts well for my site, but the same link running at Lycos isn’t a performer. Why should I be forced to pay to appear in both places? If I ran banners through a network, I could pick and choose the places I’d want them to appear. Similarly, I could run different banners on different Web properties. GoTo really is no longer a search engine but rather a search engine ad network. As such, I should be entitled to the same control an ad network offers, allowing my paid listings to appear where I choose and even to have different descriptions, depending on the service.

The industry also needs to ensure that it keeps improving the quality of search. Google has been the shining example of a service that offers good search capabilities and has attracted users without needing to spend a lot of advertising dollars. Yes, many users have tolerated the poor search capabilities some portals have provided. But, the long-term strategy for survival should be to provide a great search product along with complementary ways to earn money off that product.

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