Can Apple become an e-commerce portal?

Sherlock II, Apple's upgraded search engine technology, will simplify the shopping process by culling the price and availability of products from designated Web sites, among other features. Shoppers can submit a query for a product they want, and Sherlock II will inform them who has the product and at what price, as well as link them to the site.

The software will not be confined to computers, working for other products such as books, CDs, or any other goods sold through searchable databases. With this technology, the company could also be planting the seeds for a strategy that allows Apple to make money off of e-commerce transactions made by Mac consumers, as well as garner ad revenues.

Because Sherlock traces transactions and traffic, Apple could conceivably receive a cut of any sale or charge a fee to companies listed on the service. In effect, Sherlock II could make Apple an e-commerce portal.

So far, Apple executives are playing down the idea that they are seeking new revenue streams outside of selling hardware and software. The company offered a preview of upgrades to Sherlock II, which will accompany the next version of the Mac OS, at the Apple Worldwide Developer Conference this week.

"We're looking at making a better personal computer," said Phil Schiller, vice president of worldwide marketing for Apple in an interview with CNET News.com. "One of the things [users] want to do is search and shop on the Internet," he said, noting that two-thirds of Mac OS consumers who have Sherlock use the technology.

"We help ourselves and the Mac if we make it easier for people to shop on the Internet than any other computer," Schiller said.

The current version of Sherlock already offers the ability to track an online transaction that starts with a query from a Sherlock-enabled Mac. As previously reported, any purchases made with an online store can then result in a "finder's fee" of sorts for Apple, if it already has business deals in place.

But now Apple is expanding on this basic technology and applying it to whole sets of e-commerce sites and refining the way in which information is presented--and is ready to tout it as a major feature of the computer, a possible sign that the company will ramp up its e-commerce efforts later this year.

"There is no other way people will want to shop on the Internet," said Avie Tevanian, senior vice president of software engineering, during a keynote speech at the developer's conference. Schiller also said he expects shopping to be one of the most-used features in the new Sherlock II.

The company is working on adding the ability to search on specific "sets" of sites, which Apple refers to as channels. When a set of e-commerce sites is selected, the search results will be automatically displayed in a window that lists items, their prices, their availability, a general description of the product, as well as a link to the specific page on the related site. The original Sherlock technology can display links to specific pages but is harder to tailor into groups of sites, and doesn't show any information about product pricing or other related information.

Sherlock II is slated to be included in an upcoming version of the Macintosh operating system, code-named Sonata, that is due out this fall. The technology was originally developed to search content on a user's hard disk drive, as well as provide a way to search Internet sites.

Apple isn't alone
Inktomi has a similar technology for comparison shopping, called the Shopping Engine. That technology, however, resides on a powerful server and is used by Web sites that want to add customizable comparison shopping, product information, and transactions to their sites. The company makes most of its money from the Shopping Engine by getting a fee for every time a user goes from the shopping page to the merchant's site.

Amazon.com, the online bookseller that has been broadening its product selection, recently bought Junglee, developer of product-search technology. Junglee, founded in 1996, developed a virtual database technology that makes it easier to search for items by storing millions of items in its database.

Unlike Junglee or Inktomi, Apple does not have to worry about keeping a database of information up to date--a problem that has caused more than a few expensive errors at some e-commerce sites in recent months.

Apple thinks it has some advantages over other price comparison search technologies--but isn't yet interested in licensing the technology to others.

"Others are doing meta-search engines," Schiller acknowledges. "We just find that we're doing something much broader. We can get this out to millions of users and make it a standard part of the use of a Mac," he said. Additionally, Apple can quickly add new partners, who only have to develop a small piece of software, called a "plug-in," that allows Sherlock to talk to the search engines on partner sites.

Among the partners demonstrating the ability to work with Sherlock II, are such as Ebay, Amazon, Music Boulevard and Barnes and Noble.

While Inktomi, which has a market valuation near that of Apple's, has been able to turn its technology into a stand-alone business, Apple said it isn't yet considering licensing Sherlock.

"We haven't proactively gone out to license the software," Schiller said. If a company had an "interesting business opportunity," Apple wouldn't automatically say no, either, he indicated.