Search upstarts storm Google's gates

As speculation of a Google public offering hits a fever pitch, would-be rivals are combing over the company's business and technology for signs of weakness that could cut short its reign as the king of Web search.

Analysts have already forecast a protracted and difficult battle among Google and Net titans Yahoo and Microsoft, which have both carved out Web search as a key piece of their businesses.

Below the radar, Google also faces Lilliputian threats from a fast-growing group of start-ups that hope to replicate its own meteoric rise from unknown upstart to Internet powerbroker. While most of these companies are long shots, a handful have begun to garner attention from analysts and investors thanks to new technologies that expand on Google's formula and take it in entirely new directions.

At the top of the list are companies like Quigo and Industry Brains that aim to improve on search engine advertising techniques. A second group, including Mooter, Eurekster and Dipsie, are advancing ways for people to get personalized query results, something that both Google and Yahoo also are hoping to perfect. Others are developing search tools tailored to specific localities as well as visualization features to assist in better targeting search results around specific topics.

"Search is a hypergrowth area," said Alan Meckler, chief executive of Jupiter Media. "There will be lots of special smaller players that without going public will be worth between $20 million and $100 million annually."

Search engines are a hot commodity because they've shown they can make money through pay-per-click advertising programs pioneered by Yahoo subsidiary Overture Services. Search engine advertising is one of the fastest-growing segments of the rebounding Internet marketing sector and helped Yahoo's earnings grow 84 percent last year.

With recognition has come respect, and search is fast becoming a research and development priority for some of the biggest players in technology, including Microsoft and IBM. Partly as a result, some analysts now predict it's just a matter of time before Google loses its dominance to rivals in at least some areas of the search market.

Google "can't be everything to everyone," according to Charlene Li, principal analyst at Forrester Research. She recently predicted that Google is positioned to dominate consumer paid search, while Microsoft is the most situated to advance search technology on the operating system.

The money engine
Such thinking has fed hopes that a lucrative new business, if not a new king of search, could emerge from a crowd of wannabes.

Google wannabes?

Mooter
Aims to deconstruct user search patterns to serve up personalized results; its algorithms also decode the themes of Web page content to better match queries.
Founder and CEO: Liesl Capper
Location: Sydney, Australia
Site launch: Beta in October 2003
Privately held, funded by the Australian government's research and development start fund.
Moneymaker: Plans to develop its own ad network and license its technology.

Eurekster
A marriage of social networking and Web search, where groups of friends can lean on each other to find the best Web sites.
Technology: Licensed from SLI Systems, a learning search engine.
Co-founder and CEO: Grant Ryan
Location: Offices in San Francisco and New Zealand
Privately held; NBC holds a 15 percent stake.
Moneymaker: Paid ads licensed from Overture Services.

Dipsie
"Find what you're looking for within 2 clicks," is the motto of this soon-to-be-launched search engine, being developing with proprietary semantics-based technology.
Founder and CEO: Jason Wiener
Location: Chicago
Founded: Summer 2003, to launch in 2004.
Privately held; angel investors.
Moneymaker: Licensing, paid advertisements.

Quigo
Develops technology for Web publishers to deliver contextually relevant ads.
CEO: Michael Yavonditte
Co-founders: Yaron Galai and Oded Itzhak
Location: Offices in New York and Tel-Aviv
Launched first product in August 2001.
Privately held; raised $5 million from Highland Capital.
Moneymaker: Licensing to the likes of Overture Services and Hewlett-Packard.

Industry Brains
A private label ad network where advertisers pay for placement in search results on sites such as BusinessWeek, Dr. Dobbs Journal and PC World.
Founder and CEO: Erik Matlick
Location: New York
Product launch: February 2002
Privately held
Moneymaker: Advertising; recently syndicated its paid listings for publishers distributing content using Really Simple Syndication.

Groxis
Its product, Grokker, organizes search results into visual maps and categories; recently issued a plug-in to display Google results.
Co-founder and CEO: R.J. Pittman
Location: Sausalito, Calif.
Privately held, backers are Grok Partners / Baldwin Brothers, EcoTrust and Venture Factory.
Moneymaker: Plans to license the technology to companies such as Amazon; consumer subscription sales.

Source: CNET News.com

Last week, Highland Capital Partners invested $5 million in Quigo, a company whose technology discerns the context or meaning of a Web page to deliver more targeted ads, similar to Google's advertising engine. Quigo already has one high-profile customer: Overture. That's a sign that Overture is trying to use more technology to deliver ads, as opposed to its traditional human-dependent system.

"Quigo's going to be a player," said Bob Davis, a Highland partner who within a year of founding Lycos in the 1990s took the company public. He is on Quigo's board.

According to Richard de Silva, a venture capitalist with Boston-based Highland, the smart investors are betting on companies that can improve search engine advertising, rather than the search technology itself, because "there's no money in it."

Start-up Industry Brains is taking a spin on search engine marketing by powering private label services for Kiplinger.com, BusinessWeek, Slashdot, Salary.com and around 50 others. It's seeing demand because of pitfalls of the current setup of Google and Overture, analysts say.

The common gripe of many publishers is that with the ad networks of Overture and Google, they're often lumped in with many other publishers not of the same caliber, hampering their ability to get higher rates from advertisers. Advertisers, on the other hand, complain that they can't target their text-based listings to specific sites.

Industry Brains lets computer publishers, for example, charge premiums to tech-focused advertisers, which in turn get better response from viewers, according to company CEO Eric Matlick.

"Not all clicks are equal," Matlick said. "This lets the advertiser not dilute their clicks. And instead of bidding on 100 search terms, advertisers log in to one place, bidding separately for each site."

Matlick said that his business is not targeting the roughly $4 billion search engine advertising industry this year. Rather, he pegs the premium private label industry at $100 million, and he's seeing growth of roughly 20 percent to 30 percent in sales every month. The company has drawn investments from Mike Perles, former president of Ziff-Davis who's now at Softbank, and Jeff Judge, founder of media company 24/7 Media.

Analysts believe it's a smart business, though companies like Google and Overture have yet to offer anything similar.

"As search emerges as one of the most effective means of advertising, if not the most, companies will want to own all that revenue if they can," said James Lamberti, an analyst at ComScore Networks.

Powering a personal engine
Another area of development is in personalized search, and several upstarts believe they can provide a better mousetrap to deliver it.

Newly launched search engine Eurekster is designed to take advantage of social networking to deliver results of a more personal nature. It lets people create a social network using the engine to see what others in the group find interesting. The service works like any other search engine by using keywords and algorithms to locate the most relevant Web sites for a given query. But it also ranks the results according to what interests people in a particular group.

Still, the company's engine relies on Web crawler technology from SLI Systems--a company founded by Eurekster's CEO--and advertising from Overture. NBC holds a 15 percent stake in the company.

Meanwhile, Australian search company Mooter is inciting investor attention, company CEO Liesl Capper said last week. Capper, a former teacher, launched Mooter with government funding last October, and she is thankful for the chance to advance what she calls the pitiful state of personalized search.

Mooter uses mathematical algorithms modeled on neural networking to better understand and differentiate two people searching on the term "travel Australia," for example. Does this person want data on backpacking options or luxury golf tours? With a range of techniques, Mooter will look at how people search to determine their tastes for follow-up queries within the same day or session, Liesl said.

"It hurts my head to use a lot of search engines--we're not built to process that much information," she said. "We're looking at the real themes inside the content and responding to users' implicit search patterns to deliver better results."

Another dark horse, Dipsie, is planning to launch a new search engine later this year. Though its search techniques are still under wraps, company CEO Jason Wiener said that Dipsie is indexing more of the Web, or the "deep Web," such as the billions of Web documents that originate from databases. It also will use different techniques to rank Web sites, including evaluating the semantics of a page's content. Dipsie, which has several unnamed investors, will support its service through the use of its own advertising.

Search developers Vivisimo and Groxis are working on creating tools to organize search results around specific topics. For example, a search query for "Paris Hilton" would separate results for the luxury hotel chain from the publicity-seeking heiress of the same name.

Vivisimo offers a search engine on its Web site that organizes queries into logical categories. The company last month launched an eBay search tool aimed at sorting through auction information on the e-commerce giant's site. It also won an endorsement last month from online discount Web site FatWallet, which agreed to use its technology to sort Web site results from Google. Groxis, meanwhile, has developed a Google plug-in that sorts the company's search results by topic.

Other companies are developing technology to serve the local search market, a much-hyped area of growth for many search engines and a potentially lucrative piece of the $12 billion to $18 billion local ad business in the United States. Whereonearth.com, for example, is working on a system that pinpoints the Internet Protocol addresses of the Web. Citysearch.com is positioning itself and its own search technology as the answer to finding local listings for restaurants, shops and entertainment.

Still, established search players are well at work on many of these fronts. What's different is that investors are looking for the next Google.

"The opportunity for vertical slices of the market is huge," Jupiter's Meckler said.