For all the problems faced by dot-coms over the past
year, the Internet nonetheless offers stunning
services. Type a few keywords into a good search
engine and up pops a list of related Web sites from all
over the world, research that could have taken months prior to the search engine.
is the second biggest activity on the Internet, behind
Odd, then, that so many well-known search engines
have struggled. Excite is in deep financial straits, and
many analysts expect it to go under. Well-known
engines such as WebCrawler, Lycos and Infoseek have
either shut down or turned themselves into fronts for
other engines. One of the biggest names, AltaVista,
has suffered a steep decline in market share.
But then there is Google, clawing its way to the
top of the heap. Jupiter Media Metrix, the Web rating
service, reported in July that Google was first among
the free-standing search engines, handily beating
GoTo, Ask Jeeves and AltaVista. (Search sites
associated with portals such as Yahoo are not
included.) Among all Web sites, Google was No. 15 in
usage in July, with 15 million users.
While financial data is limited because the company is
privately held, the Mountain View, Ca., company says it has
turned profitable this year, making it the envy of
money-losing dot-coms everywhere.
With a combination of top-quality search service and
high credibility among users, Google offers some
valuable business lessons--not just for search engines
but for other types of Internet services as well,
according to two Wharton professors.
"Google is a little unusual among dot-coms because it
competes based on performance, not glitter," says
David C. Croson, professor of operations and
information. "It?s simply the best at search, period. It
finds pages that other search engines can?t find. And
when you search 30 times a day, as I do, performance
is what matters."
For any search engine, the problem is to be thorough
and finely focused at the same time. No busy user
wants to wade through hundreds of thousands of hits,
but a search engine that produces only a handful of
results has probably missed valuable targets. "Google
became a huge Web favorite because it?s simple and it
works," Wired magazine proclaimed recently.
The details of Google?s search methodology are a
proprietary secret. But the company says its
trademarked PageRank technology seeks out pages
containing the user?s keywords and then ranks the
results according to "votes" that have built up over
the time the page has existed on the Internet.
Google interprets a link from page "a" to
page "b" as a vote by page "a" for page "b," according to the company.
In addition, Google ranks the
importance of the pages that cast the votes, and
those ranked as most important are given more
weight. Rankings are also influenced by the
prominence of keywords on pages found, based on
factors like typeface and positioning.
"Google?s technology uses the collective intelligence of
the Web to determine a page?s importance," the
company says. "Google does not use editors or its own
employees to judge a page?s importance."
The company was founded in September 1998 by Larry
Page, now 28, and Sergey Brin, now 27. Each was a
Stanford University PhD candidate in computer
science. They received financing from venture capital
firms Kleiner Perkins Caufield &Byers and Sequoia
Capital, as well as Stanford and others.
Earlier this year the company, seeking an experienced
technology manger, appointed Eric E. Schmidt as its
chairman. Schmidt added the role of chief executive in
August. Schmidt, 47, is a former chief technologist for
Sun Microsystems. Most recently, he had struggled to
turn around software maker Novell, where he was CEO.
Analysts say Google has been run frugally. It did not
engage in the massive advertising campaigns typical of
so many dot-coms in 1999 and early 2000, relying
instead on word of mouth. Hence, it has not been
forced into the deep cutbacks that have hurt some of
Search engines receive much of their revenues from
advertising. Some observers say Google has weathered
the past year?s ad slump better than its competitors
because it relies on text-only ads linked to keyword
searches. This is a growing ad niche because of the
strong likelihood the user will be interested in the ad.
Meanwhile, banner ads, the scatter-shot approach
used at many other search engines, have become less
profitable; many users find them intrusive and simply
Google says it receives the largest portion of its
revenue from licensing agreements with approximately
130 other companies. Yahoo, for instance, falls back
on Google searches when its own search engine fails
to produce a good match for the user?s keywords.
Advertising and licensing are obviously more valuable if
a search engine attracts lots of users. Aside from its
effective searching, Google has won users? loyalty by
keeping its searches clear of conflict of interest.
Many search engines sell prominent display space to
Web pages. Thus, the first results displayed in a
search are sponsored sites rather than ones the
search engine has deemed most relevant. Defenders
contend payment makes searches better. Because a
Web site must pay the search engine each time a user
clicks on it, the site has a financial incentive to be
sure it is relevant to the user, they say. But consumer
groups have criticized the industry for being less than
candid about this practice.
Google sells "sponsored links" that are sorted and
displayed according to the user?s search terms. But
the links are prominently labeled as advertising, and
they are displayed separately from the search results.
This is appealing to many users who are annoyed by
the interference created by unlabeled sponsorship,
says Wharton marketing professor David C.
Schmittlein, who has studied search engines. Some
engines, such as AltaVista, allow users to exclude
sponsored sites but do not give this option very
prominent display, he says.
According to Schmittlein, for many users, sponsorship--or the lack of it--becomes part of a broader issue of
fair treatment. Some users may associate sponsorship
with past controversies, such as cases of travel sites
that steered users to sponsoring airlines that did not
offer the cheapest flights.
Internet users have a number of concerns these days,
Schmittlein says. Are Internet companies installing
undesirable features such as cookies on one?s
computer? Is personal information or search
patterns being sold? "If you are getting spam e-mail,
why are you getting it?" he asks. Since users generally
cannot tell what is going on behind their screens, they
may pick Internet services based on a general sense
of whether they are treated fairly.
"An organization that is perceived as doing a relatively
good job, or of being relatively forthcoming in one area
of trust, is seen as doing well elsewhere, too,"
Schmittlein says. "The value of that trust element has
not been going down over time."
The combination of trustworthiness and effective
search technology has given Google a solid niche, he
says. Few people go to the trouble of using more than
one search engine. And many advertisers prefer to
stick with one large, effective site rather than paying
for placement on many smaller ones, Schmittlein adds.
As king of the mountain, Google may well turn out to
be one of the Internet?s long-term successes.
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