Jul 24, 2006

Another week - and more drama from our Search Engine Warlords - first it's Yahoo: Loosing share and $$$ in the process. Last week, Shares of Yahoo hit their lowest point in about 2 years and the delay in "Panama" doesn't help. Looks like Yahoo is worried about the possible impact to their revenue if Panama isn't a slam-dunk initiative, especially with the all important holiday season right around the corner.

That's the key difference between Yahoo and Google. Serg & Larry would launch that baby and call it beta. They'll hope for the best but prepare for the worst. Take feedback and improve it before Christmas. But Yahoo, is a more mature company - with a history of being punished by Wall Street analysts - for not delivering on earnings estimates - so there you have it. A few years from now Google will be a lot more cautious about what type of products they launch and how much "cool stuff" they invest in. That's what a few market downturns would do to a company. Once you take money from Wall Street - the rules of the game change for good - or for bad - just ask Microsoft.

Interestingly - Yahoo is showing strong growth in graphical advertising

While Yahoo, which runs the world’s most popular Internet site, has a booming business selling graphical advertising, it has been struggling to rebuild its search service.

Jul 20, 2006

Looks like Google's Wall Street Honeymoon may be over. Even with 2nd quarter earnins which topped the streets expectations, their stock price is flat. Overall, earnings certainly look healthy - Adwords, Adsense and the supporting cast delivered $2.5Billion in one quarter. One interesting thing to note is that their TAC costs seem less than I expected - at about $780 (30% of total revenue).

Nice Work Google - now let's see how the Markets respond in the days and weeks ahead. One thing seems evident, Google's strategy for monetizing product features will be closely scrutinized from now on. I expect Wall Street to gradually start to exert a little more influence on Google's Product Plans soon.
It's funny how things work out. Bill G (Gross - not Gates) events the whole revenue model for Search and he's not even a key player in the "Search Wars" - or the crazy paper being generated by the big 3 players.

Don't get me wrong - the $1.6 Billion Yahoo paid Bill for Overture was cool, but then AdWords and AdSense produced $6.1 billion in revenues for Google last year alone - a fact I'm sure Bill knows only too well.

Well it's an exciting time to profile the "Search Wars" - and I'm going to devote much of my blog to this subject over the next few months.

Just take a look at the trend in the Graph above. Clearly - as Search Goes - so does the rest of the online advertising industry. So if Online Media is every going to take a significant share of the $400Billion Global Advertising Market, then Google, Yahoo and MSN are going to need to step up their game even further and grow Global Search Spend. All in all - the future is bright......

Jul 13, 2006

Search Wars II

Alright - let's see if we can pick up where we left off........... Oh yeah - the "Search Wars". Seems that our friends at Google are pushing Search advertising as as a revenue generator for their clients. Google presents advertising to its clients as asset management, turning it from a cost to a revenue generator. Google encourages companies to move from only advertising blockbuster brands, to advertising every one of their products.

Ideally, their new pactice of tracking the success of advertising, especially sales leads, moves it from a fixed marketing cost unrelated to sales success, to a variable cost of production.

That's all well and good but how long before the other key Search Players introduce similar functionality and how will this affect the Geese which lay the golden eggs - Adsense and Ad Words??

Search Wars - Google vs. everyone else

Things are really shaping up in the "Search Wars". Looks like Google continues to take share at the expense of Yahoo, MSN and other smaller would-be pretenders. According to Comscore's recent reports - Google now controls 42% of Search queries conducted in the United States. This amounts to a YoY increase of over 5%. While MSN (16% to 14% Y/Y) and Yahoo (31% to 28% Y/Y) are loosing share on a daily basis. Yahoo is betting the farm on their Social Search feature. Frankly - this approach doesn't scale. It's an interesting user engagement mechanism, but it would take the active involvement of thousands or users to improve the relevance of Yahoo results through Yahoo Answers MSN on the other hand, seems to have a more balanced approach to addressing this issue.
Ad words? The launch of ad Center will be an interesting catalyst for the paradigm shift which is undoubtedly coming to the Search Industry. It will take a while for ad centre to develop a user base which is strong enough to trouble Googles' Ad words. Bid Density (frequency of bids placed by ad centre clients) and coverage (% of search queries which feature sponsored, paid links) are still pretty low
Ad Sense? It would be interesting to see what happens once MSN introduces a program which rivals Ad Sense. Ad Center features interesting capabilities for categorizing online user demographics and day parting. It's more than likely that Google will loose some incremental revenue as Ad Words customers divert some of their budgets to a cheaper, more cost effective Ad Centre platform. ROI may be lower, but then so are costs
Syndication: Google is still the best Search Engine out there - bar none, and that perception has helped fuel a remarkable YoY increase in Market share - in most countries World Wide. However, the key to Googles’’ continued growth is in its aggressive Distribution Strategy. That's why they went all out to re-sign AOL as their premier syndication partner. Google understands that most internet users are not loyal to a specific search engine - to the exclusion of others. So - it's very important to keep the Google Search engine generally accessible and “top of mind" to internet users especially in the largest web markets. If MSN can sign a few high-profile distribution deals with market specific portal - look out!
The key point to note here is that Google is like any other dotcom company - I’m sure we all remember what happened back then!! Google's Valuations are clearly inflated - and the Company has benefited from lots of hype. Once the markets start to perceive that MSN or Yahoo is gaining ground, we'll start to see increased speculation regarding GOOG price points. Throw in a few missed revenue estimates and we will certainly see a frenzy of activity. Sure, Google will continue to hold sway with online users - in the short term. Perception is often reality. However - as long as they have not way to monopolize your Search experience - there will always be room for the likes of MSN and Yahoo to make headway. Stay Informed......