Googling

I find it amazing how quickly “Google” has become synonymous with with “web search.” For me, it’s as simple as Google was the first search engine to really work. When I was researching The Encyclopedia of Record Producers in the late-’90s, especially the discography database part of it, I used many different search engines and none of them had anything like the reliability, logic, and comprehensiveness of Google.

Of course, when you’re on top people mess with you:

FOR many people, ordering a gift online goes something like this: type a few words into a search engine, click on a few of the top results and place an order.

For this reason, being among the first few links in a list of search results is critical for many online businesses. Falling off the first page of results can mean a sudden loss of customers. So companies have tried for years to manipulate search engines so they land in the top ranks.

But lately a new strategy has emerged that is raising questions about business ethics and the nature of online competition. Because search engines like Google give weight to sites that are linked to other sites, companies set up networks, creating or encouraging others to create large numbers of sites that sell the same products and then linking them together. If the strategy works, what the searcher sees is a list of links that lead back to the same product or company.

….The practice has roiled the gift-basket industry, where several online shops have noticed in recent months that their rankings on Google have suddenly dropped. No longer do they show up in the top 10 listings. Instead, a company called Gift Services Inc. has taken their place.

“We cannot be found anymore,” said Michelle Wiesel, president of Cesta Gift Baskets in Los Angeles (www.cesta.net). “We have not sold one fruit basket” in two months, she said, adding that before, when Cesta showed up in Google’s top 10 results, her business was doing fine.

Gift Services, based in Vancouver, Wash., has created dozens if not hundreds of Web sites to market its gift baskets. (It will not say how many sites it has.) Last week, for example, a search on Google for “fruit baskets los angeles” returned 8 seemingly different sellers in the top 10 listings. But most were Gift Services sites offering many of the same baskets. [NY Times]

Interestingly, this same principle is why blogs show up so high on Google: because blogs link to each other with frequency, they create ad hoc “networks.” Interesting that Google now owns Blogger, isn’t it?

The Wharton School takes a look at Google from a business standpoint:

Although countless web surfers use Google each day, the nature of the company’s product causes some to wonder whether it shouldn’t simply be, well, part of something else. After all, its main function, search, can be added on to a web browser or other software.

Not so fast, says Wharton marketing professor Peter Fader. “It’s easy to justify Google’s being a stand-alone company. If you look at all the things it’s doing — search-word optimization, news, ‘Froogle,’ etc. — it’s a set of services that are mutually consistent. It leaves open the possibility that the company can just keep adding best-in-class unique services. So I can definitely see Google competing with Yahoo! as a complete portal solution. The first thing I do on my own computers and on the computers in my classroom is change the homepage to Google. It’s inconceivable that I’d consider doing that with any of the others.”

Raffi Amit, professor of entrepreneurship and management at Wharton, agrees. “Look back at the early days of Yahoo!, eBay, and other companies, and look where they are today,” he notes. “No one thought the eBay auction engine would make it as a stand-alone product, for instance. Google already has news and other features. So the company can develop the search engine, the paid listings, the rankings optimization, and so on, and turn it into a major portal. The question is whether Microsoft can do to Google what it did with Netscape — that is, with its marketing and technology power, develop an algorithm, add it to Internet Explorer and crush Google. That’s the risk an investor takes.”

So far, Google has been amazingly resistant to rival threats. “About every six months you see some new offering that’s trying to compete with Google, like Teoma and others,” says Fader. “But there’s been no reason to switch. Microsoft really can’t compete with Google on that basis. It occupies a relatively small niche. Even if it’s selling keywords, no one’s talking about Google as the 900-pound gorilla. What’s especially valuable is the goodwill it has accumulated. Microsoft doesn’t have that installed user base, nor does it have carte blanche to do whatever it likes. If Google is perceived as selling out, however, people will turn on it.”

“There are lots of competitors in this space, and Google still manages to win, based on its technology and its brand,” adds Wharton legal studies professor Dan Hunter. “The built-in-the-browser issue is a non-starter, since the desktop search button is available to all systems that provide for plug-ins. Google has this, and it’s been a big success for them. Microsoft could block plug-ins of this sort, but then they’ll face an antitrust claim that would be a strong one against them. Since they just went through a bruising antitrust loss on the browser side, I wonder whether they would want to push their luck again with the Department of Justice. I doubt it, but no one ever went broke betting on Microsoft’s using its monopoly powers.”

“Google has survived many other search engines,” agrees Wharton marketing professor Jagmohan Singh Raju. “The fear people have as users of Google is, once it’s run like a public company, will the search engine become less important versus other revenue generators?”

The Case for an IPO

Amit notes that Google’s incentive to go public is no different from that of other companies. “The IPO is to raise money and give liquidity to Google’s investors; it would be a means of giving investors a return. Of course, it leads one to ask, do they need more money? Yahoo! and Microsoft’s MSN are two big competitors, and both have deep pockets and a diversified range of businesses. They can invest in technology and marketing. As an independent company, Google must come up with a budget to compete effectively. Being publicly held will deter potential advances from Microsoft and Yahoo!.”

Amit also sees a Google IPO as a potential industry stimulant. “I’d suggest that perhaps, since it is a technology player, Google’s going public will revive the tech sector and facilitate the continuation of innovation and the ability of new products to get to market. The IPO market for tech companies was basically shut down for the last two to three years. Maybe this will be the beginning of the resurgence: Seagate Technology reentered the public market in December 2002, and today it trades at $19, well above the IPO price of $12. Google’s IPO might have positive externalities on the entire technology sector. Investors could regain confidence to put money in it, which would in turn be good for jobs, productivity and the economy.”

Keep on Googling.