179 lines
8.5 KiB
Markdown
179 lines
8.5 KiB
Markdown
---
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created_at: '2014-10-09T00:03:47.000Z'
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title: Can Google's search engine find profits? (1999)
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url: http://www.zdnet.com/news/can-googles-search-engine-find-profits/102541
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author: grinich
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points: 179
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story_text: ''
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comment_text:
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num_comments: 66
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story_id:
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story_title:
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story_url:
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parent_id:
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created_at_i: 1412813027
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_tags:
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- story
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- author_grinich
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- story_8430096
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objectID: '8430096'
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---
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**Google.com seems to have it all. The nascent search engine sports an
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intriguing technology that has excited some of Silicon Valley's biggest
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investors. And last week, those investors pulled up their dumptrucks of
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cash to shovel some $25 million on the startup. But one thing Google
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doesn't seem to have -- or at least isn't answering questions about --
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is a business plan.**
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When asked how the company plans to make money, Google CEO and
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co-founder Larry Page would only say what they won't do. They don't want
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to become a portal. No content. And they want to avoid competing with
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other search engines to be the browser of choice for existing portals.
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In fact, Page said [Google](http://www.google.com/) doesn't have any
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real competitors at all, which may be why they don't intend to do much
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marketing.
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But even Internet companies, which are almost expected to lose gobs of
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money, need at least a revenue stream, don't they?
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"We have other ways of making money," said Page. "You'll see."
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And Google's investors are equally mum about how they plan to reap
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returns on their capital. At a June 3 press conference, Google announced
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the $25 million investment came primarily from a unique pairing of
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sources.
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John Doerr of Kleiner Perkins Caufield and Byers, a founder of
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[@Home](http://xlink.zdnet.com/cgi-bin/texis/cofinder/cofinder/CoDetail.html?CoId=C0002357)
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(Nasdaq:[ATHM](http://www.zdii.com/industry_list_new.asp?mode=news&ticker=athm))
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who was an early investor in
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[Amazon.com](http://xlink.zdnet.com/cgi-bin/texis/cofinder/cofinder/CoDetail.html?CoId=C0007803)
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(Nasdaq:[AMZN](http://www.zdii.com/industry_list_new.asp?mode=news&ticker=amzn)),
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and Michael Moritz of Sequoia Capital, who brought
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[Yahoo](http://xlink.zdnet.com/cgi-bin/texis/cofinder/cofinder/CoDetail.html?CoId=C0002565)\!
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(Nasdaq:[YHOO](http://www.zdii.com/industry_list_new.asp?mode=news&ticker=yhoo))
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to market, split the lions' share of the funding. The two big spenders
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share reputations as powerhouses in Silicon Valley -- so they must
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expect big returns from Google, right?
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**Query not found: Google business plan**
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"We are not saying a lot about Google's business plan," said Kleiner
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Perkins' Russ Siegleman, who worked with Doerr on the deal. "We think
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it's the best search engine right now on the Internet. Obviously, we're
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going to build an interesting business about it."
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And [Sun
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Microsystems](http://xlink.zdnet.com/cgi-bin/texis/cofinder/cofinder/CoDetail.html?CoId=C0001836)
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(Nasdaq:[SUNW](http://www.zdii.com/industry_list_new.asp?mode=news&ticker=sunw))
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co-founder Andy Bechtolsheim, now a vice president at [Cisco
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Systems](http://xlink.zdnet.com/cgi-bin/texis/cofinder/cofinder/CoDetail.html?CoId=C0000437)
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(Nasdaq:[CSCO](http://www.zdii.com/industry_list_new.asp?mode=news&ticker=CSCO)),
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was an early investor in Google. But Bechtolsheim would shed little
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light on the company's plans.
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"That would be up to the company to communicate," he said.
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But Bechtolsheim did reiterate that the company would avoid jumping into
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the content and portal business, which has been the path of choice of
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nearly every early search site, such as Yahoo\!,
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[Lycos](http://xlink.zdnet.com/cgi-bin/texis/cofinder/cofinder/CoDetail.html?CoId=C0002379)
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(Nasdaq:[LCOS](http://www.zdii.com/industry_list_new.asp?mode=news&ticker=lcos)),
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and
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[Excite](http://xlink.zdnet.com/cgi-bin/texis/cofinder/cofinder/CoDetail.html?CoId=C0002363)
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(Nasdaq:[XCIT](http://www.zdii.com/industry_list_new.asp?mode=news&ticker=xcit)).
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"What people thought of as search and now as portals are really media
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companies," Bechtolsheim said. "This is really a search company." Few
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who have looked at Google, doubt that it does search well. Page and
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co-founder Sergey Brin began developing Google three years ago while
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Ph.D. students at Stanford University. Unsatisfied with current search
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engines -- which often give thousands of bad results -- the two looked
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for a way to make search smarter.
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**Searching the entire Web**
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They didn't get their degrees, but in Sept. 1998, Page and Brin turned
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their dissertation project into a company. It works like this: The
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entire Web is constantly downloaded onto Google's computers, where it is
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aggregated, indexed and prepared for searches. When a user types in a
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search, Google performs a complex computation -- solving an equation
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that has 500 million variables and 2 billion terms -- to determine the
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best results on the "most important" sites. That equation takes into
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account many factors including how close the search terms are to each
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other, and whether other "important" Web sites point to the site the
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terms are on.
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"You're asking the whole Web who's the greatest site to ask about this
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subject," said Page.
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In order to do the computation, Google splits up the work on hundreds --
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and perhaps thousands -- of low-cost PCs running the free Linux
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operating system, linked together in a parallel and redundant network.
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The system turns the low-end PCs into a supercomputer at a fraction of
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the price, Page said.
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Page said he plans to use the $25 million to beef up the company's
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infrastructure and technology. Google plans to more than quadruple its
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staff from 23 to 100 by years' end, and has been buying PCs for its
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network in shipments of 80 at a time, though the company wouldn't
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disclose exactly how many computers it has.
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**You gotta sell it\!**
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But John Hagen, an analyst with Forrester Research, said all the
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technology in the world won't generate revenue without good marketing
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and a business plan.
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"Right now there are weak technologies that have great marketing and are
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making great progress" said Hagen. "The space moves too quickly and at
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some point, you have to make money."
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Hagen said Google is reaping the benefits of the speculative nature of
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the Internet, which is still in a Wild West stage.
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"We're in an unreal world now where the concept can get you $25 million
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-- where revenues and business plans, you don't need to have those,"
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said Hagen. "But that blip's got to end at some point."
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There are a finite number of ways of making money with search engines,
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Hagen said. You can build a portal around it like Lycos and Yahoo\! did
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and make money with advertising and e-commerce. But Google said they
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won't do that. Another way is to partner with the portals and be paid
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for the searches they generate -- that's something
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[Inktomi](http://xlink.zdnet.com/cgi-bin/texis/cofinder/cofinder/CoDetail.html?CoId=C0004081)
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(Nasdaq:[INKT](http://www.zdii.com/industry_list_new.asp?mode=news&ticker=inkt))
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and
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[Infoseek](http://xlink.zdnet.com/cgi-bin/texis/cofinder/cofinder/CoDetail.html?CoId=C0000804)
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(Nasdaq:[SEEK](http://www.zdii.com/industry_list_new.asp?mode=news&ticker=seek))
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do. But Google also indicated that wasn't on the table.
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**Build it and wait?**
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A third way to profit is to license the technology to other sites who
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can tailor it for their own needs, but Hagen doesn't think that would
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suit Google. The company could also build its technology and wait for a
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big company like
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[AOL](http://xlink.zdnet.com/cgi-bin/texis/cofinder/cofinder/CoDetail.html?CoId=C0000262)
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(NYSE:[AOL](http://www.zdii.com/industry_list_new.asp?mode=news&ticker=aol))
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or Amazon to purchase them. Amazon might even be likely because Amazon
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vice president Ram Shriram is on the Google board, and Amazon CEO Jeff
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Bezos is widely rumored to be an investor in Google.
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But Hagen doesn't think that the large companies -- especially the
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portals -- would be interested in buying Google.
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"My sense is those guys are more interested in licensing the 'best of
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brand,' " Hagen said. "If they buy Google they have to develop the
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technology. They're publishers really -- they're no longer technology
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companies."
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But companies that have worked with Google think the company must have
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something up its sleeve. [Red
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Hat](http://xlink.zdnet.com/cgi-bin/texis/cofinder/cofinder/CoDetail.html?CoId=C0007658)
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has chosen Google as the browser on its home page and has worked with
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Google to make a search specifically for Linux-related sites. Red Hat
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Chief Technology Officer Marc Ewing said he's taking a wait and see
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approach.
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"I don't know exactly how they're going to do it," said Ewing. "They're
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not idiots over there. They must have some sort of plan. They're just
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not sharing it."
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