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Print Print 2004-03-24

Competitors lining up to crash Google's party

Is the Google bubble over before it even began?
Published March 24, 2004

Is the Google bubble over before it even began?
Even before Google Inc. reaches its hotly anticipated initial public offering, the Web's top search portal finds itself facing tougher competition from both deep-pocketed rivals and an upstart, Linux-like co-operative.
It also faces scepticism from potential investors who worry that expectations for Google have outrun the reality of a more competitive market.
Yahoo Inc and Microsoft Corp are betting that they will be able to unseat Google as the Internet's top search destination.
Google itself concedes that its lead will be tough one to defend. Larry Page, one of Google's co-founders, said he expects the search market to be "healthy market with many companies."
"We have really a long ways to go with search, it's not a solved problem," Page told Reuters.
But the recognition of having its name being used as a verb, and being crowned the world's No. 1 brand are piling pressure on Google, based in Mountain View, California.
"Google's biggest weakness is its popularity," said Danny Sullivan, editor of industry tracker SearchEngineWatch.com. "When you are on top, everyone takes swings at you."
Indeed, Web portal and media provider Yahoo has come on strong in recent months, search experts say. Google provides some technology for Yahoo, although that relationship is coming to an end over the next few months.
Microsoft, the world's largest software company, has also identified search as a strategic market, and has assembled a team in the MSN Internet division to design a better engine.
MSN said on Friday that it would launch a new search engine in July, mainly with key changes to the way advertisements are displayed alongside search results.
"We think that's going to dramatically improve relevancy," said Yusuf Mehdi, MSN vice president of information services.
Despite Google's lead, its competitors are quick to note that an estimated 60 percent of search queries do not yield the results users were after.
This month, Yahoo launched a new local Web search tool that integrates its popular maps service with listings for restaurants, hotels, movie theatres and banks. Google followed with a local service of its own last week.
"The closest competitor is Yahoo, also a talented company with money," said SearchEngineWatch.com's Sullivan. "The gap between them is much, much less than in the past."
Speaking of the euphoria and speculation surrounding the company, Page said, "I think it keeps people from making rational decisions."
"We don't get to decide what other people think about us expecting Google to change the financial state of the world is probably an unreasonable expectation," Page said, "I think that especially in the stock-market speculation, those things seem completely unreasonable."
Although Google has yet to state its intention to take the company public, many expect an initial offering of shares that would value the company at between $15 billion to $20 billion.
Some warn that the heightened expectations surrounding Google mean that any offering and every step the company makes in its early going would have to be flawless in order to avoid investor disappointment.
"Just because a company is known and there's buzz about it - it doesn't mean it's going to do well in the offering," said Francis Gaskins, of online newsletter IPO Desktop.
Another potential threat could come from Nutch, a group of programmers who are developing an open source search engine.
By making the underlying algorithms and code available for all to see, Nutch's co-founder Michael Cafarella says the pace of search innovation could be improved dramatically.
"The jump in technology from 1997 to 2000 was much greater than the jump from 2001 to 2004," Cafarella said, noting that the rate of search innovation is beginning to slow.
Kenneth Winans, who manages $119 million in investments at the fund he founded, Winans International, said while Google has made it "incredibly easy for people to find information on the Internet," it was questionable whether their position was defensible.
"I probably will not be buying it," Winans said of the expected Google IPO, "I'm fearful of the hot money that will be chasing it," he said." Even so, Winans conceded that he would consider buying the stock after Google has a couple of quarters as a public company under its belt.

Copyright Reuters, 2004

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