The Google backlash

There are some people for whom Google is a very generous god, one who, in return for small gifts, will bestow great fortune -- these are the people who use its AdWords program, which, according to many who run Web businesses, has revolutionized the way products are sold online.

AdWords ads are the ones you see on the right side of the screen when you do a Google search; they're small, text-based pitches that are triggered by keywords that advertisers bid on, as in an eBay auction. Google did not invent this ad model -- GoTo.com, now called Overture, has long been a leader in the field of keyword-based search ads, and, indeed, the company is suing Google for allegedly infringing on its patents. (Google denies any wrongdoing.) Overture has done remarkably well selling so-called pay-for-placement ads, which run on search sites all over the Web, including on Yahoo and MSN. This year, Overture will make over a billion dollars in revenue. But Google's program has attracted more advertisers because, Web owners say, it treats all businesses, regardless of size and wealth, equally.

"It works on a system that's independent of the cost," says Ashwin Iddya, the author of an e-book on AdWords. "In Overture, a big guy like eBay may beat all the other competitors," Iddya says, explaining that Overture determines rank strictly according to the price a company pays for a certain keyword. "In Google that's not a problem. In Google the listing of the ad depends on the price you pay and on the click-through rates" -- meaning that a big company's ad could end up lower than a small firm's ad if the small guy has a more attractive pitch.

"So I think most advertisers think that Google is God," Iddya says. "It's working out great for small businesses and medium businesses. Before this, they really didn't have a major avenue for advertising on the Internet. If you wanted to advertise in Yahoo or AltaVista, you needed to pay like $2,000 up front. Now you can start paying something like $5 and $10. You pay only for the clicks you get. So what you would call 'mom and pop' sites, people who start small businesses sitting at home, these people love Google."

Iddya himself has done well with Google's program. He lives in Bangalore, India, where a few years ago he got caught up in the tech boom. "I was a marketing executive at a dot-com that went bust," he says. "We burned all the V.C. money, just like any normal dot-com." After that, he started looking at Google's AdWords program and decided it was a good way to sell small products online -- which is what he did for a while, until "I realized that AdWords is different, and so I wrote a book about it." His book, which offers a step-by-step guide for creating effective ads, became a hit, and one day a reader asked Iddya if he would, for a fee, care to manage the reader's AdWords campaign. So that's what Iddya does now -- from India, he manages AdWords campaigns mostly for American firms. "It worked out," he says. "Now we have three employees and an office, and we are basically riding piggyback on Google."

As a private company, Google doesn't disclose its finances, but according to analysts the firm could make about $600 million in 2003, much of it money from AdWords ads. The firm is expanding the program: It has just announced a program called AdSense, in which Web site publishers can get money for allowing Google to post targeted text-ads on their sites. (Notice, for example, how this article on affirmative action at Infoplease is served up with a bunch of ads for affirmative action consulting companies.)

Some Google-watchers wonder if Google will become too enamored of ads. Especially if the company goes public, this suggestion goes, Google might decide to put the bulk of its resources into its advertising programs, where the money is. What will that mean for its search services? "The mistake that Yahoo and AltaVista made was saying, 'We can't be a search engine company anymore, we have to offer all these other products and services' -- all the trends that characterized the dot-com mania," says Sherman, the Search Day editor. "Google has avoided that with what they call their 'laserlike focus on search.' But they're expanding at so fast a pace that I find it hard to believe that their laser-like focus is at all as laserlike as it once was."

Google is expanding into new areas at the same time that its rivals are honing their search services. In February, Overture purchased AltaVista, an acquisition that gave it some of the best search engineers in the country. The company has been a bit cagey about its plans for AltaVista, but most observers believe that Overture is attempting to position the company as a viable alternative to Google. More troubling for Google was Yahoo's purchase, in December, of Inktomi. Google is currently a Yahoo "partner"; when you search in Yahoo, many of its results are provided by Google.

"I think there are people at Yahoo who feel like because they partnered with Google, they helped make Google what it was," says Sullivan, of Search Engine Watch. He expects that when Yahoo's contract with Google comes up for renewal in September, Yahoo will drop Google and start using Inktomi's results.

Asked about this possibility, Tim Cadogan, Yahoo's vice president of search, was noncommittal. "The best way to think about that is, we're focused on our goal," he said. "And we're going to use whatever component technologies there are to get to that goal. To date Google has been a very good partner to us. We've been very happy to use them." But Cadogan also said that Yahoo plans to invest in Inktomi's technology, and, when asked if he thought that Inktomi's results were as good as Google's, Cadogan said that "a couple of third-party studies show that Inktomi is slightly better than Google." (This study -- which was commissioned by Inktomi but appears quite free of bias -- found that Inktomi came up with slightly more "relevant" results for a given list of queries.)

But the gravest threat to Google comes from Microsoft, which has been suggesting for some time that it's thinking of going after Google's business. "We do view Google more and more as a competitor. We believe that we can provide consumers with a better product and a better user experience. That's something that we're actively looking at doing," Bob Visse, Microsoft's MSN chief, told Reuters in April. And in the middle of June, several webmasters noticed that Microsoft had released a "crawler" -- software to scan and index Web sites -- onto the Web, a first step in creating a search service. Microsoft declined to comment on the discovery.

Many people are already putting the worst spin on Microsoft's intentions. There are suggestions that the company will tie its search service into its next version of Windows, that it will enable people to search using MSN from any desktop application, not just a Web browser. Google and the other search sites might find it hard to compete with Microsoft when it begins integrating a key service into its popular software, meaning that they could suffer the same fate as Netscape. But some webmasters are also suggesting that Microsoft's entry into the search market, combined with Yahoo's possible dismissal of Google, will have a salutary effect on Web searching. Google needs some competition, they say, to rein it in.

More than that, Google needs competition to stay as good as it is. Search engine users are fickle creatures. Sure, Google's been good to us, but none of that will count if the search engine begins to slip in its results. Many observers note that, unlike changing your car or your computer's operating system, it's pretty easy to switch your favorite search engine. It's free and there's nothing to learn. "You want to say it's all over -- nobody could do what Google has done," says Sullivan. "But that can be a naive statement for an industry that's just coming on to 10 years old. Something could happen, like how IBM got replaced by Microsoft."

But martinibuster, the search engine marketer who takes a meditative view of controlling Google, cautions not to count the company out. "Remember when Joe Montana had the ball? He was just moving backwards and slipping and sliding all around while everyone tried to get him? That's Google."

Editor's note: This story was updated since it was first published to include the information that Jeremy Zawodny, who is quoted criticizing Google, works for Yahoo.

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