http://www.businessweek.com/bwdaily/dnflash/dec2000/nf2000127_947.htm

> DECEMBER 7, 2000
>
> NEWS ANALYSIS
>
> Will Google's Purity Pay Off?
> As rivals branch out, the Web's hippest search engine claims it
> can make money from a few big clients -- without pay-for-placement
> or the clutter of banner ads
>
>
> It's probably the only company in the world with a former
> Stanford University neurosurgeon on the payroll, a man who would
> rather punch code than wield a scalpel. In the reception area of
> its headquarters in Mountain View, Calif., lava lamps change
> colors to match the site's many hues. Two-year-old Google
> (www.google.com) is surely the hippest search engine around. And
> it has the tech to back up its bravura. This year alone, Google
> has amassed more than a dozen awards from computer and business
> publications such as PC Magazine and Upside.
>
> Google, which performs 23 million searches each day, has a rabid
> following among computer geeks, who rave about its amazingly
> accurate results and clean looks -- uncluttered by banner ads. In
> short order, the company has captured 25% of the search-engine
> market, says consultancy Gartner Group. And it has some brawny
> backers in Silicon Valley venture-capital notables Kleiner
> Perkins Caufield & Byers and Sequoia Capital. That potent duo has
> collectively bet $25 million on the still-private company.
>
> LIMITED BUSINESS.  But how will Google ever make money? There's
> the rub. The company's adamant refusal to use banner or other
> graphical ads eliminates what is the most lucrative income stream
> for rival search engines. Although Google does have other revenue
> sources, such as licensing and text-based advertisements, the
> privately held company's business remains limited compared with
> its competitors'.
>
> Northern Light (www.northernlight.com), which matches Google in
> many search-engine competitions, sells archived articles from
> hundreds of publications and builds intranet portals for
> companies. AltaVista (www.altavista.com), another competitor, has
> integrated its search engine into a broader portal strategy.
> "There isn't really good evidence, frankly, that companies
> focused purely on search, as Google has been, can support
> themselves with that model," says Northern Light Chief Technology
> Officer Marc Krellenstein.
>
> The brainchild of Stanford computer-science grad students Larry
> Page and Sergey Brin, the company's CEO and president,
> respectively, Google pioneered a now-popular technique that
> counts the number of links pointing to a site as a gauge of its
> importance. According to the theory, every link to a site is a
> vote of confidence that the content matter there is useful.
>
> SPARTAN AND FAST.  The beauty of the Google search engine is that
> it keeps frivolous links, so common on other search engines, to a
> minimum. And the company claims Google's massive database of 1.2
> billion Web pages is the world's largest. The result: Not only
> can Google judge the importance of sites but it also has the
> capacity to drill down into minute topic areas for hard-to-find
> information. Brin boasts that the competition can't match such
> performance. And Google's spartan look -- a simple search bar on
> a white page with minimal text and graphical pollution -- enables
> faster downloads, according to search-engine expert Greg Notess.
>
> So, where's the business model? To this end, Google has started
> to diversify its revenue stream. It boasts 100 co-brand partners,
> such as The Washington Post and Netscape, that have selected
> Google as an embedded Internet search engine on their site. Most
> of these co-brand partners pay the company from $8 to $10 per
> thousand queries and from $600 to $2,000 per month in licensing
> fees. Google also has a program offering free search capabilities
> to smaller Web sites, with the caveat that it might begin
> inserting advertisements on search-query pages at a future date
> -- but no banner ads.
>
> The company has also instituted a pay-for-play scheme called
> Adwords that allows an advertiser to purchase a word and place a
> small text ad on the page whenever that word is mentioned in a
> query. But Google is making the most money from customized
> intrasite search functions, built for a dozen select clients,
> such as router giant Cisco Systems and Linux provider Red Hat.
>
> YAHOO! POWER.  An even bigger stamp of approval came in June,
> 2000, when portal Yahoo!  replaced Inktomi's (www.inktomi.com)
> search engine with Google. "If they can hold on to the Yahoo
> business, it may prove as powerful for them as it proved for
> Inktomi initially," says Gartner senior analyst Whit Andrews.
>
> Even though Google is seeing queries grow at a rate of 20% a
> month, Brin and Page admit that the company makes less cash per
> search query than AltaVista or Northern Light. Supporting a
> research staff of 100, including 30 PhDs, might have something to
> do with this. But Google has spent less money developing an
> ad-sales staff than other search engines.

30 PhDs? What are they all working on? Seems fairly straightforward
from here :)

> Still, the company says its burn rate is decreasing and that it
> should be profitable sometime after the third quarter of next
> year. According to Google spokesman David Krane, the company also
> saves money by using Linux, the free operating system, on its
> network of 6,000 desktop PCs.

Huh? They must mean "6,000 linux servers running on commodity
PC hardware similar to that used by desktops".

> While Page admits Google doesn't
> yet make a penny per search in revenue, he's upbeat. "We do more
> than 20 million searches a day, so it works out to $80 million
> dollars a year," he claims.
>
> "MORE DIVERSIFIED."  Competitors question the accuracy of such
> high revenue numbers.  Furthermore, Google's pure-search strategy
> has thus far garnered fewer unique visitors than more developed
> portal competitors. AltaVista, for example, ranked eighth among
> portals in September, with 20 million visitors to its site,
> according to Media Metrix, which measures Web traffic. Google
> ranked 48th, with 5.7 million unique visitors. Says AltaVista
> President Greg Memo: "Our model is much more diversified." As
> evidence, he points to AltaVista's recent launching of sites for
> 10 different European countries and the sale of the AltaVista
> engine as a piece of enterprise software to more than a thousand
> businesses.
>
> Now comes Google's big test. Can it keep forswearing
> pay-for-placement deals that allow commercial sites to buy high
> rankings in searches? Yahoo has begun cutting these deals in
> droves, matching lesser competitor LookSmart. But Brin says he
> isn't worried: "When somebody searches for 'cancer,' should you
> put up the site that paid you or the site that has better
> information?" Brin is betting better information will win the
> day.
>
> But when the whip comes down and shareholders start to demand a
> return on their investment, Google may have to swallow its
> scruples -- particularly if it hopes to keep banner ads off its
> pages.
>
>
> By Kalpana Mohan in San Jose, Calif.
> Edited by Alex Salkever

--
Gerald Oskoboiny <[email protected]>
http://impressive.net/people/gerald/