The big problem with search engines is that it is difficult to search for
anything relevant. Rather, the traditional search firms – like Yahoo!,
Excite and so on – are places to get free e-mail, e-commerce and news
stories. Search is not a high priority.
As for GoTo.com
, it is a
company that has been true to its roots. Founded in late 1997, the firm saw
an opportunity to develop a useful search engine. How? By using the power of
capitalism; that is, sites that want to get high rankings will bid for it.
Although, the payment is based on a success basis. In other words, for
GoTo.com to get paid, there needs to be click-throughs.
GoTo.com has been enhancing its search services. For example, the company
purchased Cadabra, which allows for comparison shopping. Another key
acquisition was AuctionRover.com, which is a comparison shopping site for
auctions. Basically, GoTo.com wants to design a comprehensive targeted
So far, Goto.coms advertisers are getting lots of click-throughs. In the
past quarter, paid clicks increased to 88 million, which was up from 73
million in the prior quarter. The average paid click is 19 cents, which is
up from 17 cents as of late last year. In all, GoTo.com has 25,000
advertisers, which is up from 21,000 (at the end of last year). All this
has been translating into nice revenue growth. In the latest quarter,
revenues were $17.2 million, which was up from $13.3 million in the prior
The company has also found strong growth through affiliate deals. Clients
include such players as Microsoft, Earthlink, and Netscape. Just recently,
CNET signed a deal to use GoTo.com as a premier search partner (it will be
part of CNETs Search.com). CNET gets about 16 million users per month.
However, GoTo.com is losing substantial amounts of money. In the latest
quarter, losses were $9 million. Of course, investors are leery of losses
— and investors are putting pressure on GoTo.com.
Keep in mind that it was not long ago that the stock was above $114; now it
is 10-5/16. Basically, GoTo.com will likely need a new infusion of capital
and cut back on expenses. Another option may be consolidation. There
should be many interested parties who would like the technology and
impressive customer base.