Could Google Have Saved

“Google could have made theglobe profitable,” declared Tim Armstrong, Google’s vice president of U.S. sales.

The notion of paid search saving one the most notorious busts of the Internet bubble was one of many triumphal assertions of paid search’s strength made yesterday during U.S. Bancorp Piper Jaffray’s one-day gathering of search-industry executives.

Paid search, the bright spot of the Internet advertising industry in 2002, is poised to become an even hotter commodity in the years ahead. Piper Jaffray forecasts the worldwide search industry will generate $2.1 billion this year, growing to $7 billion in 2007.

The industry continues to undergo consolidation, kicked off by Yahoo!’s acquisition of Inktomi in December for $235 million. Overture upped its battle with Google with its back-to-back purchases of AltaVista and FAST’s Web search unit. Most industry watchers expect more moves.

One of the most talked about acquisitions was quickly dismissed at the conference. Espotting CEO Daniel Ishag responded to a report last week in the New York Post that Yahoo! would acquire the European paid search provider.

“Last time I checked Espotting is not being bought by Yahoo!, as many rumors have been flying around,” he told the audience.

The Post story, citing anonymous sources, said Yahoo! and Espotting were in advanced stages of acquisition talks. Such a deal would hurt Yahoo!’s partner Overture, which provides Yahoo!’s paid listings. Last year, the partnership generated $120 million for Yahoo!. It is set to expire in April 2005.

Paid inclusion received much attention as a major growth area. Unlike paid search, where advertisers bid on keywords, paid inclusion allows advertisers to pay for their Web pages to be crawled during a search.

While First Albany pegs the paid inclusion market at $200 million today, LookSmart’s chief executive, Jason Kellerman, said he expected the paid inclusion market would be worth as much as $3 billion in 2007.

“When we first went out with this product three years ago, it was difficult to get advertisers to understand it,” he said. Now, though, LookSmart has seen advertisers realizing the value of insuring their pages are crawled during searches.

The idea is still somewhat controversial, since paid inclusion results are not set apart from those results generated by non-customers. LookSmart, for example, offers its paid inclusion customers consulting services to help their results move up the search results page.

Yahoo! and Overture both have plans to offer paid-inclusion services soon. The idea is simple: Of the 210 million searches on the Web a day, about 40 percent generated revenue, according to Overture.

“We do see it as a really good opportunity for us to continue the monetization of search,” said Cadogan.

Google, however, remains reticent. Google fears paid inclusion could besmirch its reputation for providing pure search through its algorithmic search engine.

“We wouldn’t venture down that path unless it was going to provide a better user experience,” Armstrong said. “At this point, we have not seen that.”

For LookSmart’s Kellerman, paid inclusion does not involve a tradeoff with user experience.

“Advertisers are really starting to adopt paid inclusion at a pretty rapid pace, and the pace they’re adopting it is starting to accelerate,” Kellerman said.

News Around the Web