Google's Example of Innovation Begetting Market Stability

Yahoo!’s acquisition of Inktomi – the company first made famous by developing the search technology behind the original HotBot search engine – seems to some to bode ill for Google’s existing contract to serve Yahoo! as its search provider.

While Yahoo! officials have said that this won’t effect any relationships in the near-term, the long-term looks pretty clear. Yahoo! has a history of using outside vendors until such time as it can develop or acquire an equivalent technology.

But some commentators have read a little too much into this. Overture’s chief financial officer, Todd Tappin – Google’s chief competitor in the paid search category – seems to believe that this is indicative of a fundamentally weak business structure Google has. He says that, since Google’s business model is based on so many different types of technologies and revenue streams, that they often find themselves in competition with would-be clients.

“As Yahoo! and Microsoft and some of the others look to expand their strategies in search, and start branding themselves as a destination for search, I think that will accrue a benefit to us,” he said, implying that Overture would look more attractive to such clients since they do not currently compete in non-paid search technology.



Tappin seems to put the lie to the axiom that financial officers aren’t optimistic souls. Companies that have been in business for more than six months in the Internet space understand that any potential partner – whether through new development or acquisition – may well be a competitor in a matter of months. In fact, they eventually will. It’s unlikely that a company evaluating the two would consider Overture any less of an eventual competitive threat than Google.

In fact, Google looks decidedly more friendly when you begin to look closely at the company. Unlike Overture, Google hasn’t run its business based on the principles of distribution and scale. Instead, Google has taken a fairly radical approach to its business. It sets up fertile groups of technology development programs and tries to bring to market the ones that prove amazingly useful. Its mission, at heart, is to deliver completely new types of innovative applications.

In the long-term, the fact that companies like Freeserve may choose a company other than Google for paid search listings matters little. Google became a great and girthful search engine not because it played the Internet distribution business development politics. It won that position because it created the most insanely awesome search engine on the Web.

And, in the process, it proved a wonderful principle: Web users care about quality. Even if AOL and Microsoft foist their search engines on their respective browser users, people still go back to Google precisely because they know it works best. Quality mattered. Microsoft can hop up and down, shout obscenities, throw its weight around at companies who would otherwise do business with Google, but it would all be for naught. Users would still surf over to Google because they’ve created the better application.

And they did it in paid search listings. And they did it in automated news compilation. And they did it in do-it-yourself classified listings. And so on, and so on.

People first poo-poo’d the idea that Google could become a big player among search engines. They were basing their skepticism on the twin fallacies that all searches are pretty much equal and that Web users aren’t very discriminating in their choices, relying on what tends to be fed to them by the major portals.

Google need not worry about Inktomi taking over its Yahoo! business because Google will wind up conducting the search one way or another. If Yahoo! chooses a different search mechanism, users will merely conduct their searches over at the Google website. That’s the power that great innovation gives you.

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