Industry Shakeup

On December 23, 2002, Yahoo! shook up the search engine industry when it acquired Inktomi. Now this change had a first glance, far ranging implications. Would Inktomi replace Google as the back end power behind Yahoo!? Remember, Inktomi lost the Yahoo! contract to Google in 2000. Another question was how would this affect Microsoft? Would it want to have the same search results as its competition?

In my previous article I wrote “One final change to watch for is who will supply MSN with their results in the future? Right now it’s Overture for the first 3, then Looksmart, and lastly Inktomi. I’ll keep my eye on FAST. It powers Lycos, and Alltheweb, has a comparable database to Inktomi, and is FASTer than Google.” Just a few days ago it was announced that Microsoft had extended its contract with Inktomi for one year, until 2005. So there won’t be an earth shattering change there in the next two years. But the ground is shifting.

In the last two weeks, Overture bought both Altavista and FAST’s Search unit. These purchases move Overture from being purely the leader in Pay-per-Click advertising /search, to a bona fide player in the pure search engine business. It also means that over the next year we should see the melding of results from the to search engines, a change to their Pay-for-Inclusion model, and an expansion of their client base. You will get their results more often, from more sources.

That Overture made these purchases is telling. It signals a maturation in the Pay-for-Placement market and a need on their part to nurture continued growth, and new avenues for expansion. It also opens the door for new players to make their way into the market. Today, as a result of these changes, the market is controlled by Google, Yahoo! and Overture. Then it’s a step down to the next level of players. These second tier providers are often technologically equal to the leaders, but have not yet acquired the market share, or distribution partners to take it to the next step. I always point to the fact that prior to the Yahoo! deal, no one knew what Google was, and overnight they became the darling of the industry. There’s lots of great engines out there, it will be interesting to see who emerges from the pack.