So what happened in August? While I was on vacation the world seemed to change in mysterious ways, or, at least, I awoke to mysteries long in the making. Quite apart from England starting to win cricket matches on a regular basis, that is. Or summer to be sunny in these parts. Something fundamental happened.
I had the first inkling of this from the headline “Lycos sold for $35 million” (http://www.medianama.com/2010/08/223-lycos-ybrant/). So now we are 16 years on in the glorious history of the networked globe, and we have our first example of a start up with an almost complete cradle to grave financial history. Founded with a $2m investment from CMGI, this was the fastest company to the market when it floated on Nasdaq in 1996. By 1999, with a range of subsidiaries in some 40 countries, it became the most popular Website in the world. In May 2000, Telefonica of Spain bought it for $12.5 billion, according to cnet.com, and with the acquisition of Tripod, Lycos created the characteristic surge of the Bubble years – the Portal. When enterprize search failed for it, Lycos began to shed its subsidiaries, and sell off its local manifestations (to Bertelsmann in Germany, for example). The now diminished company was still innovative (remember Lycos Phone of 2006), despite its sale for $94 m to Daum of Korea in 2004. This latest sale, to the Indian advertising services player, Ybrant, emphasises that the current migration is to web advertising services. Revenues in 2009 were reported as $24.76 m. Ybrant made the acquisition for $36 m.
This is not a “how are the mighty fallen” story. It tells us instead how fast brands grow in the networks and above all how fast and threatening the steep slope of the success graph can seem for established players: Lycos and the creation of Terra Lycos was Telefonica’s vastly greater equivalent of the Murdoch Moment over My Space. And it is not a story about lack of ingenuity and innovation: Lycos genuinely moved with the tidal waters of business model change, and its history shows managers trying hard to re-position and re-use their access and brand position. This is a story about search.
At the root of the Lycos is Google and its growth. In many ways Lycos was a John the Baptist project, and the work which Google’s founders did was not so much an exercise in replacing the fundamentals of search created by Lycos and its competitors, but in adding back into the mix something of the experience of previous users (PageRank) in such a way that the user perception was “better results”.
Today Google has 85% of the market in search, and this year its results have begun to decline slightly. Not much, mind you. A peak of 86% market share followed by a near 2 percentage point decline is not a disaster, but it underscores something else: unless you are in India or China (and Google’s numbers are still roaring away in the former despite Google’s well publicized problems in the latter) the most significant global user communities are already on the Web – or unlikely to use the Web in significant numbers for very many years.
So will Google also and inevitably follow the path mapped out by Lycos? The pressure from the Semantic Web and the world of Linked Data certainly point in the opposite direction from keyword searching. But clearly not if the acquisition programme comes through, and the new business development programme matches it and Google are able to grow a new business alongside Search. The sector has never seen a company like Google for using its wealth to pursue opportunity outside of its core markets. From YouTube to Android, from DoubleClick to Aardvark, from Google Earth to Google Energy, the company sometimes seems to be restlessly evading its destiny while remaining 98% tied to advertising for its revenues.
For its destiny is surely now reasonably clear. There will be a decline in search as an apps orientated world moves more fundamentally towards solutions. Already Google is feeling some of this, as well as the continuing movement of advertising markets away from the traditional way of contextualization. There will be continuing pressure within solutions created for professional and business services for search to be customized to need, and good enough for active purposes (which may be better or more targeted or more rigorously selective or more representative of niche user groups than public search environments).
On their track records you would have to say that Google, driven by current management, will diversify and survive. But it may be a closer issue than many expected at IPO time, and some of this is reflected in the current share price decline. And if they do accomplish the building of a new company out of the old (an Internet first in itself) then it may be by rediscovering what users do in a way that the apps market already does. As someone wittily commented “if they had really cared about users all these years, the service would have been called Find, not Search”. But in the meanwhile business and professional information service providers may be relieved to find that insuperable Google pressures may lessen a little in order to allow integrated solutions to grow. This will create opportunities that are time limited, so nobody should sit around waiting for users to ask or rival revenues to grow.
And a final sob story. In 1994 our favourite comparison was the pornography marketplace, which blazed a trail in viral marketing and online portal techniques. Porn established itself as a sector to watch closely if you were in advertising markets, and a model of content protection and business model evolution if you weren’t. According to an article in Technology Review (www.technologyreview.com/web/26074/) porn is blighted by mass evasions of copyright on peer to peer networks and the rise of user-generated content. Wage rates are falling in the industry and so is program production. I do NOT know what the “solution” is here, but it is only to be expected that when all the other models created in early web days are changing then this one would as well.keep looking »