Werbach in Slate on back-to-1995: B2C is back!

Rohit Khare khare@alumni.caltech.edu
Tue, 7 Jan 2003 00:20:46 -0800

...can't believe he didn't add your favorite B2C and mine, HOTorNOT :-)

The challenge is really the conclusion: it is NOT obvious to all that=20
the conglomerate model fails. Personally, I believe it, but there have=20=

been long periods of time where the fashion (and returns) have accrued=20=

to conglomerates.

The more interesting story is whether it was ever thus -- could any of=20=

those companies he mentions have possibly avoided bloating? It was the=20=

rule, back then.

But then again, not bad for a quickie creampuff piece. It's no 20page=20
exposition, folks.


PS. Do go have a look at Werblog...

Party Like It's 1995
The commercial Web in 2003 is getting back to what worked years ago.
By Kevin Werbach
Posted Thursday, January 2, 2003, at 1:43 PM PT

Way back in the mid-1990s, search was one of the Internet's primary=20
battlefields. AltaVista, spun out of high-end computer vendor Digital=20
Equipment Corporation, competed with Infoseek, Lycos, and Excite to=20
offer the biggest search-engine database and the most accurate results.=20=

Yahoo!, which had the most Internet users thanks to its deep=20
subject-oriented directory of Web sites, chose not to develop its own=20
search engine. Instead, it licensed technology from a startup, Inktomi.=20=

Yahoo! believed that its transcendent brand and a growing array of=20
services and content=97rather than a lowly search engine=97would allow =
to remain the starting point for most Internet users.

So, although Yahoo!'s original claim to fame was helping Internet users=20=

find Web sites and other online resources, it allowed Google to become=20=

the king of that function today. Big mistake. Search engines have=20
re-emerged as critical assets for Web-based businesses. In a belated=20
effort to regain search supremacy, Yahoo! just plunked down $235=20
million in cash to buy its old friend Inktomi.

Yahoo!'s saga is a microcosm of the entire Internet industry. Today, as=20=

companies retreat to their core businesses, they are finding, to their=20=

horror, that nimbler competitors have occupied the ground they=20
neglected. Through the heady days of the dot.com boom, Yahoo! and other=20=

leading Web-based businesses larded on feature after feature, including=20=

stock quotes, Web-based e-mail, shopping, calendars, streaming audio=20
and video, chat, instant messaging, and games=97anything to increase=20
traffic and therefore revenues. Companies that were once simply "search=20=

engines" fattened themselves into "portals." Yahoo!'s Web directory,=20
its original raison d'=EAtre, became an afterthought.

But as it turns out, the one thing people really want to do online is=20
find things. A Pew Foundation study last month found that more than 60=20=

percent of Americans expect they can locate information online about=20
government resources, news, health care, and business products and=20
services. That's among all Americans. For those online, the numbers=20
surpass 80 percent. The Web has become so enormous that it's a virtual=20=

certainty the answer you're looking for is out there; the hard part is=20=

locating it.

Google, launched in 1998, came on the scene too late to join the portal=20=

wars. It put all its energy toward one goal: being the best at search.=20=

While Yahoo! slept, Google quietly became the dominant Internet search=20=

engine, handling one-half of all searches. With its Day-Glo logo,=20
grad-student founders, and offices featuring a masseuse and a=20
professional chef, Google is a caricature of the bubble-era dot.com=20
startup. With one difference: It's profitable. It's now the fourth most=20=

popular destination on the Internet, trailing only Microsoft/MSN (which=20=

publishes Slate), Yahoo!, and AOL Time Warner. For many users, Google=20
is the Web, in the way that AOL and Netscape once were. It's the=20
primary interface they use to maneuver online.

Buying Inktomi is Yahoo!'s last, best hope to reassert itself as a=20
starting point for users. But it's too late. Yahoo! is still trying to=20=

be all things to all people. Google succeeds because it concentrates=20
exclusively on search. It's no accident that the other profitable=20
search company, Overture, maintains a similar focus. Overture's secret=20=

is that it sells its listings to the highest bidder, much the way=20
companies can pay for bigger listings in the Yellow Pages.

The Net has come full circle. The enduring startups fall into the=20
categories that led the market in the early commercial days of=20
1995-1996: search engines (Google and Overture), business-to-consumer=20
e-commerce (Amazon and eBay), and infrastructure software for business=20=

(BEA Systems and VeriSign). Meanwhile, the landscape is littered with=20
the carcasses of companies, from incubator CMGI to Excite@Home, that=20
convinced themselves that more was always better. Like Yahoo!,=20
Inktomi's story follows the script: Instead of extending its early lead=20=

in search, it jumped into unrelated businesses such as content=20
distribution. As a result, Yahoo! abandoned Inktomi for another search=20=

technology vendor=97none other than Google. When the bubble burst,=20
Inktomi was forced to scale back through layoffs and asset sales.

The Googles of the world, who found valuable niches and stuck to their=20=

knitting, are thriving. Yahoo! and Inktomi find themselves the=20
equivalent of a 1970s conglomerate: The whole is worth less than the=20
parts. It doesn't take a search engine to figure that out.

Kevin Werbach is an independent technology analyst and organizer of the=20=

Supernova conference.=20=