Net Search Engines Rev Up for Battle ; BUSINESS ANALYSIS Google's Dominant Position under Threat as Rivals Develop Competing Technology

Article excerpt

ASK JEEVES, the internet search engine, has come up with the best answer of all. Constantly asked by sceptics whether it would ever make money, the PG Wodehouse inspired business based in Emeryville, California, produced the clearest result this week.

Steve Berkowitz, the chief executive, announced that 2003 income was $22m compared with a $5.4m loss in 2002. Sales at the company were $107.3m compared with $65m the year before and in the fourth quarter alone Ask Jeeves sales were up 58 per cent to $31.8m. "Quarter four was another great quarter capping off a great year," said Mr Berkowitz.

But if you thought the Ask Jeeves results were impressive you should adjust your search criteria and ask the question about profits of Yahoo!, the rival quoted search engine that announced results two weeks ago. Terry Semel, the Yahoo! chairman and chief executive, said fourth quarter sales were $663.9m compared with $285m the year before and operating income for the full year was $295.7m compared with $88.2m in 2002. But in the fiercely competitive search engine world there are others even bigger and more impressive than this. Or at least we think there are. Google, by far the biggest search engine by its share of searches conducted on the internet, has yet to reveal any of its financial information.

Google's on-off flotation plans have kept the world's business press guessing for several months and the best estimates put its revenues at up to $1bn and profits of $300m.

Until its student founders, Sergey Brin and Larry Page, decide to go public - with the agreement of their financial backers Kleiner Perkins Caufield & Byers and Sequoia Capital - we will never know how profitable the business is.

What is clear, however, is that the search engine business model is proving increasingly successful as the market experiences explosive growth.

Using search engines is now the second most popular activity on the internet, after e-mail, and it is estimated that 550 million searches are performed daily on the web. With so many people using search engines they have become an advertisers' paradise. And where there are advertisers there are revenues to be had.

Whit Andrews, a research director of Gartner, the technology analysts, said: "If you do an online search then you are essentially taking a cable and projecting it into your forehead and telling advertisers more honestly than any other way what it is you want to know exactly."

The priorities for search engines now are to differentiate themselves in terms of technology, and the sophistication they can offer users. And they need to provide advertisers with ever more subtle ways of getting their message in front of millions of pairs of eyes.

The scramble to attract advertisers in this booming market is behind the ever more complex relationships developing between the search engines themselves. Some concentrate on simply marketing their brands and farm out the technology to another search provider. Some that were basically marketing machines are now going the other way and moving into the technology field. So, AOL, a marketing-led organisation, uses Google technology to provide the results for its search engine, AOL Search. …