You Don’t Have to Kill Google to Make a Killing

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A couple of days ago, when Cuil launched to the public there were a lot of bloggers and media outlets talking about the new search engine excitedly as a Google killer. Given the grandiose way in which the company described itself — taking shots at Google’s “superficial popularity metrics” and calling itself three times as big — those comparisons were probably warranted. But after trying the service, we all realized that, at least for now, they’re unfounded.

With Cuil search results so consistently worse than Google’s some bloggers began to wonder why they launched with such a flash. Surely they knew their technology wasn’t yet good enough to truly compete with Google, right? “I think it’s a play for Microsoft money,” wrote Robert Scoble. And he could be right. Powerset, another over-hyped search engine that failed to impress at launch cashed out early to Microsoft, who is sitting on piles of cash with the Yahoo! deal off.

But then again, you don’t have to kill Google to make a killing at search. Don Dodge did some back of the envelope math last year and found that for Google, every 1% of the search market is worth about $100 million in revenue and the market values each percentage point at $1-3 billion in market cap.

“VCs are investing big bucks trying to find the next Google,” he concluded. “New comers like Powerset and Hakia would be quite happy with 2 or 3 percent market share although they have aspirations of much bigger things. Do the math…it is staggering.”

If every one percent of the market is worth $100 million in yearly revenue (or perhaps a bit less since the smaller your share of the market the harder it seems to be to sell ads against your search results), a few percentage points could be a huge deal for some of these smaller, independent search entries. “Even the small search engine players can generate huge revenues and are extremely valuable. Search is not a winner take all game,” said Dodge in the comments on his May 2007 post.

And of course, Cuil or any other search competitor doesn’t need to steal those percentage points from Google — they can take them from Ask, or AOL, or Yahoo!, or Microsoft, all of whom might be easier to compete with on technology at the consumer level than Google.

Josh CatoneJosh Catone
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Before joining Jilt, Josh Catone was the Executive Director of Editorial Projects at Mashable, the Lead Writer at ReadWriteWeb, Lead Blogger at SitePoint, and the Community Evangelist at DandyID. On the side, Josh enjoys managing his blog The Fluffington Post.

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