Search for Tomorrow – The Google Killers

An army of fledgling companies is lining up to take on Google. Could the world’s biggest search engine possibly be vulnerable?

Inc. Slideshow: The Google Killers

In April 2002, The New York Times anointed Google “the king of search.” It’s impossible to argue with that today. Google, which is headquartered in Mountain View, California, conducts 48 percent of all online searches in the United States, compared with Yahoo’s 28 percent. And although Google’s sales growth has slowed ever so slightly, it is beyond impressive for a company that is already huge. In the most recent quarter, Google reported revenue of $3.2 billion, a 67 percent increase over the same period in the prior year.

Yet despite Google’s dominance, there are dozens of companies working to bring new search tools to market. Last year alone, 68 search-oriented firms raised venture capital, according to VentureOne, and countless others have been self-funded or backed by angel investors. Yahoo and other members of the old guard are also showing signs of life.

What’s behind the renewed competition? The upstarts believe there is more than enough opportunity to go around. The market for search advertising is expected to hit $11.1 billion by 2011. And Google’s reputation has taken a pounding. Keyword prices for valuable terms (example: “medical malpractice”) are skyrocketing, crowding out smaller advertisers. Those who can afford keywords can be the victims of click fraud, by which they are charged for meaningless traffic. They must also compete for traffic with sham websites called sportals, splogs, and flogs, which divert users to irrelevant sites. To fight these scam artists, Google constantly tinkers with its algorithms, but that can sometimes frustrate the legitimate efforts of advertisers to optimize their rankings.

Besides these shortcomings, some competitors sense that Google is increasingly distracted by its ballooning portfolio of products. There’s the plan to scan the world’s books, the digital medical records, the no-frills office software, and even a map of the moon. Viacom’s $1 billion YouTube lawsuit, filed in March, is seen by some rivals as a portent of headaches to come.

In public, Google is sanguine about the rise in competition. “We’ve always said that small companies should be buying ads on Google and other search engines,” says Sheryl Sandberg, who oversees the company’s online advertising sales. “But we think we offer the highest quality of information to our users.”

Few would argue that Google is set for a fall anytime soon. Still, the bets being placed against it offer a fascinating menu of options for business owners in any industry who want to upset the status quo. Here’s a look at five ways of taking on Google.

The Technologists

Try out: hakia.com and powerset.com

Google became Google in part because its technology was better than everyone else’s, but it’s been more than a decade since Sergey Brin and Larry Page began developing it. Many software developers believe the world is ready for something new.

To that end, Powerset and Hakia, start-ups based in San Francisco and New York City, respectively, are developing “natural language” technologies that aim to absorb the human nuances of a user’s query. Both companies are well financed: Hakia has raised $16 million, Powerset $13 million. Using artificial intelligence technology from Xerox’s famed Palo Alto Research Center, Powerset will debut later this year. The beta version of Hakia is already online, and it seems to work as promised. Type in “Which club does Tiger Woods use?” and Hakia provides equipment-related results and serves you an ad for Callaway. Google responds to the same search terms by offering you information on Tiger Woods video games.

Natural language technology raises some questions. A site that handles searches better than Google could end up processing fewer of them. Would fewer searches yield less ad revenue? Plus, both Hakia and Powerset acknowledge that natural language sites are expensive to build and chug processing power. Are they doomed to lower profit margins? “The short answer is we’ll take them,” says Powerset founder and CEO Barney Pell. Last year, Google’s net profit margin as a company was 29 percent. If Powerset or Hakia make less on their searches, Pell says, they will still have viable businesses.

The People Powered

Try out: chacha.com and search.wikia.com

Scott Jones is relying on a business-world version of the time-honored “ask your teenager” approach. His site ChaCha employs more than 31,000 workers, half of them college kids, to serve as guides for stumped online searchers. The guides chat online with users for three minutes on average, and then provide them with a list of results. They work part time from home and earn between $5 and $10 an hour.

The approach is expensive, but Jones hopes to bring in revenue by running video ads for users while they wait. Then there’s the bigger prize. Data collected from ChaCha’s conversations will serve as the backbone for an automated search engine that will one day compete directly with Google. At least one Web pioneer thinks Jones is on to something: Amazon’s Jeff Bezos is one of Jones’s lead investors.

The people-not-machines approach also underlies Wikia, a company started by Wikipedia founder Jimmy Wales. Plans remain under wraps, but the gist is that users will edit automated search results for relevance. Like Wikipedia, Wikia will allow users to track changes and identify who is making them, undercutting efforts to manipulate search results. “Someone can do something bad,” says Wikia CEO Gil Penchina, “but at least it will be transparent.”

The Specializers

Try out: The likes of toptenwholesale.com, zillow.com, and kayak.com

Unlike Google, “vertical search” companies don’t rely on fancy algorithms or indexing technology. Instead, they specialize in a topic or industry and use rudimentary search means, such as collecting links to relevant sites or charging companies a per-click fee for a listing.

A handful of consumer-oriented vertical search engines–Zillow.com in real estate and Kayak.com in travel–have already garnered significant attention and Web traffic. The category also contains many business-to-business sites. For example, TopTenWholesale.com helps distributors source industrial-sized merchandise. (One recent posting offered a case pack of 200 laser pointers.) “Vertical search engines know their industries in a way that Google or Yahoo never can,” says founder Jason Prescott, who reports sales of $1.5 million last year. That may sound small, but the market will top $1 billion in ad spending by 2009, according to Outsell, a Burlingame, California, research firm.

The Comeback Kids

Try out: yahoo.com, ask.com, and live.com

In a bid to grab market share, Google’s major rivals–Yahoo, Ask.com, and Microsoft –have been on a rebranding binge. Microsoft and Ask.com have introduced spare homepages that resemble you-know-who’s. (Ask also retired its Jeeves butler mascot.) Not to be outdone, Yahoo recently unveiled Panama, which is intended to bring its system for placing ads alongside search results into parity with Google’s system. None of these changes is revolutionary, but they could make these also-rans more attractive to companies that advertise online if Google’s keyword prices continue to rise.

The Adsense Assailants

Try out: contextweb.com and quigo.com

Most people associate Google with search, and yet 39 percent of its revenue (or $4.2 billion) comes from the AdSense network, a service that allows website owners to display Google ads in return for a share of revenue. Some of Google’s new rivals are bypassing search and instead going after this business. The problem with AdSense, they say, is that Google refuses to reveal the actual revenue split to its partner sites. A firm called ContextWeb is now offering sites more control over how much they are paid. Another upstart, Quigo, is letting advertisers be more choosey about where their ads are displayed; Google has promised to follow suit.

Whether or not the challengers gain a foothold in the market, their efforts are good news for all companies that rely on search-engine optimization and online advertising to boost sales. By challenging Google, they help to ensure that it doesn’t become complacent. “Everyone thinks Google is great, but we don’t have any reference point for what search can be,” says Riza Berkan, founder and CEO of Hakia. “Search is not yet a solved problem.”

Inc.

Creating a Sustainable Competitive Advantage for Your Small Business

Getting a leg up on the competition — and keeping it there — takes more than a solid product, smart marketing and savvy management. You also need a way to achieve a long-term advantage, a strategy that will provide a sustainable edge over rivals.

“The experts often talk about the importance for large companies to win a sustainable competitive advantage,” says Sarah Gerdes, CEO of Business Marketing Group, a San Francisco-based firm specializing in management and partnership consulting. “But, it’s important for other businesses, too.”

How do you pull it off? Try these tactics:

A long-term contract

Signing a deal with customers that allows you to be their regular vendor makes it nearly impossible for competitors to take business away from you. That’s what Doc Parghi, vice president of worldwide sales and business development at five-year-old AppLabs has done.

From the beginning, the Philadelphia-based software testing company strategically inked one-year contracts, focusing on startups that are more likely than bigger companies to go for such deals. At first, AppLab’s approach was to spend three to six months proving itself to customers, then asking for a long-term deal.

But when it became more established, AppLabs took a different tack, proposing a one-year agreement during initial negotiations, with the understanding that clients would sign on after a few months if they were satisfied with the service. More recently, AppLabs has nailed down four such agreements with Fortune 50 companies, two of which renew automatically. The tactic has helped AppLabs double revenues every year.

Exclusive distribution rights

If you can arrange to become the only company distributing someone’s products, you’ll have a nearly impregnable line of defense. Just look at Travis Schneider, CEO of StarBrand Media.

The three-year-old Los Angeles-based company has a Web site — www.starbrand.tv — where fans can order fashions and other products featured on popular TV shows and movies. To make it happen, Schneider has locked up exclusive deals with movie studios and networks allowing him not only to feature the items, but get word on what the actors will wear before a TV show airs, so he can be ready at the jump.

Exclusive geographic rights

Arrange to be the sole vendor of a service or product in a specific area, which AppLabs has also tried.

It signed an agreement with a software company to be the only provider of testing services for that firm’s overseas clients. It also made a deal with an association to be its exclusive partner in India. While the tactic hasn’t been as central to AppLab’s success as its long-term contracts, there’s been a handsome payoff.

Exclusive access to a resource

You might be able to win the right to use a technology that gives you a significant edge in the market. In this case, you don’t own the actual patent. But, by locking up exclusive use under certain circumstances, you can still gain a tasty advantage over rival businesses.

Even if you’re not the only one with access to the resource, you’ll still be ahead of the game if it’s something that’s hard for others to lay hands on.

That’s what Eric Ling figured when he started Bubbles Tea and Juice Co., in Columbus, Ohio, a year-and-a-half ago. He uses a special machine that seals plastic cups airtight and prevents leaks. Ling doesn’t have exclusive rights to the device, which is made in Taiwan, where he grew up. But he thinks it’s unlikely to be used by local competitors. “It’s not that easy to find unless you have a connection back in Taiwan,” Ling says.

Go for the gold: a patent

Of course, the piece de resistance is to win a patent for your own technology or product, giving you a legal monopoly on its use. Take Fortius One, a one-year-old firm in Washington, D.C., that provides geography-based business intelligence.

Its patented mapping and analysis tools “provide us with an invaluable advantage,” says CEO Daniel Abraham. Better yet, because the technology was developed by the company’s founders as part of their doctoral dissertations, Fortius One has been able to get around the usual restrictions on intellectual property ownership.

While the university where researchers develop their inventions generally owns the patents, that’s not always true for technology developed as part of a dissertation, Abraham says: “It’s been clearly vetted legally just who the rights belong to.”

Our bottom line

The more you can lock up the use, distribution or sale of a product or service, the better off you’ll be — and the more likely it is that competitors will eat your dust.

http://www.startupnation.com/pages/articles/competitive-advantage-small-business.asp?src=nw

5 Startup Tips for Beating your Business Competitors

5 Startup Tips for Beating your Business Competitors

By the Sloan brothers

Competition is as inevitable in business as death and taxes are in human existence. Even if your startup business has stolen a march on the rest of the world with your product, service, execution, distribution or customer service, somebody else will inevitably try to chase you down and beat you at your own game.

Most entrepreneurs become concerned about competition early on and never quite shake their fears. In fact, besides tax issues and the matter of health care coverage for their employees, a recent survey reveals competition is the biggest concern of small business owners. And most of them are far more worried about the guy down the street than they are about being stomped by some Fortune 500 corporation.

But there’s one fail-safe way to avoid a preoccupation with your rivals – and that is to focus always on making your startup business the best that it can be. Whether your edge on the competition lies mainly in unique product selection, supreme customer service or cutting-edge marketing, you’ve got to maintain or increase that lead – and then look around for some other way to best your competitors as well.

Here are some other ideas for keeping the competition at bay by rejuvenating your own startup business:

Do Some Sleuthing

If you’re truly concerned about the competition licking at your heels, check their businesses out thoroughly yourself. You need to experience what customers are experiencing there. See how their pricing or product mix or the overall encounter compares with your own. Certain other ways of spying on your competition can be helpful as well, as long as they’re all ethical and above-board. Greg Hamilton, for example, operates a Curves International franchise in Bakersfield, California. One of his best ways of getting qualified leads for his women’s workout facility is to leave “lead bags” at other businesses around town where women can drop a slip with their contact information if they want to find out more about Curves. Well, a competitive club in town has started to do the same thing – so Hamilton isn’t above sneaking a look at how many slips are in his rival’s lead bags versus his own.

Form a “Club”

Even if your business competition is primarily local, every now and then it’s a good idea to see how other companies in your industry, around the region or across the country, are doing things as well. You might even want to create an affiliation of geographically dispersed companies in your industry (therefore ensuring that they are non-competitive with one another) who could help one another immensely because they’re all in the same business and faced with basically the same challenges.

Take Some Pre-emptive Steps

If it’s not too late, ward off competition from the start by raising the barriers to entry in your niche. You might try to develop exclusive relationships with distributors of the hottest merchandise in your field, for example, which prevents competition from overlapping your product mix. Or issue a price guarantee that ensures your place is the last one a customer will visit before making a purchase decision.
Re-energize your Customer Base

It’s always going to be true that your best customers are the ones you have. Figure out every way possible to make them even better customers. That probably starts with having a database of information about them – whether you deal with B2B purchasing agents or ordinary consumers – and using it to the hilt. Contact them about new products or with reminders that they’re on your mind (and, implicitly, not on your competitors’). Continually look for opportunities to cross-sell or up-sell.

Get Back to your Entrepreneurial Roots

If you’re going through a period of self-doubt, sluggish sales, or some kind of paradigm-wrenching change in your startup business, scrape everything else away and get back to the bedrock of your business. Recall the spirit and creativity and enthusiasm that led you to startup in the first place, and then do whatever you can do to rekindle those attributes. Maybe it’s simply getting away from the business for a few days to escape your routine, recharge your batteries and get the entrepreneurial juices flowing again. Or maybe it will take a brainstorming session with a handful of your key employees, the way you used to do. Whatever it takes, clear away the fog of war so you can re-engage the insights that made you successful in the first place.

Our Bottom Line

Stop feeling beleaguered or sorry for yourself when competition pops up or starts getting feistier than it has been. Use it as the opportunity you’ve been waiting for to re-examine and revitalize your own startup business.

http://www.startupnation.com/pages/articles/AT_5-Startup-Business-Tips-Beating-Competition.asp