The Search -New Business Model

The Internet - New Business Model:

Bill Gross , founder of the company with the most anticipated IPO in the history of Wall Street, the genius who rewrote the rules of business and rewired the way culture understood itself. Had Bill Gross not given up his argument ,had he just followed his gut, there might not even be a Google. Brin and Page might have sold out to Yahoo or Excite or Microsoft, or merged with Ask Jeeves or gone the way of Alta Vista.

Gross National Products - GNP , Inc

Gross started in a linear fashion, building companies one at a time. He'd grow them till he got bored or distracted; then he'd sell them. Gross hacked up a new high-fidelity speaker design and launched GNP, Inc, to sell creations. GNP, Inc., grew to claim number seventy-five on Inc, magazine's 1985 list of the 500 Fastest-Growing Companies. When he graduated, he sold the speaker business to his college partners and started a software company that presaged much of the rest of his life's work. The company, GNP Development ,allowed computer users to type natural language commands that the computer would translate into the arcane code needed to execute the specific tasks.

Magellan:

Back in the 1980's there was no Web to index, but there was the personal computer hard drive. PC's held a mere 20 or 40 megabytes of data that time, most were already a mess of lost files and hopeless organizational structures. To solve this problem Bill Gross invented Magellan. Magellan was an early version of what is now known as a file manager, a way to search all your files on your hard disk instantly. Sounds simple, but in the mid- 1980s, this was pretty revolutionary idea.

Knowledge Adventure:

Bill Gross another company took off, becoming the world's third-largest children's software publisher. Even in this Gross was working on piece of the search problem. But Gross , in 1996 Knowledge Adventure was sold to Cendant for $100 million.

IdeaLab:

Inspired by Spielberg, Gross decided his dream job was to start a company that allowed him to start company that allowed him to start many companies in parallel - a business incubator of sorts, an idea factory. IdeaLab was born a business incubator, but given its birth at the onset of the Internet boom, it quickly became far more than that. For a brief moment, IdeaLab was a major hub not only of the Internet industry, but of cutting-edge business theory to boot. In 1998 and 1999, many of IdeaLab's companies went public in spectacular fashion, and on paper, Gross and his investors got very, very rich. As long as the updraft was continuing, it worked. But the updraft ended, the capital markets stopped funding concept plays , and by the middle of 2001, IdaLab inventors were left holding a shattered portfolio, eventually filed suit, demanding that Gross liquidate IdeaLab and all its holding ,so they could at least get some of their money back.

GoTo.com: A New Model for the Web

Overture remains Bill Gross's greatest financial success - a company he built and sold not for $10 million, or even $100 million, but for well over a billion dollars. Overture was a hit, yes but it might have been Google, or at least it could have tried to be, when GoTo launched Google was still an obscure graduate school project.

Before Google, most search engines employed simple keyword-based algorithms to determine ranking. In this they indexed the words on a particular page, then matched those words to search phrases. It worked great for small, controlled data sets, and as AltaVista proved ,it worked quit well for the early Internet. But once spammers realized they could capture traffic for high-traffic keywords like "cars" by hiding those keywords all over their sites (often in small white letters on a white background, for example),the model quickly broke down. This is why, by late 1998, the majority of results matching a search for "cars" on Lycos were porn sites.

Gross had more than a dozen other Internet-related IdeaLab companies in various stages of execution, and all of them needed a good traffic , for this he developed GoTo.com an eye toward solving that problem i.e. identifying the good traffic and crap one and it become the GoTo's mission.
Gross's eureka moment: It's the quality, Any business would be willing to pay a lot more than seven to ten cents a click for the right traffic.
Gross's core insight: Together with his IdeaLab team, Gross looked at human-edited approaches and also tried for better algorithms, but was convinced that any approach to search driven by algorithms would ultimately be out mastered by spammers. So Gross turned to it's original idea: to kill spam. Gross's core insight, the one that now drives the entire search economy, is that the search term, as typed into a search box by an Internet user, is inherently valuable - it can be priced. But you can't charge the Internet user for searching. But what if you could charge the advertiser?

Gross's time-honored approach: Gross built not one but two entirely audacious ideas to GoTo's initial business proposition for advertisers: first was the concept of performance based model - one which advertisers paid for a visitor only when a visitor clicked through an ad and onto advertisers sites. Instead of demanding money upfront from advertisers, the way AOL or Yahoo did, GoTo's model guaranteed that advertisers had to pay only when their ads were clicked upon.

Second, and even more audacious ,was how Gross priced his new engine: one cent per click, an extraordinary discount to the market. He knew his price wan seven to ten times less than what every Internet marketer was paying at the time.

GoTo.com Launch:

In February 1998, Gross introduced GoTo.com at the famed TED (Technology, Entertainment, Design) conference in Monterey, California. Gross was one of the first to see a world where millions upon millions of search queries created the perfect advertising marketplace and like a missionary. When GoTo.com launched (four months after TED in June 1998), it spotted just fifteen advertisers. But with in six months it had hundreds, and by 1999 its advertisers numbered in the thousands. Gross had created a platform that let his advertisers build his business , by middle of 1999 advertiser grew to nearly eight thousand.

GoTo developed two lines of business: its main site, GoTo.com; and syndication business, which had lower margins. In the middle of 1999, at a time when Google had arguably no business model to speak of, Gross had already positioned GoTo as the company to beat in paid search.

AOL Deal with GoTo.com :

The terms were reasonably simple: GoTo would pay AOL a whopping $50 million to syndicate GoTo's search listings on AOL's site. GoTo would make its profit on the traffic AOL sent through the GoTo listings. The AOL deal was huge for us, says Ted Meisel, a McKinsey consulting veteran who took over as CEO of GoTo in May 1999.

GoTo.com to Overture:

In September 2001, GoTo.com formally changed its name to Overture in favor of the syndication business. But all along Gross was worried they were making a mistake. We were worried about channel conflict and we overreacted, "Gross says ruefully". "We thought that if we didn't phase out the GoTo.com site, our partners wouldn't renew. But the truth was, as long as we were making them money, they didn't care."

In 2001 TED conference, Gross met with Larry Page and Sergey Brin to suggest the two companies merge into partnership that would once again realize Gross's dream of creating ultimate search destination. But Page and Brin turned a cold shoulder to Gross's overture. The reason given: Google would never be associated with a company that mixed paid advertising with organic results. Several months after the talks stalled, Google introduced AdWords, its answer to Overture.

The Search Economy:

To profit from search and control it's own destiny, a company requires three elements,
       First, it must have high quality organic search results, also known as algorithmic, or editorial,search.
       Second, company needs a paid search network.
       Third ,it needs to own its own traffic - the consumer's search queries against which editorial and paid results can be displayed.

Microsoft and Yahoo realized as 2002 came to a close was that this was the only element that either of them truly owned.

Overture also owned only one of these three magic elements - the paid search network. Both Yahoo and Microsoft began to pencil out strategies for acquiring Overture. Both Yahoo's Terry Semel and Microsoft's Bill Gates had guns at Overture's head. Either one could say , "Take my offer, or I' ll go to Google and your stock will tank." Overture had agreed to a $1.63 billion acquisition by Yahoo...Even after this Bill Gross isn't finished dreaming the next dream. His companies have sold for $1 million, then $10 million ,then $100 million , and now more than a billion dollars (Yahoo deal), but he's still not satisfied. Bill has a big idea, that is next paradigm in search, It's the next economic model and next relevance model.

SNAP: Gross answer to next paradigm search

A new breed of search engine that ranks sites by factors such as how many times they have been clicked on by prior searches, among many other things. SNAP has developed a pay-for-performance scheme that goes pay-pay-click one better: advertisers can sign up to pay only when a customer converts - in other words, when the customer actually buys a product or performs search as specific action deemed valuable by the advertiser, like giving-up e-mail address or registering for more information. The motivating factor to Gross start all over again, search engine spam solution.