Life After Free: Search Engines Seek Cold, Hard Cash

Search engine sites are continually on a quest to find the right formula for generating revenue. Since experience has shown that such companies cannot live by banner ads alone, they must employ a variety of techniques to make money and stand apart from competitors, according to experts.

To ensure long-term viability, site operators need to offer a full, balanced complement of pay-to-use features, paid placements and paid advertising, analysts said. In addition, they must pull off this tricky balancing act while maintaining the trust of Web visitors.

"All the independent, public portal sites are struggling to find a model that will pay the bills," Giga Information Group analyst Steve Telleen told the E-Commerce Times. "From what I can gather, there will likely be no single revenue model, even for a single site.

"Revenue will continue to come from a mix of sources, none of which will be sufficient by itself to pay all the bills," Telleen said. "Charging for certain types of searches will probably be one of them."

Targeting Niches

In some cases, sites may need to target specific businesses or find ways to deepen searches for those with niche interests, rather than trying to be all things to all users.

"Those search engines that don't offer an index as large as that of a Google or AltaVista may want to consider targeting e-commerce sites or content that resides behind the firewall in a corporate environment," Rob Lancaster, an Internet market strategies analyst with the Yankee Group, told the E-Commerce Times.

"This application better suits search engines that don't have the scale to handle the breadth of information available on the public Web and are able to better focus on smaller repositories of content," Lancaster said.

Lancaster said URL placement and paid-for-position services will continue to be good revenue sources, as has been shown by companies like Overture (formerly GoTo.com).

"But, for each of these, the search engine has to have scale and reach," Lancaster noted. "Overture is positioned within most of the major portals, which is why it is able to generate the revenues that it does. Without this kind of penetration into the consumer market, paid position is worthless."

Lancaster added that a more popular trend recently has been to move toward enterprise or corporate search services. "The main driver behind this is the recurring revenue stream that corporate clients represent, which relieves any burden built up by a reliance on advertising and commerce revenues," he said.

Going Deeper

The need for search engines to continually evolve was illustrated by Ask Jeeves Web Properties' recent move to purchase Teoma, a startup search engine site.

Ask Jeeves president Steve Berkowitz told the E-Commerce Times that Teoma is unique because it allows deep searches in specialized categories, helping users find niche-interest sites that would not turn up high in a general search engine's results.

Teoma ranks sites not by how many links they have received from other sites in general, but by how many links they have received from sites that are similarly specialized. For example, Berkowitz said, a site devoted to fencing would be ranked based on how many links it received from other sites geared toward fencing aficionados, with less emphasis placed on links from general sports or portal sites.

Berkowitz said this method gives searchers a more targeted list of sites covering any subject. He added that Teoma is already popular among librarians and should work well for academic researchers and others who need to perform quick but deep searches.

"We believe Teoma has the capability to take searching to the next level," said Berkowitz. He noted that Teoma's technology immediately increased the number of search results getting clicks when it was added to the Ask Jeeves site in December.

More Selling Possible

In addition to deeper searches, Teoma's technology holds the promise of more revenue sources. Berkowitz said his company is already licensing its Ask Jeeves and Teoma technology to other sites and businesses that want to perform specialized searches.

According to experts, deep-search capabilities also open the door to services that sell, for example, single articles from specialized journals for those who do not want to invest in costly full subscriptions.

"This involves partnerships and is basically an information reseller model," said Telleen, vice president of Giga's Web Site ScoreCard service. "It seems like a natural for a public portal site.

"They may actually provide a way for the subscription vendors to safely 'unbundle' their information products for organizations and individuals that are otherwise too small or too casual a user to justify a full subscription -- like a bar selling drinks by the glass," he added.

Telleen noted that this model would work for everyone involved, as long as paid-for samples do not encourage defections from a publication's regular subscriber base.

Paying for Updates

Berkowitz said Ask Jeeves and other companies will continue to offer a mix of paid-placement services and banner ads. But within paid placement, there are additional ways to make money -- for example, charging extra to advertisers who wish to have their listing continually updated to reflect current pricing, product availability and other data.

Berkowitz said these types of services not only will help advertisers target their intended audiences, but also will boost the relevancy of listings to consumers.

"If you can't deliver content that is relevant, people are not going to come back to your search site," he said.