My attempt to try to figure out where the puck is going and how we can get there two steps at a time. Speculations about the future mixed with a splash of musings and poorly informed critiques of the present.

Sunday, December 11, 2005

Will Microsoft Create Network Effects in Search?

In a panel discussion on an Indian television channel, Bill Gates said that Microsoft will share a part of its advertising revenues from its search engine with users. Gates went on to explain that search engines like Google get their revenues from advertising because people use these search engines, but they don't share these advertising revenues with the end users who help them get the revenue. (Thanks to Ro Choy for drawing my attention to this)

Plenty has been written over the past several weeks about how Microsoft seems to suddenly "get it." SSE released into Creative Commons being the most striking example. I will leave further comments on that to others.

However, this latest announcement from Gates strikes me not as another example of Microsoft suddenly "getting it", but rather as a reminder that Microsoft, better than most, deeply understands the power of building a network effect. The sustained success of the Office suite should serve as a constant reminder.

Despite all of the well substantiated claims of Google's technical brilliance, the fact that they have not translated their success into a self-reinforcing network leaves them open to competitive attack. While more searchers drives more advertisers, Google has never closed the back half of that loop. I am not increasingly likely to search on Google the more advertisers Google adds. However, what if Microsoft (or someone else) started to pay me to use their search engine, and would pay me more as advertisers paid them more, and advertisers would pay Microsoft more the more I (and others) used their search engine, which would result in me getting paid more - making me more likely to use their search engine... and the cycle continues.

Interesting, eh?

Too often, I think we all forget that Google is not a given. As much as I am impressed with Google's products, I am not convinced that they have proven an ability to build a sustaining business - not only should they be concerned about the lack of network effects, but also by the related fact that the switching costs both as a searcher and as an advertiser are so low.

While I am convinced that search will remain a central aspect of our Internet experience, I am unwilling to accept as a given that the search models we see today will endure.

Perhaps the broadcast/cable anaolgy will hold and "Vertical Search" players will emerge as leaders or perhaps someone will figure out how to introduce network effects into search?? or...

Where is the puck going?


Anonymous Jason said...

Welcome Josh!

11:29 AM


Post a Comment

<< Home