VRTY followers, FYI:
Internet search engine companies still
looking for their pot of gold
Copyright c 1997 Nando.net
Copyright c 1997 N.Y. Times News Service
(Feb 11, 1997 01:18 a.m. EST) -- Thanks to those clown-size fish in the company's TV ads, or the
hillbilly yodel in the radio spots, even investors who have never surfed cyberspace have likely heard
of Yahoo -- a leader in the market for services that help users search for information on the World
Wide Web.
Following the example of McDonald's and other consumer-product marketers, Yahoo, like its
closest competitors, Lycos, Excite and Infoseek, has been building brand awareness through sizable
television and radio advertising campaigns.
And Yahoo, the first of these four publicly held search companies to post a profit, appears to be the
most aggressive brand builder so far. It plans to spend between $10 million and $15 million on ads
this year; that included a spot during last month's Super Bowl. In all, the campaign is a significant
outlay for a company with less than $9 million in sales in its most recent quarter.
But a recent run-up in Yahoo's stock price indicates that Wall Street supports the brand-building
strategy. Yahoo's main service, free to users and supported by on-line advertising, is a navigation
and search engine, which finds material on the Web based on key words or phrases that the
computer user types in. Because most Web surfers employ a search tool on almost every visit,
having one of the best-known brand names can certainly stimulate traffic -- and ad sales.
By some analyst estimates, Yahoo leads the pack in selling Web advertising. According to the
Electronic Advertising & Marketplace Report, an industry newsletter, Yahoo ended 1996 with $19
million in ad revenue; its nearest rivals, Infoseek and Excite, respectively generated an estimated
$14.1 million and $13.5 million.
Monday, Yahoo's stock closed at $29.125 a share, up nearly 75 percent from its price as recently
as Jan. 2. The stock has yet to climb back to the share price of $43 it achieved on its first day of
trading last April, on an offering originally priced at $13 a share.
But investors have reason for optimism. Last month, the company reported earnings of $91,000 on
sales of $8.6 million for the fourth quarter, making it the first publicly traded search-engine company
to break into the black.
The company also said that the number of advertisers on Yahoo's Web sites had risen to 550, from
340 in the third quarter. That news, and positive forecasts for Web advertising generally, recently led
several analysts to upgrade their recommendations for the stock.
Yahoo has made solid gains, but investing in Internet companies is still not for the skittish.
For one thing, searching for material on the Web through key words or phrases -- which is the basic
method for Yahoo and its rivals -- remains a far too random exercise for serious research. Most
people browsing the Web -- whatever search service they use -- too often find themselves adrift in a
sea of irrelevant information.
That may help explain why Yahoo, in courting the consumer, is expanding beyond searches to
develop new Web sites for specific demographic groups and is striking deals with big-name
information and entertainment providers.
Late last month, for example, the company started a site for women, providing a gender-specific
guide to entertainment, events, health resources and information sources on the Web. Next month,
the company plans to start a life-style and entertainment site for twenty-somethings that it has
created in partnership with MTV. These creations extend a long list of sites that include Yahooligans,
for children, and regional sites like Yahoo Boston and Yahoo Japan.
Alan Braverman, a Credit Suisse First Boston analyst, said that Yahoo was best positioned to take
advantage of the huge growth in Web advertising expected in the next few years. "What creates the
winner on the Internet is brand, distribution and content -- and not necessarily technology," he said.
"Of the public companies, Yahoo is going to be a clear leader."
For advertisers, the lure of Yahoo is the target audiences defined by its demographically or
geographically focused sites.
"What they want to be to the Internet is similar to a broadcast model," said Paul Noglows, an analyst
at Hambrecht & Quist in San Francisco, who recently raised his recommendation on Yahoo to a
"strong buy" from a "buy" and increased the 1997 earnings estimate from a loss of 14 cents a share
to a profit of 4 cents. "They want to provide content that advertisers know will attract specific
viewers."
Like Yahoo, Excite wants to provide a broad consumer service and extend its brand through a
range of ancillary sites, such as a guide to chat groups on the Web and a guide to news. Excite not
only directs users to Web sites but reviews and ranks the sites, too.
And Excite has broad distribution, thanks to an exclusive arrangement providing Web-navigation
technology to America Online -- a relationship enhanced by Excite's recent acquisition of the Web
Crawler search engine from America Online. In turn, America Online received a 20 percent stake in
Excite.
Excite's revenue is surging: $6.5 million in the fourth quarter, compared with $574,000 in the period
a year earlier. Still, the company lost $12.7 million for the quarter, or $1.06 a share. Excite shares
closed Monday at $15.0625, down $1.9375.
While Yahoo and Excite embrace the consumer market, Infoseek has abandoned it, choosing to aim
for serious researchers and business clients by concentrating on development of a fast and efficient
search technology.
In late January, Infoseek's shares reached a recent high of $10.75, but then gave up ground after the
company reported 62 percent revenue growth -- middling, by Internet standards -- to $6.1 million
for the fourth quarter. The loss of $4 million, or 15 cents a share, was a penny a share higher than
the $3.7 million loss it posted in the quarter the previous year. Monday, the company's shares
slipped 25 cents, to $9.
Among the search companies, Lycos is perhaps taking the most singular approach. Rather than
compete solely on advertising sales, the company has expanded its business by licensing its search
technology to other Web developers -- including many leading Internet access providers. Already,
licensing fees account for about 14 percent of the company's revenue.
For the first quarter, which ended Oct. 31, the company had sales of $3.7 million. Lycos shares
closed Monday at $17.75, down 87.5 cents each.
For all the investor interest in Web searchers, the biggest question may not be which companies take
the market lead, but just how far -- technologically -- the whole field still has to go.
"Without search engines, there's no way the Internet growth that has occurred could have
happened," Braverman said. "But do search engines really work? The answer is 'No.' In my mind,
we are at the point of the $300 calculator that subtracts and multiplies."
STEPHEN MANES: Missing links on
search engines
Copyright c 1997 Nando.net
Copyright c 1997 N.Y. Times News Service
(Feb 11, 1997 01:18 a.m. EST) This column appears weekly not only in newsprint but also on the
World Wide Web. Yet if you hunt for it with one of the popular Web-wide search engines like
Altavista, Infoseek or Hotbot, you will probably never find it.
So-called web crawlers and their search engines are indispensable tools that help users sift diamonds
from the rough. The engines can deliver so much information that they may seem infallible and
complete.
But when a search fails to turn up information that you know has existed on the Web for months, or
sends you to a nonexistent page or one that lacks the information you were hunting for, you sense
something is amiss. Despite one product's claims that it "was the first search engine to index and
search the entire World Wide Web," it is impossible to sniff out every last nook and cranny.
The reason lies in web crawlers' very nature. They typically begin at a known page and follow links
from it to others, downloading pages and indexing them as they go. That strategy means that if no
reference to a document exists in the outside world, the web crawler will never find it. John, June
and Jake may have wonderful Web pages linked only to one another, but though their friends may
see the sites by typing addresses, no crawler will ever reach Jayville until another site cites it. To
address that problem, search engines prominently offer a form for submitting new addresses, but site
developers do not always send out birth announcements.
Other omissions can be rectified only with difficulty, if at all. Most search engines skip sites that
demand a password for entrance, even those like The New York Times on the Web that offer
passwords free of charge. Internal search tools are usually available, some better than others, but
you cannot hunt for information until you get past the password. Some sites lack links to archival
pages and make them accessible only through a local search engine. Web crawlers cannot see them.
And an increasing number of pages exist only fleetingly, built from a database only when a user asks
for particular information. Sites offering stock quotes or on-line book catalogues, for example,
generate pages only in response to your queries. If you customize your home page to show today's
weather forecast, it is certainly a part of the World Wide Web, but it appears only in response to the
information stored on your machine.
The ultimate example of evanescence? A search site itself. "How many pages does it hold?" asked
Louis Monier, the technical leader of Digital Equipment Corp.'s Altavista search engine project
(www.altavista.digital.com). "As many as there are queries." The page that displays the sites
containing the words "mustard" and "lorgnette" may not have existed before you requested it and is
likely to look different if it ever appears again.
As Monier pointed out, "You don't want the thing to index itself," so Web sites can use something
called the Robots Exclusion Protocol to tell web crawlers what to skip. For example, pages that are
updated frequently are poor candidates for inclusion in indexes; by the time the index is created, the
content it points to has long since disappeared or moved. Unsophisticated Webmasters may not
know about the protocol and let crawlers index pages changed daily, weekly or even monthly, thus
guaranteeing frustration when users arrive at pages lacking what they expected to find.
Information can vanish for other reasons. Webmasters move pages or entire sites without notifying
the search engines. Pages are deleted when customers' accounts are terminated. University students
graduate. Life goes on, and so does the Web. Though the best engines update their indexes daily,
the goal of keeping current is Sisyphean.
If you believe that the Web is the repository of all human knowledge, an unusual new site called AT1
(www.at1.com) will demonstrate otherwise. It offers free searches into what it calls "the invisible
Web," which typical web crawlers do not reach. Much of this information is not on the Web at all,
but tucked away on CD-ROMs or in proprietary databases that charge as much as $300 an hour
plus annual service fees, so venturing past the result screens can cost real money. But there is also
free material from a variety of sources and an extensive index of material from America Online. The
ability to search an index of indexes that web crawlers miss is a concept that deserves to catch on.
Meanwhile, search services are adding useful options to the information they do find. Altavista is
introducing Livetopics, an enhancement that analyzes the information from a particular search and
generates categories and related words to help users home in on the data they seek. Though the
pre-release version's interface displays rough edges, the idea seems attractive as a
computer-generated supplement to the category lists traditionally compiled by humans at sites like
Yahoo.
And last week's arrival of Excite's Newstracker (at nt.excite.com) means you can search recent
editions of 300 Web-based publications, including many on-line versions of newspapers and
magazines. This crawler cleverly peeks into password-protected sites, but it is up to you to register
and, if necessary, pay for access to those sites if you want the full text of articles the program finds.
The time lag for indexing means up-to-the-minute news can be missing, and material disappears after
about a week, but Newstracker looks like a useful tool. However, it could not find last week's
edition of this column. Why not? Search me!
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