Google vs. Ebay, The Battle Continues

Type in any product on Google and you'll notice something interesting at the top of the page - two links, one that says "web" and the other that says "products." These links are right below the search box and right above the first three sponsored links.

When you click on products you are, of course, taken to Google Base. Now take a look at the top of Google Base - you'll notice that there are two prominent sort options "Show all items" and "Show Google Checkout items only." It should be noted that Google Checkout is also prominently displayed (in some cases, with a full-color logo) on the paid ads of participating merchants on Google itself.

No doubt the combination of prominent placement for Google Base on the search results, and the prominent placement of Google Checkout in search results and at the top of Google Base will lead to a lot more business for both products.

And, as I have noted in prior posts, these are two products that are directly intended to take marketshare away from eBay, with Google Base being a direct competitor to Shopping.com, Rent.com, and eBay (all of which are owned by eBay), and Google Checkout being an obvious attack on PayPal.

Imagine what would happen if Google Base expands its reach beyond new items from merchants and starts to offer used items, sellable by anyone. And perhaps not just 'buy it now' used items, but also items that people might want to, oh I don't know, auction? And since Google could monetize this traffic through a combination of Google Checkout fees and AdWords ads, it wouldn't be that crazy to think that Google would just offer auctions for free.

And unlike other failed attempts to capture part of eBay's auction market (Yahoo, Overstock, etc), Google's immense traffic would enable them to create a marketplace of buyers that past eBay competitors failed to ever accumulate.

As I noted last week, I find it interesting that eBay is considering a purchase of StumbleUpon. Past eBay acquisitions have all seemed logically related to their core business model - the online marketplace. This would include actual marketplaces (StubHub, Rent.com, Half.com), and enablers of online ecommerce (Skype, PayPal, Shopping.com).

So the acquisition of an innocuous Web 2.0 toolbar seems out of place, until you consider the potential for social media search (collaborative filtering) to someday provide more relevant search results than an algorithmic search engine. If that is indeed possible, then suddenly you could see eBay gaining search marketshare at Google expense. And with more marketshare, it becomes possible to further grow eBay's core businesses.

In other words, Google is trying to grab marketshare from eBay by promoting eBay killers through its search dominance, and eBay is trying to grab marketshare from Google, by gaining search dominance to protect and grow its existing properties.

Meanwhile, Microsoft still controls the browser, Ask spends millions on a bad advertising campaign, and Yahoo loses c-level executives (Yahoo does have a social media strategy, but I have yet to see it really take off in any meaningful way).

The battle for search dominance is really the battle for online dominance. And despite Google's current catbird-seat position, it's still too early to declare a winner. Technology, user behavior, and smart competitive moves will make this race very interesting over the next several years.

Collaborate or Die

Lately I've been playing around with StumbleUpon.com and it's pretty addictive. For those of you not familiar with this site, it works like this: you download a toolbar for your browser that says "Stumble." When you click on it, it takes you to a site that it thinks you might like. This is determined by the categories you select as areas of interest, and also by how you rate past sites you have visited.

For example, let's say that StumbleUpon shows me PayScale.com, an online compensation survey. I rate it as a "I like it." The site has also been rated by many other users as well. Over time - after I've rated maybe 50 to 100 sites - StumbleUpon can match me up with other users that have also rated similar sites similarly. As a result, it can start showing me sites that people like me have already reviewed, making it likely that I will also like these sites. This is known as "collaborative filtering", most famously seen in Amazon's "people who liked this, also liked this" box.

Right now, StumbleUpon is basically a fun way to find funny or cool sites. I mostly end up with joke sites, strange pictures, or YouTube videos. The potential of StumbleUpon, however, is much greater. Indeed, rumor has it that eBay is about to acquire the company for $75 million. That's a lot of dough for a service that sends people to lawyer joke summaries.

But think about StumbleUpon this way: if I rate sites for a few months, I'll probably have 500 to 1000 sites rated. That's a pretty good profile of my likes and dislikes. Now let's say that the Stumble toolbar expands from just the ability to randomly access cool sites to an actual search box. So now I type in "los angeles airplane tickets" and StumbleUpon determines that people like me really prefer Kayak.com over Orbitz. As a result, I get sent to the result that works best for me. Sort of like Google's "I'm feeling lucky" feature, but much more personalized.

You could even take a regular search engine approach and show me the top ten listings based on my personalized preferences. If you think about it, which would you prefer: results based on sophisticated computers with oodles of complex algorithmic code, or results based on 500 people just like you who have already looked through a bunch of sites and found the two or three that they like the most. Personally, I'd bet on the people.

As much as a lot of Web 2.0 companies seem to be over-hyped, and over-valued, I do think that companies that use the "wisdom of crowds" to personalize results have the potential to provide far more accurate results for users than an algorithm by itself. I count Flickr (photos), Digg (news stories), and StumbleUpon (Web search) as the leaders in this arena.

Granted, as with any technology, the more popular it becomes, the more likely it is susceptible to manipulation. Just as the rise of search engines created an entire industry of "search engine optimizers", so too will the rise of "social media" create an entire industry of "social media optimizers."

It may, however, end up being harder to game social media than it is to game a search engine. I can envision closed networks of users that work as a collective to decide the best sites for their group. In other words, in the current social media world, it is possible to "Digg bomb" and generate buzz around a news story simply by spamming the results and voting a site up the ranks. But if users have the ability to approve or reject members of their 'crowd', you could truly end up with a spam-free world where you really trust the results that you get back from the social media engine.

The number of people using StumbleUpon, Flickr, and Digg is still very small - probably 90% live within 50 miles of San Francisco! But once these sites reach critical mass, you have to wonder whether traditional search sites like Google and Yahoo will start to seem far less relevant and somewhat anachronistic.

Ask: Complicated So It Must Be Good!

Ask.com is spending millions on TV, billboards and newspaper ads proclaiming "the algorithm killed Jeeves" among other things. No doubt, the message of these ads is that Ask uses very complicated technology to provide great search results.

This message was definitely drilled home with Ask's full page ad on page B5 of today's Wall Street Journal. While I couldn't find an image file of the ad online, the ad headline pretty much sums up the concept: "The Algorithm Sees the Internet The Way Dmitry Sklyarov Sees a Poorly Encrypted DRM File." The ad also includes several mathematical formulas, confusing charts, and seemingly random inclusions of words like "vacuum energy density", "Riemann Hypothesis", "autosomal recessive gene" and "bibliometric."

But there is also a story in all the multi syllabic text, and the story basically goes like this: the major search engines are dumb and Ask is smart.

Assuming any WSJ reader other than myself actually read all 500 words of text, I could see the high-falooting wordsmithing working its magic. You might end up thinking "gee, I don't understand any of this, but it seems that there is a lot of neat technology behind Ask. I should check it out."

Unfortunately for Ask, I actually did understand their argument, and I came away with two negative thoughts: 1) The ad makes many false accusations against Google and Yahoo and 2) It sounds like Ask hasn't improved their algorithm much since their acquisition of Teoma.com may years ago.

First, let's discuss the claims about, as Ask calls them, "today's most widely used search engines." Here are a few claims that are flat out wrong:

1. Claim: "They find sites with the most links and present them as authorities. This is roughly analogous to handing the Fields Medal to your high school homecoming queen." The Truth: Google counts the number of relevant links to a site as part of its ranking algorithm. So, for example, if you had a Web site about homecoming queens, inbound links from other homecoming queen Web sites would be relevant, but inbound links from sites about the Field Medal would not.

2. Claim: "Counting inbound links isn't enough . . . the heavy hitters of search all use the same mathematically myopic approach - counting links back to authoritative Web pages." The Truth: Well, for one, this directly contradicts the first claim above, that Google uses a pure "link popularity contest" to rank pages. But in addition to that, the claim above suggests that Google adds the same weight to each link. As suggested in the original Page Rank algorithm, this isn't true.

3. Claim: "And never again will you get "results" consisting merely of ten blue links, rather than the rich aggregate of images, video, conceptually related search topics and pure expert insight the Algorithm delivers." The Truth: Three words: Google Universal Search.

OK, so Ask is lying about their competitors' algorithms. I can dig that - this is an ad after all. But what does it say about this amazing new algorithm. Let's deconstruct that as well.

1. Claim: "It works like this. For each search query, an index G of Web pages is found. For each page p, you associate a non-negative authority weight a(p) and a non-negative hub-weight h(p). This will lead you to the rather obvious conclusion that when p points to lots of pages with big a values, it should get a big h value (inverse weighted popularity). And when p is pointed to by lots of pages with big h values, it should get a big a value (weighted popularity). " Explanation: Ask looks at a page in the context of a community of other relevant pages, and rewards higher value to pages that are more respected within a particular community. This is the entire concept behind Teoma, and as far as I can tell, there is no difference between this explanation and Teoma of, say, three years ago. So the Algorithm was developed several years ago. Woo-hoo.

2. Claim: "But while you are learning from the Algorithm, the Algorithm is learning too. It studies the way anonymous groups of users search and forms an aggregate view of which results those users find the most valuable." Explanation: Well, this is basically the same as the point they made above. This 'learning' algorithm is nothing more than a collaborative filter - the same technology used to power Amazon's "people who bought this also bought," Yahoo's launchcast, and Web 2.0 companies like delicio.us and Flickr.

3. Claim: "It's here to narrow or expand your search based on concept - something no other search engine can do." Explanation: I actually had no idea what they meant by this, so I decided to do a search on Ask for the keyword "love." On the right navigation, they have a list of related terms, some very narrow, like "love poems" and some quite broad, like "Hearts," "Hate" and even "Winnie the Pooh." I did the same search on Yahoo and got an "also try" for "love quotes", "love poem" and "love calculator." On Google, on got nothing other than search results. So my conclusion on this point is that Ask has done a better job of integrating semantic clustering into their search results, but this isn't going to revolution search relevancy.

I have no doubt that the good folks on Madison Avenue who created this ad never expected search nerds like myself to deconstruct their work and expose their facade of intelligence. But, as I often remind myself, the number one search on Google is "Yahoo" and the number one search on Yahoo is "Google," which goes to show that the average American doesn't need much convincing to be convinced that search algorithms are complicated.

Don't worry though, Ask, I can assure you that the average American doesn't read this blog, or any blog, or even the WSJ for that matter. Your secret is safe.

Adteractive: Birthplace of Internet Executives and Founders?

In the two years I worked for Adteractive, I met a lot of great people. What has really amazed me, though, is how many of those great people have gone on to found, fund, or lead Internet companies post-Adteractive.

As you will see from the list below, out of maybe 150 ex-Adteractive employees, there are literally dozens of CEO and founders scattered throughout Silicon Valley.

The Founders
Cesare Alessandrini - Founder, Company Name Unknown
Andrew Barenbom - Founder, TellAPal
Viva Chu - Founder, Company Name Unknown
Dan Ellis - Founder, Syndero
Sanj Goyle - Founder, LogicalAds
Vipul Gupta - Founder, LogicalAds
Saar Gur - Angel, numerous start-ups, VC at Charles River Ventures
Shane Holland - Founder, Tippit
Chris Lien - Founder, Marin Software
Dave Lukrich - Founder, Syndero
Mitch Liu - Founder, MyOfferPal
Jon Murray - Founder, Company Name Unknown

The C-Levels
Burt Podbere - CFO, iPerceptions
Tom Soevyn - CEO, Focalex
Scott Sorochak - CEO, BookCrossing
Jay Webster - CTO, Blue Lithium

A pretty impressive list. And these are all people I worked with in just two years. Plus I'm not including any VPs (like yours truey) or all the other talented people doing other great things. And I know that I have forgotten several people who should also be included (if its you, its not on purpose).

My question is this: is Adteractive an anomaly, or is this just the natural outcome of careers progressing over time?

The first theory would basically suggest that Adteractive hired a bunch of highly-entrepreneurial people who used the learnings and contacts they made at Adteractive as a stepping stone for further successes. The second basically argues that *any* company in Silicon Valley is filled with future execs and founders, you just have to give people a few years to spread their wings.

In this case, I think it's a little of both. Adteractive purposely (at least I think) hired people who had strong entrepreneurial leanings, thus it's not a surprise that so many former employees went on to lead or found start-ups.

At the same time, every company in Silicon Valley today has some 25 year "assistant to the regional manager" that in five years will be running a VC-funded start-up. Silicon Valley attracts the smartest, most hungry people in the world, so look to the right of you and look to the left of you - one of those people may very well revolutionize digital media in the future.

That Adteractive is not a complete deviation from the mean serves to remind me of what a crazy and wonderful place Silicon Valley is today. I don't think there has ever been a time in history in which having dozens of business owners and executives in one company at the same time would be concerned anywhere near normal. Twenty years from now I doubt such opportunities will exist. It's worth stopping for a moment to breathe it all in.

Universal Search, Nextag, and Quality Score - Oh My!

1. Google Universal Search. Lots of hype, but really is it that different than what is already there? My friend Owen doesn't think so. To me, it seems like both Google and Yahoo are acknowledging that "searches for Web sites" is just a piece of the puzzle - Google chooses to address it by incorporating books, news, videos, etc into search results. Yahoo focuses on social networking like delicio.us and Flickr as an alternative to traditional search altogether.

2. Nextag and the A word? Rumors are flying that Nextag has been acquired. Unclear by whom. My guesses: private equity company, Amazon, or Yahoo. More to come.

3. Quality Score Update. A few of my dormant AdWords accounts recently got oodles of clicks out of nowhere. Then the traffic stopped. I smell a Quality Score algorithm experiment.

4. Reactive or Predictive? Having talked to many bid management companies recently, I'm realizing that some companies are big into predictive modeling ("all your keywords that contain the word 'red' perform well, therefore, increase the bid on all 'red' keywords, regardless of history") versus reactive management ("look at the last month of data and adjust bids for position, geography, demographics, day-parting, etc for all high-traffic keywords"). Seems like someone should invent a tool that combines the two approaches.

5. Speaking Circuit. I'm tired of looking at conference agendas with faux-expert SEM consultants as the main speakers. So I'm going to start making an effort of talking at some of these conferences for the good of humanity. I'm working on WebMasterWorld PubCon at the moment. If anyone has ideas (or invitations) to speak, let me know.

Google's Sneaky Addition to Quality Score

Most Google advertisers have now become accustomed to messages at the top of their AdWords interface notifying them that one or more of their keywords is "inactive for search." Sometimes, this is to be expected, such as when you are bidding under $.10 for almost any keyword. In other cases, though, it's clearly the result of the dreaded and oft-baffling "quality score."

Google has tweaked the quality score algorithm continually over the last year or so. This is not to be expected, since - as Google should know by now - SEO or SEM blackhats will work 'round the clock to come up with end-arounds to any algorithm.

I noticed a very slight change to the AdWords UI about two weeks ago that is clearly yet another attempt to thwart quality score optimizers. If you click on the "tools" tab at the top of the AdWords UI, then select "Advanced Search" and finally "Find and Edit Max CPCs" you'll get to a nifty tool that allows you to make mass bid changes across your entire account.

In the olden days (read: March), you could use this tool and filter the results based on whether a keyword was active or inactive. In other words, you could find all your inactive keywords and - if you wanted - in one stroke increase all inactive bids to the minimum CPC.

As a white-hat SEM, I found this to be useful in identifying keywords that had slipped just below the inactive bid threshold. So I would increase all bids that were only a penny or two away from the minimum CPC.

Now, however, Google has changed the tool. Instead of being able to choose either or both inactive and active keywords, there is just one choice "active and inactive for search." In addition to the strange grammar (I mean, outside of quantum physics, I didn't think keywords could reside in two states at once), this basically means that you have no choice but to search all of your keywords at once.

The result? Clever SEMs can no longer use this tool to quickly combat quality score penalties at the lowest cost possible.

For the record, I haven't dug into the AdWords Editor or the AdWords API to see whether the same rule applies. I would doubt that Google could prevent this in the API, as it is so customizable. That being the case, you can sort of look at this as a "regressive tax" against the small advertisers who don't have the luxury of building their own API integration.

Alternatively, it may be the case that Google has concluded that most black-hats don't have the resources (or the patience) to build API integration and so cutting off quality-score end-around tools in the UI will solve 99% of their problems.

Whatever the rationale, this move - albeit quite minor - is yet another salvo in Google's all out war against black-hat SEMers (um, unless they are typo-squatting on the Google Domain Park . . .).