Seven implications of GOOG Q&A, and the threat to YHOO, ASKJ and GRU
Google (ticker: GOOG) announced that it now provides facts (in addition to links) in response to a search phrased as a question. For example, a search for "When did Bob Marley die?" returns the answer "11 May 1981" as the top result. This is a significant development for Google, Yahoo (ticker: YHOO), Microsoft (ticker: MSFT), Ask Jeeves (ticker: ASKJ) and its acquirer IAC (ticker: IACI), and GuruNet (ticker: GRU). Here's the Google announcement in full, followed by analysis and stock impact:
The Google announcement (from Google's blog):
Thursday, April 07, 2005Seven implications:
Just the facts, fast
Have you ever needed a piece of info right now? Today we're excited to introduce Google Q&A. We've pulled together facts from all over the Web to help give you the fastest possible access to the quick bits of information you need every day; just type a query into the search box, and you'll get back the answer at the top of your search results. Q&A knows about a lot of areas: celebrities, countries of the world, the planets, the elements, electronics, movies, and anything else we've thought of so far (including enabling you to get answers on your mobile device). Try it out, and keep checking back. This is only the beginning.
Jonathan Betz
Tech lead, Google Q&A
1. This is a trend.
Google Q&A is the latest move by Google to provide users with its own content or direct access to other people's content. Previous examples: Google maps, Google movies (analysis), Google stock quotes (analysis). Search engines are indeed becoming answer engines (to use Jacob Nielsen's phrase). The reason is simple: when people search for something, that something is information, not a link.2. Google's move into direct content threatens other search companies.
Google's move to provide direct access to content follows in the footsteps of other search engines. GuruNet's Answers.com takes this approach to its logical conclusion, but even Ask Jeeves marketed itself on the basis that it provided faster answers (you wouldn't ask a butler for a link...), and MSN provided greater direct access to information than Google did. Google now threatens those companies (and stocks).3. The convergence of search and content threatens Yahoo in particular.
Yahoo has built vast databases of content, but the way users access content is changing. Previously, users would go to the relevant section of a web site to find the content they wanted; now they use search. Take stock quotes as an example. Stock quotes were originally part of Yahoo Finance, then Yahoo added a box to search for stock quotes on its home page, and now typing a stock symbol into a general Yahoo search bar will return a stock quote and chart, just like Google does. But if search is the gateway to content, search engines can easily displace content providers by offering direct access to content themselves. This is exactly what Google is doing, and Yahoo is the largest potential loser.4. Competitive advantage will depend on ownership of proprietary content.
GuruNet's Answers.com has a great interface and has received great reviews, and as a result GRU stock has rocketed. But the Internet Stock Blog's first post on GRU pointed out that its competitive advantage was unclear since it didn't own the content itself, and in fact sourced much of it from Wikipedia which has its own search functionality and is free for anyone to use. Now Google is offering Wikipedia content as one of the sources it uses for Google Q&A. The search engines will draw a lesson from this: competitive advantage will be built on proprietary content. (Early example: Google's acquisition of satellite map company Keyhole Corp.)5. Don't underestimate Google's ability to deliver content
While reviewing Google stock quotes and reflecting on Yahoo's emphasis on user-generated content, Om Malik says:
"...adding all that stuff at the top of the page, is antithesis of what Google once stood for - elegant simplicity... Yahoo is a content company that also does search. Google is a search company trying to do content. So far, it has not worked well. Unlike it being the must use search engine, it doesn’t feel like a must go to content destination... Yahoo gets content, Google doesn’t. It's as simple as that."
This is a mistake, and since it comes from someone as intelligent, eloquent and informed as Om Malik, it's likely embedded in Yahoo's stock price (= investor complacency) as well. Why a mistake? (1) Users want answers, not links, and answers aren't clutter. (2) It's better to be a search company moving into content than vica versa, because search will be the gateway to content, and we know from experience that he who controls the gateway... (3) Google doesn't feel like a "must go to content destination" because it's early, early days. (4) The ultimate repository of user-generated content is the Web itself, not content generated by Yahoo members. By leveraging (scraping?) other people's content, Google will quickly reach critical mass. Example: compare Google News to Yahoo's news.6. Stock impact almost entirely negative
Some broad themes: (1) Content costs money, and that will lower search engines' margins in the short-term. (2) Google's push into content will only increase the pressure on the other search companies that positioned themselves as providers of answers rather than links (ASKJ, GRU, and to a lesser extent MSFT's MSN). (3) YHOO is the long-term loser here, and that might not be priced into the stock.7. But some positive stock impact
(1) A real opportunity for TWX - it owns content and provides search to AOL users.GOOG chart below.
(2) Good news for companies that own proprietary content - they'll get acquired.
(3) In the long run, as search engines become answer engines, they'll become even more useful, and that means profitable.
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