Would you pay for a search engine?

Posted on February 22, 2010 in: Tech|View Comments

Would you pay to use a search engine? Here are some ideas as why you might and why someone might try it as a business model.

Let’s say, hypothetically, you have a search engine that is capable of producing results at near-Google quality. For the sake of my thoughts here, I’ll just say it’s Bing (since it’s generally accepted as a solid alternative to Google) and because for all intent and purposes, Yahoo is now Bing anyway.

Google Knows Too Much

In order for Google to be as effective as it is, it needs to know as much about you as possible. And they know an absolutely frightening amount of information about each of us. They currently keep nine months of data about every user (it used to be two year’s worth). That’s a lot of personal data. And it doesn’t matter that it’s Google. If you went to Yahoo they keep the same information (although they only keep it for three months). They just haven’t figured out how to use it as effectively yet.

Bing and other search engines can’t compete against Google when it comes to search results and advertising. Sorry, but Google has that pretty much tied up. So why not attack something Google can’t (or, most likely, won’t) change? The advertising model.

Hello, Big Brother

It wouldn’t be hard at all for, say, Microsoft, to tactfully-yet-pointedly educate (read: scare the ever-loving snot out of) the public with regard to how much information Google collects about each of them and then offer an alternative: Search with Bing and absolutely no information about you will be saved. That, plus 25 GB of online storage and email for $1 per month or $10 per year (or whatever the nominal cost would be). Searches would be completely anonymous and there would be no advertising. It wouldn’t have bots reading your email and putting messages next to it. It wouldn’t track where you click, how long you’re on a page or what you’ve purchased.

Pure, unadulterated search. No strings, records, logs or ads attached. Plus 25 GB online storage and email. $1 per month.

The Price of Privacy

According to Mashable Bing had nearly 50 million uniques during its first month. Let’s pretend they stick around and are willing to pay for privacy (or, if they aren’t, that a comparable number of people come from Google and Yahoo to replace them). That’s $500,000,000 in annual revenue without having to worry about a sales force, paying insanely bright people insanely high salaries to figure out/tweak advertising algorithms, maintain ad networks, or deal with EU and FCC investigations. Just take the search engine they have and get rid of the ads.

Half a billion dollars doesn’t sound too bad when you consider at the end of 2008, Microsoft was losing about a half a billion dollars a year in their search efforts. And the more information Google collects, the more attractive Bing’s offer would be.


Supply the Real Demand

Instead of spending a lot of time and money trying to 1. effectively put ads next to search results, 2. convince businesses they need to advertise with Bing when Google does it better and 3. try to show average everyday people why they should Bing instead of Google, maybe Microsoft should buck the trend, charge for a service and give people something that’s truly unique and absent from the web: privacy.

Microsoft isn’t in the business of organizing the world’s information. Nor is it in the advertising business. Yet it spends billions of dollars trying to out-Google Google. Perhaps the most innovative thing for it to do is do what it’s been doing all along: create software and sell it.

What do you think? Are you concerned about the amount of info Google and others have about you? Would you pay for privacy online? Sound off in the comments.

Google's Nexus One strategy

Posted on January 12, 2010 in: Uncategorized|View Comments

The Google Phone is here: the Nexus One. It's faster than the fastest iPhone with a better display, new Android software, a 5 mpx camera, etc. etc. etc.. It's an impressive and very sexy piece of hardware.

Background
Google is selling it directly at google.com/phone. You can buy an unlocked version (and not have to sign a two-year contract with those blasted wireless carriers) for $529. While a common practice in Europe, most Americans aren't used to the concept of getting a phone without a carrier. (You can get a subsidized version of the phone at T-Mobile for $179 with a two-year contract.)

Questionable strategy

Google wants to get its Android operating system onto as many phones in as many people's hands as possible which is why they're giving it away free to phone manufacturers (whereas Windows, for example, charges phone manufacturers to put Windows Mobile on their handsets, similarly to how they charge Dell to put Windows 7 on their computers). This makes sense because:

The more people who have an internet-capable phone, the more time they spend on the internet.
The more time people spend on the internet, the more time they spend searching on Google.
The more time people spend searching on Google, the more ads are clicked on and the more money Google makes.

So why are they charging so much for the phone? It's reported that it costs Google $174 in hard costs to make the Nexus One. Of course, there are other costs involved but the full retail price for one is still $529. Why?

Shake the industry

If Google really wanted to be disrupt the market it would sell the phone without a contract at $199.

What iPhone?

They still break even on the handset – the real money comes from ads on the sides of mobile search results. Google brings a lot of people into its ecosystem and does what it does best: brings the price of something down so low it's basically free (at $199 it could be free after carrier subsidization) and forces the industry to respond.

Despite what the current price of the Nexus One would suggest, Google isn't in the hardware business. Google had a net income of nearly $5 billion last year. They don't need to charge $529 for a phone. So why do they?

Preserving distribution

Ask most people on the street if they've heard of the Nexus One and most people will say no. And a fraction of those people will know they can get it directly from Google. At this point, Google needs Samsung, LG, Motorola and others to be putting its operating system on their phones – its reach is too small with mainstream consumers (as far as tangible products go) to do it alone. And if it undercuts those partners by giving away a high-end piece of hardware they'll stop using Android and perhaps even threaten wireless carriers who allow the Google Phone to operate on their networks.

Conclusion

Google is in a position to turn yet another industry completely upside down. All they need is a little more market share (which they'll get thanks to the hardware manufacturers and wireless carriers who are out promoting their product) and to put some polish on the Android user interface. Then, instead of people getting a free cheap-o flip phone when they walk into T-Mobile they get one of the most powerful handsets on the market and go about their happy lives doing Google searches on their Android phone. Because Google isn't in the hardware business. It's in the advertising business. And the more eyeballs it can get the more money they make.

There are lots of different ways this could be looked at. Google might be completely fine allowing hardware partners to push out overpriced handsets with their software. But if Google wants (fast) widespread adoption of people using the web from their phones they may not want to wait for their handset partners to bring their costs down while everyone buys iPhones for $99.

Thoughts?
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