Barney Pell's Weblog

While the business (in both these categories) is dominated by GOOG and YHOO, there is room in the market for new entrants. Users, Advertisers, and Publishers are willing to try multiple solutions. Users regularly use multiple search engines - both broad and focused. For searches with commercial intent (40-60% of all searches), search engine marketing tricks are making organic result rankings increasingly less effective. In addition, users still have to do a lot of searching among today's unstructured results to make purchasing decisions, which is leading to an emphasis on focused search with new UIs and added structure for different verticals (e.g. jobs, shopping). Advertisers are frustrated with lack of transparency and control and the difficulty of budgeting and managing pay-per-click campaigns. Publishers want the greatest revenue per page and transparency into their advertiser and user behavior, and they routinely experiment with different advertising networks.

While current leaders are innovative and aware of these issues, there are a variety of "innovator's dilemmas" they face in responding to new entrants and resulting market shifts. New payment models, such as a shift to cost-per-action (CPA), along with increased transparency, will be hard to address initially without losing revenue. This pattern was observed in previous shifts from cost-per-impression to cost-per-click, where rates hit a new floor and gradually built up as the market matured. New user interfaces and emphasis on market segments with commercial intent pose similar challenges for incumbents. While a new player can offer a different interface and attract users that value it, an incumbent must conduct careful experiments off the home page and only adopt changes that suit their existing broad user base.

This combination of (1) major industry shift to CPA, (2) opportunity for UI innovation, (3) focus on searches with commercial intent, (4) ease of switching, (5) PR and word-of-mouth momentum for standout products, and (6) innovators dilemmas for incumbents to address these issues has opened up a significant white space of opportunity for new search entrants to find a path to rapid growth. Even a small share of this profitable market, in the presence of fierce competition among incumbents, promises high exit valuations.

Snap plays to all of these themes with a team who has done it before, a promising initial product, encouraging user adoption and testimonials, and an attractive valuation. While it is certainly high risk to enter a place with such strong competitors, the rewards are equally high.

The discussion above is not even comprehensive of the innovations visible already today in Snap (with more to come, of course!). I encourage everyone to try out Snap with at least the following:

• search for "digital camera". Note you get both query completion, and then are taken to a nice vertical search results page.
• search for "tools". Check out the result for Craftsman Tools, that lets you select from pull-down list of the type of tools you want to browse, then takes you directly to that section of the site.
• search for "ebay". Note the results page includes most popular links within ebay; a screen shot of the homepage; a company snapshot (including stock chart); news headlines; popular searches related to ebay; ebay-specific offers like downloads and discounts; and even a summary of important auctions on ebay right now. This looks nothing like what you find on existing search engines and points to how much room there is for innovation in search user experience.
• search for "hybrid cars". Note the logos in the listings, which helps you figure out which ones are real and which are spam. Note that none of them are spam...
• search the news (click on the link at the top right corner of the snap homepage). Try out the refine-as-fast-as-you-type search (similar to X1 for desktop search). You can search for articles with a word, and then search within those articles restricting by date/time, headline, and source.

Lastly, go download Snap Ultrasearch (promoted on the homepage), and try it out. You won't be sorry! I'll write more tomorrow about what I like about this new Ultrasearch product. But needless to say, it definitely shows Snap is thinking outside the search box.