Yahoo CEO Has Google, Microsoft in the Crosshairs

After spending nearly $2 billion to bolster its search capabilities in the past year, Yahoo plans to continue its focus on search in 2004 as it gears up for competition from Google and Microsoft.

“The single greatest focus of our company, in terms of a business, in the past year has been the business of search,” Yahoo CEO Terry Semel said Monday at a Smith Barney Citigroup conference. “We woke up on time, we saw the possibilities, we saw that search was going to be ever present across our entire platform.”

Semel, who took the reins at Yahoo after two decades as a movie studio executive, said he's comfortable with Yahoo having high-powered search rivals in Google and Microsoft: “I think that's great. I'm used to having competitors.”

In the coming year, Semel acknowledged, the three likely will have more distinct product offerings compared with the tangle of alliances that still mark the search industry. He said Yahoo would continue its advances in algorithmic search technology with Inktomi, which it acquired for $235 million in December 2002 to replace Google, which still supplies the back end for Yahoo's algorithmic search.

“I think they've never had a competitor,” Semel said. “They now have a competitor.”

Microsoft figures to loom as a larger threat in the near future. Microsoft's MSN currently relies on Yahoo for both its algorithmic search, through Inktomi, and its paid search, through Yahoo's Overture Services unit.

“At some point, they'll probably create their own algorithmic search,” he said. “The book is still open with what they might do down the road in terms of sponsored search.”

The battle for search market share has big implications. Yahoo chief financial officer Sue Decker estimates that each point of search share is equivalent to $200 million in revenue. According to comScore Media Metrix, Yahoo still trails Google in the search market. In October, Google's share of searches was 35.2 percent, Yahoo's 25.9 percent and MSN's 15.3 percent.

Semel said that Yahoo's acquisitions in the past year of the search technologies of Inktomi and Overture put Yahoo in the position to combine deep search functionality with Yahoo's traditional strength of providing a personalized experience for its nearly 130 million registered users and furthering advertising revenues.

As an example of how search can be used to improve Yahoo services, Semel cited the relaunch of Yahoo Shopping in September as a comparison-shopping engine. While its e-commerce area was formerly stagnant, the addition of Inktomi algorithmic search technology, along with a paid inclusion program for advertisers, let Yahoo tap into the growing field of shopping search.

Semel reported that Yahoo Shopping saw impressive traffic levels over Christmas, which validated the company's plan to extend search capabilities into other areas of the network, including finance and music.

“We're looking at those areas and trying to decide where it is appropriate,” he said.

Yahoo recently added Overture paid listings to non-search pages in its network, using its search technology to scan Web pages in more than a dozen sections like real estate and travel to place relevant advertiser text links next to content.

“We think the whole search world is just beginning,” Semel said.

Brian Morrissey covers search marketing for DM To keep up with the latest search marketing news subscribe to our free e-mail weekly newsletter Search Engine Marketing by visiting // .

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