Did Google Get Binged?

I rarely praise a product by Microsoft, but Bing forced me to do so. In fact, you will find a bunch of articles in praise of Bing today. Here, rather than discussing the features or UI of Bing, I would discuss a few core issues - namely vertical search and network effects, which will play an important role in the search engines war.

Vertical Search:

When you search for SFO to BOS on Google and click on the first link, it will take you to a Bing URL! This is because Microsoft acquired Farecast and integrated it seamlessly with Bing, so whenever you search for travel terms such as “SFO to BOS” or “AA 187”, the top result on Bing will be by Farecast. This is one example where Microsoft is poised to take advantage of “vertical search”. General purpose search engines by nature perform “horizontal search”. Once people get familiar with a particular product or service, they search it directly on the website they like. For example, if you were unaware of online auctions, you might turn to Google (general purpose search) to give you some ideas. Once you find out about EBay (vertical), you would almost always go there directly. Same would hold true for Amazon, Kayak (vertical search in travel), Expedia, or HotJobs (jobs). This would mean that Google would lose “rich” traffic – people who are more likely to click on an ad since they are about to make a purchase – hence resulting in drop in effective CPM. In Google’s defense, it does have some “verticals” such as Google Local, Google Finance, and Google Books - though poorly monetized. Additionally it lacks verticals in critical markets such as travel and jobs. I think for Google to stay ahead of the game, it will have to seriously look into acquiring vertical search engines or building its own (which it hasn’t done very successfully so far).

Network Effects:

Fact that search market does not really have strong network effects does not help Google. In order to understand network effects, consider direct network effects. Since my value of using Google does not increase whether someone else uses it, there are no direct network effects. Point can be made that the more users use a search engine, the more content owners will try to get indexed by that search engine. But these indirect network effects are very weak at best. Besides, there are negative network effects between advertisers and users: the more intrusive ads there are less likely are users to use the search engine.

Conclusion:

Microsoft has some additional advantages when it comes to advertising. Their real estate is much diverse than Google’s: they own operating system to Xbox to Office, used in most enterprises. To top it off, Bing comes at a point where there are already several niche search engines threatening to take share of the search market pie. Kosmix, a web 2.0 search; Wolfram Alpha, a ”computational” search; and Twitter’s real-time search are some examples.

What all this means is that if Bing continues to deliver performance and good results, there is an ample opportunity for Bing and Google to coexist. Most people would agree that this will be a good thing for the market.