Search And Destroy

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This year Google will make an estimated 30% profit on revenue approaching $1 billion, according to Safa Rashtchy, an analyst at U.S. Bancorp Piper Jaffray. Right now 32% of all Web searches go through google.com. That number shoots to around 70% when you count searches on sites like AOL.com, which licenses Google's technology. Meanwhile, in the real world, Google has just finished moving its 1,300 employees into new headquarters in Mountain View, Calif., previously the offices of former Silicon Valley golden boy (and current Silicon Valley crater) Silicon Graphics. Early next year Google is expected to offer stock to the public, an IPO that should raise something like $2 billion in cash. That would make it the largest high-tech IPO ever. The company as a whole could be valued as high as $20 billion after the sale.

It's an amazing feel-good fairy tale, but it may not have a happy ending. Conventional wisdom has it that nobody can stop Google, but conventional wisdom is often wrong. When Google debuted, its technology was radically superior to the competition's. Since then, however, that technical advantage has narrowed to a sliver of its former self. Some analysts — Danny Sullivan of SearchEngineWatch.com, for example — believe there are plenty of other companies capable of matching the quality of Google's search results. Meanwhile, Google's lead in indexing the Web is also slipping. As of September, the company had indexed a total of 3.3 billion Web pages, but AlltheWeb is right behind with 3.2 billion, and Inktomi covers a good 3 billion. (According to Page, Google has passed the 4 billion — page mark since then.) And as fast as Google rolls out clever new features, like Google News news.google.com) and Froogle, Google's shopping search engine, its competitors roll out clones — like Microsoft's MSN Newsbot uk.newsbot.msn.com), which launched in November, or Yahoo's Product Search.

In fact, Google's greatest asset right now may be not its technology but its brand — and Internet brands are notoriously volatile. (AOL's trajectory suffices as the cautionary tale to end all cautionary tales.) And just when Google is looking increasingly beatable, search is becoming increasingly profitable. You can't leave a tasty pie like that on the windowsill without attracting a few bears. The fairy tale is about to turn into a war story.

Microsoft may be Google's biggest problem. Plan A for Microsoft was probably to buy Google outright, using Bill Gates' massive war chest of $49 billion. According to many news reports, Microsoft held talks with Google this fall, but no deal was struck. Plan B, already well under way, is for Microsoft to build a better search engine. A prototype Microsoft webcrawler (the software that search engines use to index the Web) was spotted online as early as last April. Kirk Konigsbauer, general manager of the project, says MSN Search isn't ready for prime time quite yet. "We decided to take a deep dive into the search business about a year ago," he says. "We're learning a lot. This is a really hard computer-science problem. In fact, our engineers say this is the hardest computer-science problem they've ever had to face." But if there's one thing Microsoft is good at, it's entering profitable markets late and strong — just ask Netscape, Apple or IBM. If Microsoft integrates its new search engine into MSN, its Internet service provider, and Longhorn, its next-generation operating system (E.T.A. 2006), the game may be over.

Google's most enigmatic foe isn't a search engine at all. It's a bookstore. In October Amazon debuted a service it calls Search Inside the Book that's both simple in conception and staggering in its implications. Amazon scanned every page of 120,000 books into a database, and it now lets customers search the books' complete contents online. In one stroke, Amazon made a new and immensely valuable kind of information available on the Web. Zenodotus would be livid with envy. "I would compare it to the invention of the encyclopedia," says Joel Mokyr, professor of economics and history at Northwestern University. "If this is further developed, as I hope it will be, you may one day be able to sit in a village in Nepal and look up every book in the Library of Congress! Think about the implications of that: the knowledge of all times may one day be accessible from every spot on this planet. That's one of the most democratic things I can think of."