On the wrong man for Yahoo

Silicon Alley Insider reports that David Rosenblatt is their pick as Yahoo CEO. Their reasoning is based on Rosenblatt’s successful tenure at Doubleclick, the argument goes: Doubleclick is good at selling banner ads, Yahoo has a lot of banner inventory, ergo Rosenblatt is perfect for Yahoo. That is my reason why he is exactly the wrong person to run Yahoo.

Yahoo has a lot of banner ad inventory but banner advertising is a dying business. It is old school newspaper advertising transposed to the internet. It does nothing new or innovative other than plop a message adjacent to something they want to read. Banners are dead and so is everyone who relies on them. In the future we will see far less advertising but it will be far more relevant. Google is the first company to crack this, a lot of Google searches don’t show any advertising and the ones that do show something relevant to the user. That’s why it’s a license to print money.

Google’s vulnerability

Yahoo should attack Google where they are most vulnerable: search. Conventional wisdom states Google is invulnerable in search and anyone who competes with them is doomed. The bones of Cuil and others litter the path of the next person foolish enough to venture into that cave. But recently Google has clearly signaled where they think their weakness lies. It was this weakness which let them to toy with the idea of buying Digg. Google search is built around the choices made by people who create webpages. But they know this is only half of the story, the other half is the web’s users.

Recently we started to see little icons appear next to our search results. One was a little up arrow ‘promote’ and the other a little cross ‘remove’. Google SearchWiki is intended to allow users to tailor search results to their own tastes. Google has recognised that the weakness of its search lies in what it once boasted about, the size of its index. There are now billions of pages on the web but what matters is showing me what I find useful. PageRank uses the natural architecture of the web to find relevant results but there is another way, using the bookmarks created by users. And which is the web’s favorite bookmarking site? Delicious.

Yahoo is sitting on a massive alternative index of the web created by its users and their bookmarks. To an extent they already do some analysis by assigning every link I save with the number of other users who have saved it. What nobody at Yahoo appears to see is that this is the beginning of a completely new form of search backed by a user built matrix of links. Yes it may be smaller than Google’s index but that doesn’t matter. It much smaller but much more relevant as it keys off bookmarks I have saved. It would not necessarily ‘beat’ Google but it would be the first viable alternative to PageRank since Google emerged and as such potentially its equal.

So the answer for Yahoo’s new CEO is simple: build Yahoo search around delicious. At this stage anything other than a game changer is no use to Yahoo.

On social search

Google’s Marissa Meyer has said that social search hasn’t shown much promise but if someone were to prove its worth then Google would be in a good position to incorporate it. I disagree. Social search is the single biggest threat to Google’s dominance and if another company did prove its worth Google would have to start from scratch. Its existing search technology would not avail it at all because PageRank is fundamentally unsocial.

Sure Google could build some social voting features into their results. The easiest way to do this would be to buy struggling pressflip to bring Web 2.0 clown prince Ted Dziuba back into the Goog fold. But that wouldn’t really get them anywhere against sites with built in bases and fundamentally social attributes like Delicious and Digg. Venturebeat also reported Meyer saying that social search may not make sense. This probably explains why she was rumoured to have  nixed the Digg deal and illustrates that Google fundamentally does not understand the social web.

Gary Stein does understand it. Instead of quoting myself again, I’ll quote him because we fundamentally agree:

But this introduced another problem, which is PageRank’s inherent flaw. As soon as word got out that pages were ranked based on votes, links became the currency of the realm. As Google became more successful and more engines followed its lead of treating links as votes, PageRank became the Web’s defining characteristic. Link spam is probably a bigger problem than e-mail spam.

Where will we go from here? The idea of votes on pages being recorded and leveraged is a good one. But maybe it’s time to visit an idea that’s been brewing for several years: social search. Where links aren’t votes. Votes are votes.

The irony is that I didn’t find this article by searching on Google, a friend sent me the link. Doubly ironic is that I found Marissa Meyer dissing social search by putting socialsearch into delicious. Change is a coming.

Pic: Kalieye

On Digg

Another chapter was added to Digg’s unhappy history of aborted acquisitions when the proposed sale to Google for $200m fell through. To go back to the beginning there was the Calacanis deal which was a good bullet to dodge. Since then there have been various rumours surrounding News International, Yahoo and Microsoft. They are running out of buyers, maybe AOL or CBS but those two have their web 2.0 prizes in the shape of Bebo and Last.fm respectively.

I think the problem is that the founders have convinced themselves Digg is worth a lot of money by reference to deals that have already gone through. The bottom line is that if they wanted to sell they should have done it between YouTube getting bought in October 2006 and the Bebo acquisition in March 2008. That was the boom for web 2.0 acquisitions and they missed it. Things are heading south for a couple of years so Digg will have to raise more VC or live within its means but by then Digg will be old news. It’s possible that they could come up with a game changing technology, I think Kevin Rose has come closest to seeing what social search could be, but the question is whether they can execute it.

Timing is everything

The feeling I got when reading about Digg is that Rose and Adelson have this ‘let’s just dump it and take the cash’ air to them. Google have got burnt with this already on YouTube for which they foot large bills but are now realising that advertisers prefer the safe, clean, controlled environment of Hulu. Now Digg and YouTube are by no means similar but the experience could have made them more wary of buying startups with big audiences but no revenue model – ‘We bought YouTube and still haven’t worked out how to monetise that. Why repeat it with Digg?’

As CEO the buck for all this stops with Jay Adelson. His track record suggests that he does not know when to sell or at what price, at one point his Equinix stock was worth $55m at the peak of the boom but he clung on long enough to see it all rendered worthless. It’s going to be hard to climb down from the $200m valuation without sending buyers bad signals. He is already in the mire because everyone will be wondering what Google found in due diligence that made them go cold. The best acquisitions are the ones you hear about after the deal is done and the ones that aren’t done you should never hear about.

Pic: Laughing Squid

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On Kevin Rose

Of all the people to come up with a search engine capable of catching Google I would not have bet on Kevin Rose. My money was on Joshua Schachter but he sold to soon and it now looks like delicious is doomed.

Rose gets what most other tech founders don’t: people matter more than machines. I think this comes from the fact that Rose is not a mathematician nor even a coder. Digg came from an insight he had into what people wanted – to see what other people liked and who was like them.

Algorithms are all well and good but all they can do is analyse what people have already done. Google does this by analysing the hierarchies created by website owners when they link to other pages. Digg can take this a step further by analysing the opinions of the people who read websites, not those who create them. In doing so you would create a better search engine than Google because the number of people who tag pages is greater than the number of people who create them.

People power

Here’s what it boils down to: is Digg’s army of users better than Google’s spider? I think the answer is yes. Rose explains:

We’re creating algorithms that take a look at what you’ve dug and compare it to other people, inside the system, in real time. We have this working on our staging servers right now – it’s not something that we’ve launched publicly – but essentially, when you Digg an item you’re agreeing with that item and all those other people who dug it. So let’s say you’re Digg number 4,000 on something: who are those other 3,999 people you agreed with? What we’re doing with the math behind the scenes is we’re saying ‘OK, you agree with all these other people, what else are they finding out there that you might like? That you might also find interesting? So we’re working on ways to surface those stories – to find quality content before it becomes popular – but also introduce you to new people based on what you’ve been Digging.

Yes! Thank you Kevin! This is what I wanted delicious to do, here’s what I said in my first post on this blog:

The beauty of delicious is that it can look into the mind of other people with similar interests to me, see what they have tagged and return more relevant results. Another advantage it has over Google is that delicious can also assess the strength of a link between me and another user by seeing how many times we have tagged the same page with the same tag.

All Yahoo has to do is analyse these links between users in the same way Google analyses links between pages and it will have a search engine which thinks differently and gives people a real reason to use Yahoo search over Google.

It doesn’t actually make much difference whether it is delicious or Digg. I think delicious is better because its easier to submit links but as it is stuck in Yahoo’s belly the chances of anything original happening with it are close to zero. So if Digg cracks it good luck to them. I don’t think they’ll end up with a social network but they might just crack a brilliant new search engine.

Read more:
On Yahoo
On Joshua Schachter

Pic: Laughing Squid

On Persai

I’m not one of those people who thinks any new startup in search is bound to be beaten by Google. It can’t be done by playing Google at their own game but it can be done by using a different approach. Search startup Persai falls into that category. What struck me was this description from co-founder Ted Dziuba:

We want to build machine programs that can learn things from information that’s out there on the web. In the first application we’ll come out with, you tell us things that you’re interested in, and we’ll continuously go out and find stuff on the internet that’s related to that. There’s a positive feedback loop where you tell us what you like and don’t, so the machine gets progressively better in learning what you like.

I like the basic idea but there is one problem: I don’t really want to tell yet another site what I’m interested in. I’ve told delicious and Digg what links I like. I’ve told facebook what films and books I like. Why should I tell Persai all over again? If Persai could work out a way to yank all this stuff from the other sites automatically and knit it altogether then serve relevant results that would be a fantastic tool, unfortunately:

Recommendations are based entirely on content, other users’ feedback has no bearing on what Persai recommends to you.

This is a mistake. I’ve said before the key to next generation search is analysing the links between users as well as Google analyses the links between pages. Persai seems to have it half right in that I can tell it what I like but I think they need to rethink their approach on other users’ contributions.

There are a few startups looking to revolutionise search for a second time. I met the founders of another new search engine Piins a few weeks ago, they are still in private beta so I can’t go into specifics but they also have a very interesting concept which has a good chance of success. Both Persai and Piins come into the “companies I would definitely invest in” category, if I were a VC.