Release the Hounds

Who knew back in 1995 how important the Web would become to our personal and professional lives? Who could even see last year how important Web search engines would become?

Search had been a low priority-even a loss leader-for big Web portals like AOL, Microsoft MSN and Yahoo! Now search engines are bubbling over with new functionality and assuming a central role in Web life. They're attracting surfers in droves, making them a promising source of Web sales for entrepreneurs-even entrepreneurs without Web pages (more on that later).

Relative newcomer Googledeserves total credit. We've had search engines from the get-go-lots of them. But Google found a way to actually return relevant results-at least, in the first few of the 32,000 page hits any search generates. Google added a little populist secret sauce to the usual battery of search technologies. Its PageRank takes a page's popularity into account, countering some of the placement games played by less-relevant Web sites.

Basically, Google built a better link trap than the next guy-and now, the world is beating a path to its door. According to on-demand Web analytics firm WebSideStory, Google owns more than 42 percent of Web searches-twice MSN's share and double digits ahead of Yahoo! And, says Geoff Johnston, an analyst with San Diego-based WebSideStory, the tide is still running in Google's favor.

Google's performance helped search engine ad spending grow by 50 percent in 2003, adds Niki Scevak, an analyst with Jupitermedia-a Darien, Connecticut-based provider of IT news and research-settling down to 30 percent this year. That's only half of the $3.5 billion spent yearly on traditional display ads, but, says Scevak, search has been crucial to the Web's big advertising comeback. It gets better from here.

Google's big, cash-rich competitors are no longer content to let it have this business, even incubating it on their Web sites. Yahoo! and MSN are bent on a comeback, and many lesser players have their own dreams of out-googling Google. That kind of competition can only mean lower prices and more innovation. As both search engine users and advertisers, entrepreneurs will benefit more than anyone.

"Billions of dollars are going to be made on contextual advertising," says Johnston, "and money from entrepreneurs is considered the Holy Grail."

A simple text ad alongside related search results is particularly suited to smaller ad budgets, he explains. Instead of broad audiences on high-traffic sites, contextual ads target searchers who've pre-qualified themselves. You bid for placement high in the results for certain search terms, paying from a nickel to $50 for each click on your address. Search engines provide tools for quickly measuring sales per click and calculating ROI. The flip side, warns Scevak, is that search advertising isn't as cost-effective as Web banners and other display forms for reaching large audiences.

"It's a one-two," says Scevak. "You build brand with display and reach people with contextual ads when they're ready to pull the trigger."

Meanwhile, search engine innovation is breaking out all over, which can only improve ad response. In recent months, Google has been carpet-bombing competitors with an array of new services-Web page alerts, news alerts, search personalization, and the ability to search on numbers and images.

Yahoo!, which dumped Google as its default search engine, has developed its own page-ranking mechanism and rolled it into other smart technology purchases like pay-for-placement engine Overture and onetime search kingpin AltaVista. Yahoo! is very good at personalizing offerings and is particularly strong with comparison shoppers.

Public statements by Microsoft executives indicate that the really big checkbook is out for MSN search, too, although improvements like natural language queries could be a year away. Predictably, Microsoft wants to add search to its next operating system.

One of the most exciting new developments on Yahoo! and Google is local search. Surfers can limit their searches to neighborhood businesses, and businesses pay only for clicks from local customers. Making the largely national and international medium relevant to local businesses has been tried before. But this works like you wish the Yellow Pages would and could truly open the Internet to millions of local businesses.

Also promising, says Scevak, are pay-per-call services like FindWhat.com. Even businesses without Web sites can advertise in local search results and be accessed by toll-free phone calls.

Search looks to be the next big battleground for our hearts and minds. Google's offer of a gigabyte of free message storage for anyone willing to look at contextual ads is particularly threatening to businesses currently renting those eyeballs to advertisers. E-mail is even more important than search for keeping surfers stuck to a portal.

New browser toolbars from Google and others also change Web traffic patterns, and Google's Deskbar lets you search without even opening Internet Explorer. Talk about tugging on the lion's whiskers.

Who will win? Who cares? You and I for sure, although it's hard to predict where search technology will take us. Like Yogi Berra once explained: "The future ain't what it used to be."

But one thing's for sure: It's going to be an exciting ride.

Mike Hogan is Entrepreneur's technology editor. Write to him at .