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I’ve been thinking of the difference (and similarities) between Y! Answers and Wikipedia, and then about Yahoo!’s true strength. Excerpts from an email I wrote a friend:

… if you can get inputs from not only patients, but medical practitioners, medical students, this could be huge. There are innumerable startups out there trying to build up a comprehensive directory of medical knowledge – the Answers model could complement a static medical database by being a naturally up-to-date, action-oriented database.

I am beginning to see Answers as a product that, if properly monetized, can be larger than Wikipedia, (an alive, multicolored, thriving Wikipedia) in that it can include topics that can never be adequately addressed on W.

Wikipedia is just that – an encyclopedia of facts. Answers is that as well as experiential.

I also see a grand intersection between this and a social network. In fact, Answers is one dimension on a massive online community… an ongoing series by Rajesh Jain on how Facebook is being construed by its founders to be a social Operating System, whereby services are being built on top of Facebook APIs. Perhaps Answers can build on top of this.

… Facebook would be a great acquisition for Yahoo! Y!’s advantage over Google (or MS or AOL or similar) is that it has always been community-based – right from the time Yang and Filo built their directory based on recommendations from their friend network, to more recent initiatives like My Yahoo!. What better than what has become the social network in the US?

One a broader level, the train of thought in last paragraph above is probably more in tune with Yahoo!’s true strength – its community. It has built an interactive community while Google hasn’t (the latter has legions of users, but little by way of a community). That’s why Flickr and del.icio.us have been Yahoo!’s most successful acquisitions, and which is also why Facebook and SixApart (Movable Type, LiveJournal) would make equally great buys for the big Y!.

Bob Cringely contends that the battle for search is over, with Google emerging the clear winner. With Google Universal Search, Google has put so much distance between itself and numbers two and three, that the incremental return on additional investment into search by either Yahoo! or Microsoft will be negative. Both firms will be better off putting their money in other lines of business.Why has GUS ended the search wars? Apart from standard Web Search, Google’s also ruled vertical search – maps, books, images, and video. (The only exception was news, where Y! did a better job.) So if Y! and MS were to follow suit with their own integrated searches, the top video (or book) results would be on Google’s properties. In fact, the better they made their searches, the more traffic they’d drive to YouTube or books.google.com! Not only does Google do the best job with vertical search, today it also owns the properties where this vertical content resides!

So where does that leave Microsoft? Simple. Microsoft should get out of search. And out of online advertising altogether.

Surprised? Read on.

Microsoft is a company that, after having led consumer computing for a generation, is now finding itself playing follow-the-leader. Over the last few years, its strategy has been plainly, reactive. Its Live initiative (Windows Live Search, Windows Live Mail, Windows Live Messenger, Office Live) was a poor attempt to match Google’s online portfolio, pitting application service against application service. But it didn’t work out. Today, the Live initiative is an acknowledged damp squib.

Why? Because the New Web is not central to Microsoft’s business model. It never has been. In the mid-to-late nineties, when it “woke up to the Internet”, it reacted. And made Internet Explorer integral to Windows 98, added TCP/IP support and made it easy to connect to the Internet (it also bought Hotmail, launched the MSN portal and tried to play ISP). These didn’t seem to me, either then or now, to be part of a concerted strategy to leverage the opportunity the Internet presented. Cut to today. With Ray Ozzie’s “leaked” memo in 2005, the company once again found itself waking up to the New Web. Once again we find a set of ad hoc tactics that don’t collectively define a web strategy. It seemed crazy that a person with the sagacity and vision of Ozzie would talk drivel like “online advertising is the next big revenue opportunity, and therefore we must move everything – Windows, Office, Mail – online, and make money out of ads”. It is almost as if with each generation, the Web is being retrofitted into Microsoft’s business strategy.

In contrast, Google is a company that has been built from the ground up to leverage the “Internet opportunity”. The firm realised that first public, then private data would find its way to the web. It first created tools so that it would have access to all of this data (either by crawling or by hosting this content). Simultaneously, it created applications that people could use to access the information they needed from this data. And it monetized this access.

Microsoft is a desktop applications company. From 1975 to 2007, repeat, it has been a desktop applications company. Further, though it may have had a profound effect on consumer computing, its revenue has come from enterprise customers. Finally, its largest selling products are not its search service, or its MSN portal, or Hotmail, or Messenger. Its largest selling products are its Windows Operating System and Office Application Suite. The mandarins at Microsoft have to consider these facts before running around like confused chicken.

The Enterprise does not “get” the Internet. It gets the network, or, more precisely, the intranet, but it does not get the Internet. There’s just too much data that needs to be kept within the walls of the organization. Two paragraphs ago, I said that Google’s essence is to have access to data, either by crawling or hosting. No large firm is willing, either now or in the forseeable future, to let that happen. This Enterprise market has been growing for two decades now, will continue growing. This is where Microsoft faces virtually no competition from the likes of Google.

How can Microsoft enter a new phase as an enterprise software company? How can it create better applications using the Network? That’s another Tomorrow Today in itself, coming up soon after this series is done.

And Yahoo! ? The Google of the late nineties is foundering. Brad Garlinghouse’s “Peanut Butter” memo seems to have done little more than cause a rearrangement on the company’s board, but I don’t see a strategy shift in the least.

Yahoo should also get out of the search and Pay-per-click advertising space.

What is Yahoo! as a company? As Terry Semel himself stated several months ago, Yahoo! is primarily a media company that is technology-heavy. An online media company, to be precise. Now think of the online advertising world in terms of the Long Tail. Yahoo’s customers were in the “head” of the Long Tail graph – a few thousand advertisers, but each one worth big bucks. Google instead targets the “long tail” with its AdWords model. In fact, AdWords is not effective for large advertisers, but then it was never intended to be.

Yahoo! needs to realise that there is much more to the online marketing world than simply advertising, especially when compared to the sophisticated offline marketing campaigns that professional marketing and PR firms run. Yahoo! would do well to induct that kind of talent onto its rolls. I’m thinking an acquisition of a respected marketing/advertising agency. Being able to use more media like video, audio, images and maps willl increase the richness of future campaigns, With regard to video, having traffic driven to Google’s properties (YouTube) won’t seem so bad once the videos on that website have been created by Yahoo! (PR videos, video ads, videos with embedded ads, the works!)

Online PR, viral and buzz marketing, social network marketing and affiliate marketing are areas that are currently a fishmarket of small fragmented firms, none of whom have the scale or the expertise to cater to truly large clients. They’d be cannon fodder should Yahoo! choose to muscle into these spaces.

Finally, mobile is one area where I believe Yahoo! already has a lead over Google. Its widget-oriented OneSearch service proves that the mandarins at Yahoo! have the right idea. The company recognises that the mobile web is different. Although more intent-based than the PC Web, mobile web is subscription-driven instead of search-driven. OneSearch is a large step down that road. Mobile online communities could be a massive revenue-earner. Google has Orkut and Dodgeball in its armory but isn’t doing a thing with them. Will Yahoo! grab this opportunity instead?

In summary, both Yahoo! and Microsoft have forgotten their company DNA in their zeal to show Wall Street that they’re wise to every Google trick. They don’t have to be. In fact, as we’ve seen in this rather detailed Tomorrow Today, they’re three very different companies operating in three different spaces, playing to their different strengths. The sooner Redmond and Sunnyvale realise this, the sooner they’ll be able to drag these companies out of the morass they’re sliding into.

Tomorrow we’ll wind up by examining what GUS means for Google itself, and where the company could go from here.

About a week ago, Google took the lid off a project that had been brewing for several months. The company calls it Universal Search. In a nutshell, it “will blend listings from its news, video, images, local and book search engines among those it gathers from crawling web pages.”

For ordinary web searchers, the change is hardly noticeable. In fact, a lot of ordinary surfers I’ve spoken to since Google Universal Search (GUS) went live have given me the “Duh” reaction. And therein lies the genius of this innovation. This subtle, almost invisible new search is a disruptive innovation; affecting the entire SEO industry, Microsoft, Yahoo! and Google itself.

This week’s Tomorrow Today is a four-part series where we’ll examine just how GUS has changed the rules of the game for all stakeholders.

Part 1: What people are saying about GUS
Part 2: What it means for SEO
Part 3: What it means for Microsoft and Yahoo
Part 4: What it means for Google and the future.

Part 1: What people are saying about GUS

Google’s had plenty of “vertical”searches in the past – its bread-and-butter web search, image search, blog search, local search, video search, even book, map, news and email search. Google Universal search unifies these previously siloed searches. Now, a search for a term will return a list of results that span all of the above. The most dramatic change as of now seems to be the video search integration. As an example, the results to the search request ”I have a dream” will include an actual video showing Martin Luther King Jr.’s famous 1963 speech along with the usual assortment of Web links (Associated Press). Now you begin to get understand how significant this little change is, and begin to think up of other scenarios. Imagine a search for “apple store”. This could lead to (apart from normal web results), a map of Apple stores throughout the state where you’re located, new results about apple stores, images of the glass Apple Store in Soho, and so on.

The real technical smarts with converting siloed searches into GUS have to do with “finding the best answer across multiple content types“. How do you rank an image search result in comparison to a web search, or a video search result? Previously, comparing a news result for a search term with a maps result for the same term, and ranking them relative to each other was like comparing apples and oranges. No longer.

Danny Sullivan demonstrates how news, maps and book results now form part of the standard search results set. Admittedly, these results did show up on the first page of the Web search results, but they were placed separately, out of the top 10 search results. That, ironically, reduced their relevance. Consequently they were hardly clicked on.

Tomorrow we’ll see what this means for Seach Engine Optimization firms who, for good reason, are quite shaken up by this new development.

A source who knows a thing or two about Yahoo!, and I, were talking about possible strategies to monetize Yahoo! Answers. The source mentioned that Yahoo! was looking at Adsense-like sponsored links to make money. At that point, I realized something interesting:

Both Y! and Google and any other search service that makes money out of sponsored results rely in part on the user perception that sponsored links are more likely to give you the answer you want than organic results . But with a service such as Answers, that isn’t true any longer, and therefore sponsored links are unlikely to have a clickthrough rate high enough for Answers to break even.

For instance, say you’re searching for a good bar on MG Road in Bangalore. On search.yahoo.com, a sponsored link would likely be much better than an organic result in suggesting such a bar. But on Yahoo! Answers, an answer to such a query would likely be the best answer , much better than a sponsored link (a member of a community – in this case the Answers community – would probably trust a fellow member’s opinion more than he/she would an ad). Which is why a service like Answers defeats the very purpose of sponsored links!

On another plane, Y! Answers doesn’t have to make money on its own, provided the company can devise a smart enough strategy to drive traffic from Y! Answers to other Y! Service that do make money. Scoble talks about Google and YouTube in this context:

By putting YouTube results into Google’s main engine Google ensures it will have better searches than Yahoo and Microsoft…anyway, Google just distanced themselves from Yahoo and Microsoft. And they just provided a way to monetize YouTube videos. I love Google’s strategy. It continues to mess with Microsoft’s strategy. Microsoft still treats each team as something that must make money. Google doesn’t do that. They didn’t care one bit that YouTube didn’t have any revenues. They knew that there’s other ways to make money off of YouTube than to force YouTube to monetize on its own.

For all who go to town declaring that India has an entrepreneur-friendly, liberalized Telecom sector, here’s a dampener. TRAI’s recommendations on “ Review of Internet Services“, a report dated May 10th 2007, show just how much (or little) babus in the ministry understand the Internet. We’re light-years away from a truly liberal Telecom policy, because the DoT hasn’t even grasped the concept of creating a free, healthy market.

After having read through the report, I think I have a better understanding of what ails the DoT (and by extension, most ministries at the Center and the states). The Telecom ministry thinks it has to juggle different objectives which, in its view, are mutually incompatible. Therefore, to achieve all of these objectives, each stakeholder has to compromise to some degree. In reality, though, these objectives are _not_ incompatible, unnecessary compromised are made, and it results in a policy full of caveats, which ends up pleasing no one.

There are plenty of examples of these misplaced assumptions in the report. To demonstrate, here are a few sentences from the voluminous, bloated 126-page report, with my comments inline, in italics.

Under the “Scope of ISP license” section:

Web hosting by certain foreign companies within Indian domain who have significant market share in global market should form part of our developmental agenda and necessary policies to encourage such web hosting need to be evolved.

How in the world can “foreign companies” with “significant market share” hosting their data here going to help our “developmental agenda”?!

Strong views were expressed to permit IPTV under ambit of ISP license as it has potential to drive market, easy to provide using ISP backbone and can encourage Internet penetration .

So is this – “encouraging Internet penetration” – going to be the compass by which permission for other services will be granted in the future? What about TV on mobile phones? This is an extremely niche market, but does not in any way increase Internet penetration. Will this be allowed then?

Under the “Grey Market Operations” (?!) section:

Some entities located abroad are offering unauthorized Internet telephony services in our country for making calls to and from abroad on Public Switched Telephone Network (PSTN) and Public Land Mobile Network (PLMN) ….The licensing, legal and technological issues arising from such services need to be urgently addressed by DoT.

Some companies are also providing Software through their websites that enables the user to have free chat with anyone using the similar software anywhere in the world while logged on to the server of such service providers. Software can be downloaded free of charge from their website.

The Internet telephony call through such unregistered entities using PCs/IP access devices in India to landline or mobile phones abroad and vice versa result in a revenue loss to the government . Such calls can escape the eyes of law enforcement agencies also.

Here is a classic case of the DoT’s misplaced priorities. Is the objective of TRAI to “increase Internet penetration” and ensure that the Indian consumer gets the best and cheapest service, or is it to ensure that the Government – comprising the DoT, BSNL and MTNL – earn the maximum possible revenue? The DoT’s most glaring – even criminal – policy failure is to disallow such an interconnect. If the DoT has to stifle innovation and consumer benefit in favor of PSU revenues, we must then question the very reason for the existence of these PSUs. Indeed, in an article I wrote back in December 2005,

If the state is not running telecom companies for “social service”, or it put it more correctly, “social benefit”, then what are they running it for? If profit is the only motive, then the company should be privatized, fully, and right away. Think about it: If there is no “larger good” for running BSNL and MTNL, their motives are just like any other private company. Why, then, should they be at such a huge advantage compared to a private player?

By escaping regulatory levies such unlicensed foreign entities are able to provide cheaper services to lure the subscribers. The Authority is aware that large number of Indians are availing such services. Stopping access to such services is technically difficult. There is serious revenue implication for the government. DoT may address this development on priority. One of the possible options could be to ask such companies to register in India, seek permission from DoT and host their website in India.

Again, the ridiculous premise that “hosting their website in India” is going to guarantee compliance! Besides, why should “cheap services” have such negative connotations as to invite use of the term “lure the subscribers”? And yes, the issue of “serious revenue implication for the Government” raises its ugly head again.

Under the “Revamping and Restructuring of Internet Services” section:

It is extremely important to regularly analyse the business data of the operational ISPs to ensure that the licensed ISPs are contributing to the growth of Internet and engage in legitimate business.

What is “legitimate” and “illegitimate” business? What “business data” will help identify such legitimacy? Should ISPs contribute to the “growth of Internet”? What if an ISP grows in an area only by managing to convert users of competing ISPs to its services? It has been a resounding success, but has not resulted in a single extra subscriber. Is that legal or illegal?

The Authority therefore favours a uniform FDI cap /equity of 74% across all telecom licenses. ISPs who have more than 74% FDI cap /equity at present shall be required to bring down their FDI cap/ equity to 74% within two years.

What is the magic number of 74% supposed to signify? Why not 65%? Why not 84%? As long as the foreign entity has a controlling stake in a firm, any additional restrictions on its holding are meaningless. If 50% FDI is allowed, why not 100%? In fact, what is any restriction at all on FDI going to achieve in a field like telecom?

Annexure II – Recommendations of “stakeholders”:

Stakeholders also felt that the ISP licensing should only be linked with the vanilla bandwidth provisioning whereas all other services based on video & voice applications, www-hosted applications should be freed from licensing. It was also stressed upon that in a multi-tasking, multi-function, convergent nature of Internet; it would be illogical to consider regulating isolated applications.

Ah. Finally something which makes sense. But…

However, it does not appear possible to expand the scope of ISP license to cover all services as it will infringe on the rights granted to ILD/NLD/ Access Providers. Therefore, for the ISPs to move up the value chain, there is no option but to obtain one or more licenses as per the services planned to be offered by them.

There – senseless restrictions again. The same issues with interfacing with PSTN that we dealt with earlier.

Stakeholder commented that since Skype / Google type service providers are not licensed to provide such services in India without having facility for lawful interception, therefore, the vigilance and monitoring efforts are required to be beefed up, as these applications not only bypass the laws and regulations of the land, but also pose a threat to security. As such these services should be blocked.

I have nothing to comment on this, except that I would dearly like to know who this particular “stakeholder” is, and that I’d like to hear his views on how Google Talk poses a “threat to security”.

Finally, the US has the most liberal laws I’ve seen:

In US, ISPs do not require license or authorization. Instead, e-mail, data and Internet services are treated as “information services,” and ISPs are permitted to operate unfettered in a competitive and free market, subject only, with a few limited exceptions, to general business laws.

Ah, this is an entrepreneur-friendly policy. Here is a Government that believes in leaving anyone who wishes to offer services “operate unfettered”, and step back from the scene, as opposed to one that gets involved in grand-scale centralized planning to the extent of mandating the “target for broadband users in India” in a particular year!

This March, Avinash Kaushik, and this week, Robert Love. Both have moved from their previous positions to new roles at Google. Kaushik is now Google’s “Analytics Evangelist” and Love is on the staff at the “Open Source Program Office”. Consider this a follow-up to my New Year’s Eve post, where I listed a few of the leading lights of the tech industry who’ve joined Google.

This is perhaps a first for the industry (well, any industry). Not even in the heady seventies and eighties were so many legends employed by one company. While Microsoft and Apple both were home to incredible talent during their peak, none had so fecund a roll of luminaries as Google can boast of now.

That throws up its own share of problems. Can Google grow fast enough (at the same time, not overheat) to keep up with the output of this talent pool? (Otherwise it risks losing them to frustration, as the Dodgeball founders demonstrated.) Can it manage the kind of innovation that is likely to emerge from these folks? More importantly, even if it were to manage to grow that fast, is the world ready for it? Case in point: though several countries now have the infrastructure and the technology to truly experience video-heavy content on the Internet, there are several issues that Google’s YouTube has to grapple with. Most recent are its tiff with Thailand for a spoof on its monarch, and with Viacom over licencing issues . Those are not technological issues but ideological ones; one dealing with a culture’s tolerance, the other over copyright.

Google’s illustrious talent will, in all probability, line up more potentially disruptive innovation. The company’s long term (even intermediate-term) success depends on how skilfully it can balance its own fast growth with a world that is not changing as fast.