Bill Burnham says that search startups are dead. His points are generally reasonable, but I think it's a mistake to write off the category again.
Search was written off as 'done' before, in 1998, but it wasn't. There is far more depth here, both on the technology front, as well as new markets, that has not yet been plumbed. Google has got a great business because they are focused, for the most part, on the some of the most interesting computing technology problems we'll face for the next 50 years. This is no shallow vein. It is not just advertising. Rich ore is yet to be mined....and Google will not own it all.
Giving in to Despair
I knew industry people on the east coast in the early 90's who thought the fledgling Internet was essentially doomed because AT&T was going to own it, once they got their act together and woke up to the opportunity. That sounds absurd, I know, but the thing is, that there were people who really did believe this, and based investment decisions around that idea, based personal career choices around it.
Later in Silicon Valley I met people who thought the growing Internet was essentially doomed because MSN was going to own it. Once Microsoft woke up to the opportunity, they would surely just eat the whole thing, and nobody could stop them. The valley really had a conditioned fear complex around Microsoft. Well the despair that leaked into their thinking compromised the quality of the decisions they made regarding how to approach the net -- for product development, investments, career choices.
Now I see the same kind of despair in the search space, thanks to Google. Heck, I've helped feed it. Is the despair appropriate? Should it be influencing your decisions about investments, product development, career? Should we all pack up and move off to clean tech, or the once-and-future enterprise 2.0, or nano or bio?
Or that such an innovative leap is possible in a mature space like cellphones and PDAs.
Now you have a rapidly changing field like software, algorithms, extraction, AI... plus the rapidly morphing social composition of the Internet, the evolving composition of the net's content... all this change makes for opportunity.
Google puts its pants on one leg at a time too
Young companies on hypergrowth trajectories seem to inevitably stumble. The painful exercise transforms the company; the free-wheeling culture is clamped down on, process and bureaucracy are instituted. Then more nimble competitors can scurry around them. Who knows if the big G will be able to escape this trial but it sure is a common pattern.
Organizations are difficult to scale. Management gets a smaller and smaller rudder for the growing boat. Turning fast was a luxury of youth.
One of their current best practices, a strategy that seemed great in 2002-2003, such as red-zone hiring rates, 20% time, or vast build-outs of infrastructure, could bring significant challenges later.
Don't get me wrong, I believe Google is a fantastic company, as anyone who has read my posts knows. But to bet against the search startup space is equivalent to betting that Google is going to bat 1000. And nobody ever bats 1000.