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Case Study: Going Up Against Google

Sifry's instincts told him to stick to his plan. But could he really change nothing?
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It was almost midnight, but David Sifry was still sitting at his office computer, nervously zinging instant messages back and forth with friends and employees. Sifry knew that his fledgling business, the popular blog search engine Technorati, was about to get a gigantic new rival: Google.

It was a moment Sifry had been anticipating. When he founded Technorati in 2002, he knew that if blogging became as big as he anticipated, he'd almost certainly face competition from the giants. Indeed, he had spent the previous three years trying to take maximum advantage of Technorati's first-mover status, the better to protect his company when the big boys made their play. On September 14, 2005, that day arrived. Google Blog Search was making its debut. Similar offerings from Yahoo and Microsoft were said to be in the works.

If Technorati was to survive, Sifry reasoned, it would have to do so on the basis of its technology. From the outset, he had been pushing his programmers to refine Technorati's novel way of searching the growing number of weblogs. And despite the long and admittedly scary shadow cast by Google, Sifry's instincts told him to ignore the new competition and stick to his plan.

Google, after all, had added other new services without killing its smaller rivals. The search engine Ask Jeeves, for example, remains viable. And Shopping.com, a shopping search engine, not only survived Google's 2002 launch of Froogle, but wound up being purchased by eBay for $620 million in June 2005, which was hardly a bad outcome. Still, it was hard to imagine sitting back and doing nothing as one of the most powerful companies in the world encroached on his turf. "I take them extraordinarily seriously," Sifry says. "These are very smart people, smarter than me, and they've made tons of money."

But Sifry didn't see many options. Launching a major brand-building campaign to reinforce Technorati's image as the original blog search engine wasn't viable; after all, who can outspend Google? And he didn't particularly want to cut and run and start looking for a buyer. A computer geek at heart, Sifry had a lot of faith in the technology he'd developed. Indeed, his bet all along had been that Google's approach to searching the Web wouldn't be the right fit for the blogosphere. The company's famed PageRank algorithm indexes keywords and looks at the number of people linking to websites in order to establish the best matches for a search. In essence, Google treats the Web like an enormous library, sifting through millions of pages and displaying the most relevant ones, regardless of how old they might be.

Sifry believes the blogosphere is different. It's not so much a library as a conversation, and old blog entries get stale fast. That's why he's made sure that the first page of Technorati search often yields items posted in the past 10 or 20 minutes.

A former Wall Street analyst, Sifry developed the technology in early 2002, while working as chief technology officer at Sputnik, a wireless computer networking start-up he had co-founded. On the side, he kept a blog, mostly to expound on tech issues, and he was curious to know who was reading it. So he spent an evening writing software code that would help answer the question. At the time, most bloggers were techies like Sifry or teenagers posting their diaries. But the phenomenon took off, and Sifry's website, which he had dubbed Technorati, was seeing rapid traffic growth and even some paying customers--including The New York Times and Reuters, both of which licensed the technology to track what bloggers were saying about their articles.

When AOL called and said it wanted to collaborate with Technorati on its new blogging service AOL Journals, Sifry realized that Technorati was no fluke and could be a lot more than a hobby. He wound down his relationship with Sputnik, signed a deal with AOL, and started raising some angel capital. In September 2003 he devoted himself full-time to Technorati. Its mantra: "Be of service."

Sifry's instincts about the blogosphere proved correct, and Technorati has been scrambling from the outset to keep up with the blogging world's explosive growth.

In 2004, the company raised $6.5 million in venture capital. By the fall of 2005, more than 15 million blogs were being read by 30 million people, and Technorati was performing millions of searches a day. The company wasn't profitable. But it was building a real business, using a business model not unlike Google's--selling advertising and sponsorships, and syndicating its technology to other websites. It had much better brand recognition than its competitors, most of them start-ups such as Feedster, PubSub, and Bloglines. But going head-to-head with Google would be an entirely different matter.

Sifry wondered what Google had up its sleeve. It might, for instance, have more effective ways to deal with the growing number of blog spammers trying to game the search engines (spammers had generated lots of complaints about Technorati). Indeed, the company was vulnerable on a number of fronts. Keeping up with demand was a constant challenge. Searches on Technorati were taking longer and were increasingly generating error messages. Customer support was overwhelmed, with some queries taking as long as a week to answer, sparking more complaints among bloggers. What if Google's technology simply worked better? What if the company had developed entirely new approaches that Sifry hadn't even considered? Could he really just stand by and do nothing?

The Decision

The prototype of Google's Blog Search went live at midnight on September 14, 2005. Most of Technorati's work force of about 30 was online, waiting. Sifry spent about half an hour checking it out, then posted a welcome note to his new competitor on his blog, including some friendly trash-talking about all the things Technorati could do that Google couldn't, such as image finding. Then Sifry went home and got some sleep.

There were no big surprises. Google Blog Search, he concluded, was solid but simple. It seemed to have a hard time keeping up with the dynamism of the blogging world; many search results it displayed were more than 24 hours old, which is ages in the blogosphere. On the other hand, Google delivered those results in less than half a second, compared with at least a full second for Technorati. It sounds minor, but in the world of Web search, that's a big difference. "We knew we had a lot of work to do," Sifry says.

Since then, the company has been scrambling to keep its edge by launching new features. First up was a tool that provides constant updates of the things that matter most to people who write and read blogs at any given moment--such as the most-discussed books, movies, and news items on the Web. Then in October, it added a feature that is able to determine who is the most authoritative blogger on any particular topic. In November, a "Mini" search window debuted that automatically refreshes users' favorite searches while they're doing other things online. And in December the company introduced a prototype called Technorati Explore, an experiment in creating a newspaperlike front page from blog posts.

Traffic growth slipped slightly in September. But it rebounded in November and is still growing faster than Google Blog Search, according to Hitwise, a company that monitors Internet traffic. As of mid-December, Technorati was tracking some 23.4 million blogs, adding some 70,000 more to the list every day, and getting 1.53 visitors for every one visitor to Google Blog Search.

Sifry, of course, knows that Google's product will almost certainly get better. He's also facing new competition from Yahoo, which rolled out a blog search function on its news page in October. But he remains confident that Technorati will not lose its technological edge for some time. "What we're building is fundamentally difficult," he says. "If it were easy, everyone would be doing it."

Another advantage: Unlike Google, Yahoo, or any other major player, Technorati needs to keep its focus on just one thing--the blogosphere. With blogging more popular than ever, Sifry says he's currently evaluating more than 100 potential deals--primarily advertising, sponsorship, and syndication deals. And a lot of the credit, he says, goes to Google. "I no longer have to explain what a blog is," he says. "It's absolutely an easier business discussion now."

The Experts Weigh In

Switch to services

Technorati has some good technology, but I'm not sure that it has a strategy that can keep it alive. In fact, I'm not sure what its strategy is. I'd like to see Sifry build a business around services, not search. Many of Technorati's rivals are offering private label services for Web publishers or platform services to bloggers, like hosting and tools. Technorati seems to be doing neither. It has introduced some very clever technology, but I don't think an advertising-based revenue model is enough to sustain the business.

Susan Mernit
Partner, 5ive, a digital media consultancy in New York City

Look for a buyer

Technorati can point to different features it has that Google doesn't, but that's only for now. Technorati's best bet is to try to get acquired. It needs to stop worrying about search technology and take the head start it has in creating online communities and leverage it. Bloggers come to Technorati for more than just searching. Building on that community will make Technorati more than just another search engine. Anything it can roll out that makes it harder for people to switch will make it a sweeter acquisition target.

Stephan Spencer
President, Netconcepts, a Madison, Wis.-based Web consultancy

It's all in the execution

I use Technorati every day to see what's being said about my blog. It's not clear to me what Technorati thinks its market is. Is it trying to be an entry point for consumers? Or a tool for blog publishers like me? Compared with Technorati, Google is terrible, especially in terms of timeliness. On the other hand, Technorati is overwhelmed by spam. Technorati's strategy is not unique, so its execution has to be perfect. Sooner or later, somebody's going to get it right. I hate to say it, but it's probably Google.

Peter Rojas
Co-founder, Engadget, a New York City-based blog about tech gadgets

What do you think? Does Technorati have the right strategy to compete with Google? Sound off at casestudy@inc.com.




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