Yahoo's Inktomi acquisition - what it means to e-business

Yahoo's year-end announcement to acquire Inktomi comes at an interesting time. It has been using Google to provide web search, integrated into Yahoo's portal. Over the last year, though, Google has begun to leverage its popularity in search and has introduced portal-like offerings. Google News, for example, presents information pulled from thousands of news sources. Other new services include a catalog search, discussion groups, a web directory and Froogle, a search tool for online commerce.

Google has challenged Yahoo and MSN as the top search site. It has one of the largest audience reaches, and its popularity has been steadily climbing. People now spend more time using Google's search than Yahoo's and others' searches.

Inktomi's fortunes, on the other hand, have been plummeting. The company's stock price dropped from US$241.50 in March of 2000 to the purchase price of US$1.65. It recently risked being delisted by Nasdaq, when its share price fell below Nasdaq's US$1 minimum. In October, it laid off 20 per cent of its staff. It also had to recently sell off its enterprise search business to Verity.

In purchasing Inktomi, Yahoo is acquiring search technology that may improve its offerings, while reducing its reliance on outside vendors. According to Yahoo CEO Terry Semel, "The addition of Inktomi's search platform adds both control and flexibility to this important business, thus enhancing our ability to create new and more innovative search offerings for consumers and businesses."

The combination of Yahoo and Inktomi may prove to be an interesting one. Yahoo built its directory around human categorization, while Inktomi has long provided automated crawl-based search. Both approaches have had problems staying up with the growth of the Internet.

Yahoo's directory is difficult to scale, because they would need to hire hundreds of thousands of people to try and comprehensively categorize the current Internet. Inktomi's search has traditionally organized pages automatically based on page content and meta information. This approach has many problems, such as page-rank manipulation and problems with page relevancy.

Google's method has been to automate the process of human ranking and categorization of pages. Instead of relying solely on a web page's content, Google looks at pages within the context of the Internet. By evaluating the links to a site, and the sites that link to a site, Google has created an automated approach that captures a human perspective.

It will be interesting to see how Yahoo puts Inktomi's technology to work. I'll be surprised if Google is still providing Yahoo's search results in a year.

E-businesses will want to watch how this plays out. Search has become the biggest source of traffic for many sites, and Google has grown to dominate this. If Yahoo can develop independent technology to replace Google, companies may need to double their efforts to monitor and improve search-engine ranking.

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