October 25, 2001 5:10 PM PDT

Google evaluates subscription options

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Google is considering creating subscription versions of its popular search engine that could target academic and corporate clients, a source said Thursday.

The Mountain View, Calif.-based company is evaluating new "vertical markets" as a means of increasing revenues, according to a source within the company. Among the considerations are new niche searches for periodicals, medical information or technology that Web surfers or companies would pay to use.

Google already offers topic-specific searches for government and military Web sites, universities and technology such as Apple Macintosh and Linux. It also licenses its search technology to portals such as Yahoo and corporate customers such as Sony.

"Vertical search and subscription services are ideas that we're looking at in terms of growing the business," the source said, despite emphasizing that plans are still at the discussion stage and such services are not expected to launch imminently.

Google spokeswoman Cindy McCaffrey would not confirm any plans to develop subscription services, but she said the company is always talking about new markets.

Subscription services have proven successful at other, smaller search companies such as Northern Light and Moreover.com. They offer a potentially attractive alternative to the paid listings that have proliferated on rival search products.

Major portals that provide search, such as the Microsoft Network and America Online, have warmed up to paid listings, while many other providers, including AltaVista and Inktomi, have started charging fees for better placement in their indexes. In addition, for-fee listing directories such as Overture (formerly GoTo.com) and Sprinks tout profitability at a time when competitors struggle to meet earnings projections in a slack ad market.

Google, however, has vowed not to go down the pay-for-placement road, preferring to stake its future on the strength of its search technology.

The company has stood out as the contrarian among major search providers because its service has grown despite the absence of conspicuous advertising or paid listings. The site's traffic has nearly tripled in the last year, while former high-flying competitors such as AltaVista have lost popularity.

But Google may be forced to uncover new forms of revenue through subscription search, industry pundits say.

Placing additional diversification pressure on Google is its ad strategy. The company only sells text advertising anchored to consumer search terms, unlike traditional banners and graphic-rich online advertising. Because the advertising is contextual and targeted, it sells well to direct marketers such as financial services and e-commerce companies. But the company has been hard-pressed to sign on traditional brand advertisers such as consumer package goods, a set viewed as the Holy Grail for online publishers and portals.

"Their big problem right now is that 70 percent of their revenues come from advertising. And you tend to get nervous when you're largely dependent on one thing. So (subscriptions) would just give them another revenue stream in a fairly efficient manner," said Danny Sullivan, editor of industry newsletter and Web site SearchEngineWatch.com. "Vertical search could be appealing to many people and...can be one of the important advancements in the industry."

Other, less commercially popular search services are having some successes on this front already. Northern Light, launched in 1996, charges consumers for access to a content library of 30 million articles from 7,000 periodicals. It also licenses its library to enterprises and creates vertical search services for corporations. For example, a contractor can license a specialized search engine for its industry. Employees at a construction firm can pull up articles from "Air Conditioning, Heating and Refrigeration News," for example.

David Seuss, CEO of Northern Light, said that he has found consumers are willing to pay for content if they are investigating a business, investment or health-related decision. The company charges anywhere from $1 for a single article to more than $100,000 to build a vertical search service for enterprise customers.

He said advertising comprises 15 percent of the company's revenues, while subscription services take up the other 85 percent. "That's an example of the power of the business model," he said.

The company plans to announce several new partners and a new round of funding Oct. 31.

"All of the large Web sites are evaluating this market right now," Seuss said. "I would be surprised if many of them did not add premium fees around premium services."

 

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