January 4, 2006 4:00 AM PST

Internet search meets the gadget

In a first for the annual Consumer Electronics Show, Google co-founder Larry Page and Yahoo CEO Terry Semel will deliver separate keynote speeches in Las Vegas this week.

At first blush it may seem odd that two giants of the Internet are presenting dueling keynotes at a conference historically devoted to gadgets and home electronics. But the speeches by Page and Semel make a lot of sense, because their long-running search engine brawl is headed to a consumer device near you.

There's little doubt at this point that Google and Yahoo are the top dogs in the search market, and as consumers increasingly access the Internet through devices other than the PC, it makes sense that the two companies should follow their customers onto those devices. The question, of course, is just how they plan to do it. They're already working on search technologies for video, television and music. It wouldn't be a stretch to drop that technology into some sort of device.

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What's new:
Google co-founder Larry Page and Yahoo CEO Terry Semel will address the crowd at CES, sparking speculation that the search companies may be getting into the hardware business.

Bottom line:
Many analysts say it's highly unlikely that two companies that have found high-growth and big profits in Internet search will stray into the low-margin hardware business.

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That natural combination has helped fuel speculation that Google is set to unveil some sort of gadget that smoothly connects to Google's Internet services. But many analysts say it's highly unlikely that two companies that have found high growth and big profits in Internet search will stray into the low-margin hardware business.

What's more likely is that the Google and Yahoo execs will present arguments--and services--to convince consumers that search technology will be the key to delivering and accessing digital media on any device, whether it's the PC, TV, set-top box, personal digital assistant or cell phone. Analysts expect them to say why their respective technologies are best for the job. And while details are still scant, don't be surprised by a few partnership announcements as well.

"They see a role for search in all sorts of consumer appliances and they want to help deliver it," said Danny Sullivan, an industry analyst and editor of SearchEngineWatch.com. He remarked that, given the cost, it would be a "strange direction" for Google to introduce hardware despite rumors on the subject.

They'd be wise to stay out of the hardware business, because few software or Internet companies, other than Microsoft with its Xbox videogame console, have been able to make the leap.

Even Microsoft has had a spotty record. In 1997, Microsoft invested more than $400 million in upstart WebTV, which sold a low-cost box for access to the Web from the TV. It reinvented the device as MSN TV, but has yet to sell it widely. AOL has also sold PCs under its own brand several times, with limited success.

There's a reason previous efforts like WebTV didn't pay off. The economics of developing proprietary hardware didn't measure up for companies accustomed to high-margin businesses like software and Internet services. The costs to engineer a device were too high and development time was too lengthy. Don't forget: There already were plenty of PCs, which get cheaper all the time, connecting consumers to the Net.

What could make things different this time around, however, are the wide home use of broadband and a creeping sense among tech companies that they need to control the bridge between the digital home and the Internet. Whoever controls that bridge, so the theory goes, mines tech's next big pot of gold.

CONTINUED: Google Cubes?…
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not worth their weight in gold
its my opinion that google should stay ion the search business and leave the lesser non leveling business ventures to that of microsoft so they can finally get a good idea out there
Posted by joemill1 (6 comments )
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successful product not taking fire
I am bewildered and worried that webtv has never o'ertaken the general population which has paid MUCH MORE for their computers which require so much diligence and administrative time. Webtv is streamlined, fast, unproblematic and provides me with 98% of my internet needs. I go to my far fussier, slower, complicated and vexing computers to do things like download pdf files or see videos. MSNTV alas offers a new product which however craftier actually does LESS than the original. My grave suspicion is that Microsoft purchased the product to eventually put it out of competition with their products which will forever gather in monies for changes, enhancements and upgrades.
Posted by ajsnyc (1 comment )
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