Friday, September 30, 2005

Vertical Search: Show Me the Money!

Stanford's renowned Graduate School of Business is energetically incubating a new generation of Web businesses, now focused on vertical search, defined as "providing essential search content and related tools for people who have a passion, need or repetitive task". Four experienced Web entrepreneurs and a venture capital entrepreneur-in-residence talked about opportunities at this recent MIT/Stanford Venture Lab event on the campus. The audience (about 150 attendees) was about half business school students and the rest an assortment of software engineers, search engine executives, headhunters, potential entrepreneurs and venture capital seekers. And yes, about half the audience was working with a vertical search business plan--the business du jour!

Overall, the emphasis was on business changes from the previous dot com boom and bust, in both revenue models and technology, as well as a better understanding of consumer search. Scott Rafer, former CEO of Feedster, was the main speaker describing the new opportunities for vertical search, which I knew in previous iterations as niche websites, aka niche publishing, aka specialized applications, and even local search. The key is finding a "community of interest" with known demographics, aka audience in the publishing world, and adding "editorial" to provide a destination, as he described a Pet-Web, which has information on what to do if your dog is sick along with referrals to local veterinarians (lead generation is valuable!), with ratings from dog owners, free content generated by site visitors! Revenue from listings of local services (does this sound like yellow page advertising?), plus advertising from national brands (buyer's guide?) provide the revenue, while many of these sites can be run on "Google boxes" using open source software, while using blogs and RSS to build traffic. So the future of many viable search businesses looks a lot more like the specialized publishing industry rather than multi-million dollar tech startups, a refreshing change from the past!

Barney Pell, of Mayfield, provided the context for this next generation of search businesses, with the increase in broadband access, wider acceptance of credit card buying on the web, the surge in search advertising and profitability in the long tail of search. Dion Lim of SimplyHired describes their business as providing the best possible experience for job hunting, a discouraging task at best, with a light touch, including well-done forums to share "Pink Slip" experiences. Reid Hoffman, of LinkedIn, has built a community of professional connections, used by recruiters and other professionals. Paul Flaherty, of Talkplus, spoke of becoming the trusted intermediary between authors and readers--familiar concepts in the publishing industry, but new to this audience. When I queried the panel about opportunities for business publications, it was clear the established commercial publishing industry was unknown territory for them, which spells opportunity for innovative publishers who do understand their audiences, and are willing to explore new models.
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