If It’s Impossible To Compete With Google, How Come New Search Engines Keep Launching?

Venture Capital

from the the-internet-is-quite-the-dynamic-place dept

We’re talking a lot these days about competition and antitrust, and the narrative over the past few years is that four companies — Facebook, Apple, Amazon, and Google — have basically sewn up the entire internet market, and no new entrants can ever succeed. Of course, we keep seeing that argument challenged by reality. First off, for a while people were including Netflix in that list, but over the last few years, Netflix has been facing competition from all different directions and is now struggling. On the social media front, TikTok certainly showed that it’s possible for other entrants to become very big, very fast, even if Facebook wants to kill them. And, of course, basically every month now we hear about this or that new social network that is gaining ground, especially among younger generations who don’t trust Facebook.

But, on search, we’ve been told that there really can’t be a new entrant, since Google has such control over the market. Of course, Bing is out there, and DuckDuckGo has carved out a pretty healthy slice of the market.

Perhaps most interesting to me, however, is how I keep hearing about new entrants in the search market. Last fall, privacy-protecting browser Brave announced that it was launching its own search engine, for example. However, in the last few weeks I’ve heard about two other brand new search engines as well. First up, Russ Roberts interviewed former Google exec Sridhar Ramaswamy, who recently launched the new search engine Neeva, which appears to be a search engine with a freemium model that promises not just no tracking (a la DDG), but also no ads ever.

Last year, the company raised $40 million from two top VC firms, Sequoia and Greylock, which, again, goes against the narrative that VCs won’t invest in these spaces. In just four months since the site launched, it has half a million monthly active users. That’s pretty tiny, but it’s still a starting point.

Then, just about the same time I learned about Neeva, I learned about another new search engine, called Yep (I wonder how much that domain cost!). Yep was just launched a few weeks ago, after the big search engine optimization company Ahrefs spent an apparent $60 million building it.

With Yep, their attempted differentiator is (like so many others) no tracking of personal info, including search history, and then a weird “profit-sharing” model, in which they promise to share 90% of ad profits with content publishers. I’ll be honest: I don’t quite understand what that means or how it works. First off, it seems unlikely that they’ll be making any “profits” in the short run (and perhaps longer) so is this just a future promise?

And, second, how are they going to (1) keep track of which content providers they owe money to and how much, and (2) get hooked up with those content providers to give them the money. The company’s “hypothetical” is that they would fund a ton for Wikipedia:

“Let’s say that the biggest search engine in the world makes $100B a year. Now, imagine if they gave $90B to content creators and publishers.

Wikipedia would probably earn a few billion dollars a year from its content. They’d be able to stop asking for donations and start paying the people who polish their articles a decent salary.

There would be no more need for paywalls and affiliate links, so publishers who’ve had to resort to chasing traffic with clickbait articles and filling their pages with ads would be able to get back to doing investigative pieces and quality analysis. A citizen journalist uncovering corruption on the side of a full-time job could get compensated without having to spend time trying to monetize content.

Again, this is not clear at all. How are they tracking that? How do they prevent gaming the system? Hell, they’re an SEO firm, they know that everyone tries to game search engines to get an indirect benefit. When you switch it to cold, hard cash, I imagine it’ll get that much worse. Perhaps the people at the company think their experience with SEO will help them spot the gamers, but it’s quite a challenge.

So, yes, neither of these may succeed. Both seem to have some pretty big challenges ahead. But I’m just generally fascinated by the idea that, despite the narrative about how it’s so impossible to build a search engine that there are “Venture Capital Kill Zones” where no VC would invest — and that includes search.

Yet, just here, within a week, I found out about approximately $100 million being spent on building two separate competing search engines, both with at least some plans to differentiate themselves in the market.

The internet is incredibly dynamic. There may be policy options for increasing competition, but it’s hard to argue that some companies have so dominated the field that no one even dares attempt to build competitors any more. They seem to be happening all around us.

Filed Under: competition, investing, kill zones, search, search engines, vcs
Companies: google, neeva, yep