Digital Scientist, Gary Flake lost the search war to Google. He spoke at a recent conference on advertising and Marketing Daily wrote the following…
Gary Flake, a Microsoft Technical Fellow who founded and now runs Microsoft’s Live Labs, was brought into Overture in 2002 to head up its paid search product. In 2003, the former GoTo.com actually had 55% of paid search, more than Google’s share. Now Google has 80% of a category that has quadrupled, and Overture was swallowed by Yahoo, which only has 15% of search.
Said Flake, “WTF? How did I lose so badly?” He lost, he said, because Overture ignored the “long tail” — focusing solely on premium partners, exact word-search, and hands-on, personal treatment of advertisers, and editing processes. Flake said the lesson — one that could apply to auto manufacturers as well as media companies — is that “the first companies in an industry must be willing to destroy their existing business to create something new; they must destroy their own business before someone else does.”
Google destroyed Overture’s business by becoming the engine of choice for the much-larger long tail of the Web — not just the premium portals like then-leaders AOL and Yahoo — and automating the search-results vetting process. Google, he said, benefited by the auto-feedback nature of networks: When your network grows, the growth creates more growth through economies of scale.
I’ve seen examples of this often enough to know that its true. Often, we don’t want to let go of something that seems to be going well only to lose our lunch to a new competitor. It reminds me of a story I heard about how to catch a monkey. You cut a hole in a coconut that large enough for an open hand to fit through but not large enough for a closed fist to come out of and then place a banana in the coconut. Then tie a rope to the coconut. Monkeys will reach in to get the banana but they won’t let go of it while you reel them in for dinner (I’m assuming this goes on somewhere in a third world country).
The point is that sometimes we have to let go of or reinvent our business models if we don’t want to become lunch.
