Yahoo! bought search in town, I believe it was Inktomi back then, which was later acquired. Google came along and were setting new standards. Yahoo!s legendary founders David Filo and Jerry Yang liked what they saw in Google's search quality and even encouraged Google's founders Sergey Brin and Larry Page to start up Google as a company and expand their search engine. Yahoo! even helped finance the two search engine founders with venture capital. As a Yahoo! shareholder I just didn't quite get it. Since search was the number one activity on Internet from the very beginning of graphical WWW around 1994 and still is, it just seemed dangerous to let someone else become a leader in this category. Not that Yahoo! was doing search themselves, as mentioned they were buying the service in town, but why help someone, that could become a big name and potentially expand to other areas? Obviously easy to say today, but I remember that specific feeling and a sense of fear for my Yahoo! investment.
Google now has a market capitalization of $84 billion, while Yahoo! stands at $47 billion. Google has exactly expanded to other areas - Gmail, Froogle, Google News, Google Desktop, Google Earth and many more (Google is King Of Beta;) putting Yahoo! under a lot of pressure. It really must feel bad having helped Google to start out, and then be overtaken. Google however, was also clever and lied about intentions. Eric Schmidt kept saying that Google would solely focus on search - always - yeah right ;). Maybe you can tweak it and say, that all their products are in fact search related - Gmail searching through your mail and serving relevant text ads. This way everything soon becomes search related.
Today these two search players are #1 and #2 in the game - with Google as a clear #1. Yahoo! is trying hard to catch up, and people familiar with the technical aspects of search say, that Yahoo! has made more hardcore advances than Google the last 1½ years. Amongst others:
- Enabling RSS and XML
- The recent announcement of 20 billion odd webpages indexed while Google is at 8 billion
- Audio search
- Video search
- Personalized search
Google has spend a lot of their time going into the usual "portal products", which might have taken focus of some areas of search. Apparently they still spend 70% of their time improving their core search, but it will be interesting to follow. More important than true search quality is though perceived quality. As long as the public perceive Google to be the best - they will use Google. However, long term perceived quality should follow true quality.