Competitive Intelligence

Google's Gmail Challenges Yahoo, Windows and Privacy Advocates

Google's recent launch of Gmail creates some interesting new competitive pressures on its top two rivals, Yahoo! and Microsoft, but in some surprising ways.

For Yahoo!, the obvious frontal assault on their users from Google is nothing surprising. Yahoo saw this coming a few months ago and took steps to break away – pretty successfully, I might add. Still, the competitive dynamics in Yahoo vs. Google align across multiple services and markets in terms of serving their REAL customers – that is, the advertisers seeking to capture the best qualified eyeballs, that constitute both firms’ real product. I read an interesting update piece on the rivalry at eWEEK.com:

It's curious why it took so long for Yahoo Inc. to discover that it was nurturing an adversary during all of the years that it hosted Google Inc.'s search engine.

Long before Yahoo finally switched search engines in February, Google was adding features to its own site designed to challenge Yahoo's position as a popular home of Web searches, news, shopping and community groups.

It's hard to believe that Yahoo would have remained committed to the Google search engine for four years if it had realized early on that Google would not be content to remain quietly in the background as Yahoo's search engine.

Now, Yahoo—and for that matter America Online Inc., the Microsoft network and the rest of the online services industry—is dealing with an increasingly vigorous competitor that is going to battle tooth and nail for market share. Web surfers have nothing to lose in this battle as Yahoo, Google and the rest try to outdo each other by offering new online services to retain users' loyalty.

Yahoo has gone to considerable pains to show that it won't miss Google search after making the switch to the Inktomi search engine, with its emphasis on product and technology Web searches. But when it comes to Web searches, Yahoo still lags far behind Google, which accounts for about 79 percent of U.S. search activity, according to Searchenginewatch.com. In comparison, Yahoo accounted for 27.7 percent even when Google was still its search engine.

Yahoo also revamped its news search by implementing an index that combines content from 100 news partners and 7,000 Web sources, which it says will let users access a wider array of content. Its earlier news search gathered information from 4,500 Web sources as well as its direct news partners.

While this seems impressive on the face of it, one has to wonder whether users are able to discern a difference in the quality of the content they retrieve when faced with a veritable avalanche of information, especially when most of the information is coming from the same set of sources.

Local search has emerged as the new competitive battleground for Google and Yahoo. But it remains to be seen whether it will prove to be a major new channel for advertising revenue, even if it proves to be a boon to users.

At first glance, local search doesn't seem like such a new or innovative idea. People have been able to do yellow-pages searches of local businesses and attractions for years.

But new features such as Yahoo's SmartView let users pull up maps highlighting the locations of businesses and attractions such as hotels, restaurants, theaters, sports arenas and bank ATMs. The maps display icons that users can click on to get additional information such as directions, prices, Web addresses, schedules or restaurant menus.

From a little farther down:

But the development of local search hardly comprises the majority of what Google is doing to challenge Yahoo on its home turf. Google's latest move is to announce a free e-mail service to compete directly with Yahoo, MSN, AOL and the rest.

The Google "Gmail" service reportedly will allow users to archive and search every e-mail they've ever sent or received. Google plans to sweeten the offer with 1 GB of free storage, far more than what Yahoo and other free e-mail services offer. Yahoo, for example, offers 4 MB of e-mail storage for free. Users have to pay for additional storage capacity.

With this powerful addition, Google's spare and uncluttered interface could prove an irresistible draw for Internet users, even those who have made Yahoo their default home page since the early '90s.

But, from Microsoft's perspective, Gmail represents a migration step toward computerless computing. By changing the model of where we store our files, Google does nothing less than diminish the need, not only for MSN's Hotmail and associated services, but for the very idea of owning a computer of one's own and the desktop OS to go with it. Over at SearchEngineWatch.com, Danny Sullivan considers the possibilities of the "Google Desktop":

Will Google's new Gmail free email system be just the first of many things we begin moving to a new Google Desktop? If so, Microsoft might have a lot more to worry about than web search.

Today, plenty of people download mail to desktop-based email programs. But Google might convince some of them to take up its email storage offer.

After all, even if you do have a great way to search through your desktop-based email, you might like the idea that all your mail is backed up, stored offsite and easily searchable from anywhere, to boot.

Now take things a step further. Imagine next year that Google provides anyone with 5 gigabytes, 10 gigabytes or more of storage space for personal files.

Got a ton of Word documents, spreadsheets and other material? Push it across to us, Google would say. We'll store it, index it and make it easy to retrieve what you want. This type of material Google already indexes from across the web and has done for ages.

As broadband expands, such an idea becomes more and more feasible. And with it, the idea that Microsoft might trump Google with "desktop" lock-in becomes perhaps less an issue.

This recent AP article takes a fresh look at the search wars from the perspective of Microsoft being on the defensive, because of how prominent Google and Yahoo have become as almost parts of the operating system, a "layer" as John Battelle puts it, above Windows, Mac OS or Linux.

Go even beyond this. Google's move might be a harbinger of redefining where our desktop lives, not just in terms of software-like applications that we interact with, but in terms of where we store that data.

Whether Gmail can overcome the concerns of privacy advocates remains to be seen. I personally believe viruses and spam have largely corrupted email communications and that differentiation, using methods such as targeted advertising to email readers, makes this interesting twist.

- Arik