Big Waves from "Google Base"


It's not enough that Google (GOOG) seems to be taking on everyone from Microsoft (MSFT) and Yahoo! (YHOO) to Verizon (VZ) and the world's book publishers (see BW, 9/5/05, "Google's Grand Ambitions", and BW Online, 10/20/05 "Google's Escalating Book Battle"). Now, it looks like the search giant has its sights set on tearing into another cast of corporations: online marketplace eBay (EBAY), the funky classified-ad site Craigslist, the entire newspaper industry, and maybe more.

Google's already outsize ambitions appeared to balloon even bigger on Oct. 25 with the news that it's apparently testing something called Google Base. The test site, spotted by sharp-eyed Web surfers in Europe, indicate that Google aims to solicit people to post all manner of content on its site. But what got people's attention were the specific examples, such as classified-ad listings for real estate.

For now, Google says only that it's trying to provide content owners an easy way to "give us access to their content." It also says it has nothing to announce right now. But that didn't stop rampant speculation about precisely what Google's next move would be. Because Google has been looking at getting into auctions or classifieds for months now, most of the buzz has centered around the potential to take on eBay.

POTENT AMMO. It's not as crazy as it may sound to the casual Web surfer. In essence, notes Steve Harmon, vice-president for corporate development at local online classifieds site LiveDeal, "Classifieds are product search." So it fits neatly into Google's stated goal of organizing the world's information and making it more accessible. And, of course, taking tidy profit off the top.

Google brings some potent ammunition to what's shaping up as a pitched battle for the $90 billion U.S. market for newspaper classifieds, Yellow Pages listings, and local radio ads. For one, it has a hugely appealing brand and enormous traffic. It managed to appropriate an entirely new advertising market that already has stolen ad revenues from traditional media, newspapers to magazines.

The highly profitable revenue from those ads has enabled Google to offer a raft of new consumer services, from e-mail to desktop search, for free. "They're not starting from scratch in many regards," says Derek Brown, senior analyst at Pacific Growth Equities. "The foundation Google is working off of is pretty sizable." It's already getting product feeds from its Froogle comparison-shopping engine, it's working with existing merchants through keywords and advertising, and it has millions of consumers.

GIVE IT A TRY? Google has also been working on a payment system for months. Few companies other than PayPal -- including eBay -- have been able to pull that off, and no one knows how far along Google is. But Brown sees Google Base potentially cutting into eBay's pricing power -- if Google's service were free -- and into the auction giant's growth. Brown already has a sell rating on eBay's stock because he's concerned about growth and large eBay sellers moving off the site.

Perhaps the most crucial eBay constituents are the so-called Power Sellers, those who make all or a substantial portion of their living on the site and account for about 29% of eBay's sales, says Martin Pyykkonen, managing director at Hoefer & Arnett. They're not going to switch capriciously, but there's nothing stopping them from testing a few transactions on Google to see how it goes, he says. As news of Google Base filtered out on Oct. 25, eBay shares fell $1.41, or 3.6%, to $38.01.

eBay may not be the only company in the way of Google Base. Newly discovered Google screenshots seem to indicate a wide range of categories of content: course schedules, events, housing, jobs, news, people profiles, reference articles, products, vehicles, travel, and more. That seems to suggest a wide variety of traditional media, such as newspapers, magazines, and even scientific journals, could be in the line of fire.

"HEAVY CONFLICT"? Even more than eBay, Craigslist looks to be squarely in Google Base's sights. Minority-owned by eBay, it has garnered a loyal following of people who like its spare but friendly feel -- and its proven success in matching buyers and sellers. Google's widely recognized brand could help it ramp up classified listings quickly, surpassing Craigslist in short order, Pyykkonen says.

Google will have to break down roadblocks, though, before Google Base poses a meaningful threat to eBay or any other rivals. It appears Google Base would put Google into the content business -- that is, content it would own, not just point to. That could rankle partners, specifically the classified-ad sites such as Monster.com from which Google recently has been asking for feeds. "It starts to put them in heavy conflict with their partners," says Craig Donato, CEO of Oodle, a new search engine for classifieds, itself a would-be competitor.

Another set of challenges lies in creating a workable user experience, says Rajesh Navar, LiveDeal's CEO. It's one thing to scan search results. It's another thing entirely to view and buy through classifieds. So the user experience would need to be carefully set up to make it clear, for example, who's doing the selling. Also, because classified listings are so transitory -- good ones on Craigslist are gone in 10 minutes -- they may not be conducive to Google's so-called spidering, the process of storing Web pages and indexing keywords, links, and text.

LOTS OF BETAS. Navar points out that Yahoo and AOL (TWX) had, and perhaps still have, a better position from which to offer classifieds, but they've largely failed. So it's not a lock that Google would succeed.

The biggest question remains whether Google can deliver on services beyond ad-supported search. It's developing a reputation for launching beta project after beta project, from its Gmail Web-based e-mail service to its Orkut social-networking service, that fail to gain much traction. In particular, traffic to Froogle trails far behind that of rivals such as eBay's Shopping.com and E.W. Scripps' Shopzilla, despite Froogle's debut in test mode more than two years ago.

That's why one person familiar with eBay management's views says the company actually remains less worried today about competition from Google than it was six months ago. Indeed, to offer buyers and sellers a credible alternative to eBay, Google also would have to come up with a number of new services -- for one, a payment system. It has said it's working on a Google Wallet, which it hasn't yet introduced, but eBay's PayPal unit took years and hundreds of millions of dollars to clear regulatory hurdles and stamp out fraud before it caught on.

WATCH YOUR BACK. Google also would need to create a reputation system to rival eBay's formidable feedback system, by which buyers and sellers rate each other to build trust.

Still, Google has a big and growing cash hoard it could use to hire the right talent, create the needed technology, or strike a deal with partners and the many upstarts already challenging Internet incumbents. If nothing else, Google Base will force a whole new swath of the business world to pay attention to the brash boys from Mountain View, Calif.

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