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Google's need for speed
Google hopes to turn its core technology into a new source of revenue. But time is of the essence.
April 22, 2002: 2:38 PM EDT
By Eric Hellweg, CNN/Money Contributing Columnist

NEW YORK (CNN/Money) - Google is no stranger to soft launches of new technology. The word "beta" appeared below the company name for its entire first year online.

But Google successfully parlayed that rough-hewn image into lots of underground cool and cachet -- helping fuel the company's meteoric rise from a college project to a stable product that is widely regarded as the best search engine on the Web.

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These days, Google is kicking off an even more ambitious beta launch, perhaps as a run-up to a much-anticipated IPO announcement.

On April 12, Google granted software developers a peek inside its treasure chest -- Google's search database -- and invited them to fool around with a set of free application programming interfaces, or APIs. APIs are software hooks that allow developers to create programs that can plug into another program -- in this case, Google's database. The only caveat is that Google requires developers to agree in writing to limit their search queries to 1,000 per day, and to not create new commercial applications around the code.

So far, the move has been an unqualified success. "The developer reaction has been very exciting," says Nelson Minar, a software engineer at Google. "We've had over 10,000 sign-ups for the service. There have been at least 25 implementations of the API in just the first week." One such application allows people to send a web site their search term in the subject line of an e-mail. The message is returned with Google search results in the body of the e-mail. "It's very cool," says Minar.

Not surprisingly, after having been granted limited access, developers are champing at the bit for more. Similarly, people who follow Web services, a burgeoning field that is all about integrating different computer systems, are also excited. "This is pretty incredible," says Ted Schadler, group director at Forrester Research. "Now I have something concrete to point to as an example when I talk about Web services."

It's not the e-mail query tool that has Schadler and others interested, but rather what that tool represents and portends. Google's API uses simple object access protocol, one of the underlying technologies behind Web services. By making its technology more broadly available, Google could collect licensing fees from thousands of developers.

Consider the following scenario: Search is one of the Internet's killer apps. It can be modified, expanded, and specialized. Google is seen as the gold standard of search. If Google were to license its technology to teams of developers, hundreds of commercial applications could be developed into money-generating tools, and Google would get a slice of the action. This could also help Google move beyond the Web and onto the desktop. For example, you could use Google's interface to search your hard drive.

"Google needs to get untentative," says Dave Winer, the CEO of Userland Software and an influential online essayist. "They need to grow, and developers are central to that. They become your sales force. Google has the two magic ingredients that developers love: users and potential."

For now, however, potential is about all that Google's API release can boast, despite the widespread developer interest. Although going slow has served Google well in the past, the company must speed things up to exploit the opportunity.

What's at stake? Quite possibly, the future of the company. Just as Google became a stand-alone search company in late 1998 (after attempts to sell the technology were rebuffed by the major search players of the time), it now stands at a similar juncture. The current dilemma: Google needs to augment its revenue stream, which currently comes from advertising and enterprise technology sales. Diversified revenues will be important as Google tries to make itself more attractive for a potential IPO. According to CEO Eric Schmidt, Google has been profitable on an operating basis for four quarters and expects to be profitable for the foreseeable future. The company is not yet public, of course, so we'll have to take his word on that.

Google engineer Minar was reluctant to discuss what else Google may do with its API, but he did say that if there is enough demand for the service, he hopes the company will "have a case for making it into a full-production, quality commercial service." But he declined to offer a time frame for such a move.

Not surprisingly, Google's competition is keeping tabs on all of this. Paul Gardie, VP for search at Teoma, a newly launched search engine owned by Ask Jeeves (ASKJ: down $0.06 to $2.07, Research, Estimates), says, "We're going to watch and see if there's a good response. If there's a demand to create cool applications, we'll consider doing it too."

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In a prepared statement, Yahoo! (YHOO: down $0.68 to $14.08, Research, Estimates) responded to Google's moves by saying, "Search remains a core initiative in Yahoo's strategy....We are continually looking at the different services and offerings that would make the most sense for our consumers and our company."

Of course, there's more to creating a successful business than just sparking geek interest. The real question is whether Google can move fast enough to build a successful business around commercializing its technology in time for Wall Street to take notice.

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