Vertical search, social search and now… identity search?

The attempts to outflank Google continue. This time it’s Barry Diller’s IAC, which has already failed to make much of a dent in the three years it has owned Ask.com. Diller’s latest gamble: that a search engine aimed at a particular demographic has a better chance of success.

Hence Rushmore Drive, which launches today - a site which wants to become the Google of the US’s 50m-strong black population (African-American is too narrow a label, says Johnny Taylor, the IAC executive in charge.) Taylor says the plan is to deliver a full Web search, but tilted towards the particular interests and outlook of its target audience (the patented algorithm that does the tilting could be used to build search engines for other broad demographics, he adds.)

So is this a better way to attack the search market? Logic suggests that if you can create a differentiated product and brand and market it well, there’s no reason you shouldn’t be able to carve out a slice of a market, even against a dominant company like Google.

Distribution will be one challenge. Inertia is a powerful force. How many internet users take the trouble to reset the default search engines they are first presented with?

The acid test, though, will be whether Rushmore Drive (named after the search engine’s street address) really can build and brand a “better” product for its target audience. A former senior search executive I spoke to this week put it this way: “The basics of search aren’t such a big deal - but there are many, many tweaks.” This process of “tuning” a search engine is a difficult art. There is also the not inconsiderable challenge of delivering results in 0.3 seconds (that’s how long it took for Google to come back with results to the query for “Rushmore Drive”.)

But unlike Ask.com, which tried to compete with Google head-on, at least Rushmore Drive has a different story to tell.

Well, soon you can. The announcement last night of Google’s App Engine (currently in closed trial) is symbolically important: until now Google has been a vertically integrated company, building one of the world’s most powerful computing networks in order to deliver its own search and other services. Like Amazon before it, Google now says it will make that massive computing resource available to other businesses that want to run their software on its servers and access it as a service over the internet.

Once again, Google has beaten Microsoft to the punch (though to be fair, this is still only a very low-key trial, and what’s being played here is a very long-term game.) Microsoft has promised to reveal more about its own “cloud computing” platform this year, with much expected at an October developers’ conference in Los Angeles.

This is shaping up to be yet another fascinating face-off between the leading internet and software companies. Microsoft is a platform company in its DNA and has a massive following among developers, but it has less experience of delivering high-volume services over the internet. Google has unparalleled brains and brawn in running internet services, but it is still at the early stages in winning over developers (a sign of its growing influence will come at a big developer conference in San Francisco next month.)

Ultimately, much will come down to trust. The mantra of IT professionals used to be, noone ever got fired for buying from IBM. Maybe, one day, Google or Microsoft will step into those shoes.

Microsoft and Yahoo continue to circle each other like wrestlers, each waiting for the other to show its weakness before getting into a clinch. At a time like this, just about anything either side says is pure rhetoric.

That is the best interpretation of today’s report that Microsoft is ”evaluating” its bid in the light of deteriorating market conditions. This is a thinly-disguised version of the Larry Ellison treatment: soften up the target by cutting the value of a takeover offer (something Ellison did while Oracle stalked PeopleSoft) or at least threatening to (his treatment of BEA Systems.)

Like Reuters, I also talked to “people close to Microsoft” today, but I came away with the distinct feeling that not much has changed. No matter. With the arbs starting to sweat (most were probably thinking they’d have banked a nice profit on this deal by now) Yahoo’s stock has slipped 3 per cent.

Only two things are certain. One is that, whatever the rhetoric, Larry Ellison eventually ended up raising his offers to win PeopleSoft and BEA. The other is that the real negotiation between Microsoft and Yahoo will be conducted behind closed doors, not through these public posturings.

Not got around to upgrading to Windows Vista yet? In that case you might want to delay a bit longer: it looks like the next version, Windows 7, is coming sooner than we thought.

That reaction is exactly what Microsoft is afraid of - and why it has been scrambling today to stamp on the suggestion that unlike Vista, which arrived years late, 7 (codenamed Blackcomb, after a Canadian ski resort) may actually arrive early.

Unforturnately the speculation will not be easy to kill. Bill Gates himself let the cat out of the bag by declaring he was “super-excited” about the next Windows in “the next year or so”. Yesterday, Microsoft said it planned to offer a version of Windows XP until June 2010 or a year after the launch of Windows 7, “whichever date is later” - an apparent indication that a date of June next year had been pencilled in for the launch of the new operating system.

A Microsoft spokesperson says nothing has changed, Windows 7 is still expected to take around three years from the consumer launch of Vista (January 2007) and maybe Gates was referring to the first beta version of the software.

Regardless of this attempt at obfuscation, what seems to be emerging is this: rather than slipping later into 2010, as some had expected, the next Vista is well on track and at least an advanced version of it will be on display in the first half of next year. That won’t help Vista, which is still recovering from all the bad publicity of its first year.

Drinking, gambling and… searching?

It seems the list of proscribed activities for the younger set is longer than you thought. A sharp-eyed blogger at CNET spotted last week that Google’s official terms of service explicitly bar anyone under the age of 18 from using any of its services. That’s right: no hanging out on Orkut, no peeping at YouTube, and definitely no searching for someone else’s homework to cut and paste.

So it’s a relief to hear that Google’s lawyers have finally decided to loosen up a bit. From a response just in:

The language regarding the age restriction is an acknowledgment by Google that, in most jurisdictions, an agreement with a minor may not be legally enforceable. Google intends to modify its terms of service to clarify that users under the age of 18 are welcome to use Google’s services, subject to certain limitations based on each specific service.

Get back to it, kids.

Googlers are in high demand. Doug Merrill, head of internal systems, has just moved over to EMI (while it’s tempting, after a recent senior departure or two, to start talking about a brain drain, the Google talent-magnet is still exerting Silicon Valley’s strongest pull.)

But how hard should other companies try to lure away Google talent? A prominent Silicon Valley headhunter I spoke to this week offered a contrarian view: that Google is like Microsoft in the 1990s, or IBM in the 1980s. It is so dominant in a particular market that it can’t help making money. That has created what this headhunter describes as a “Google bubble.”

What happens when you release Googlers from the bubble? Like Microsofties and IBMers before them, they are likely to take time readjusting to the “real world”, this person says. It’s easy, when you work for a company that has discovered modern capitalism’s version of the golden goose, to think that somehow you had something to do with it.

The betting among those who have been tracking Microsoft’s pursuit of international standards recognition for its Open Office XML formats (the voting by national standards bodies closed at the weekend) is that the software company will emerge victorious.

If correct, this is a significant breakthrough for Microsoft. To have lost would have handed a huge victory to the IBM-backed Open Document Format. The blessing of the ISO, on the other hand, would serve to further cement the de-facto standard that already exists around Office.

The official word from the ISO is not due until Wednesday, but Websites that have been trying to piece together the picture from individual national announcements point to what seems a big swing towards Microsoft among those countries that objected to OOXML as a standard when this came up for a vote last September. The Openmalaysia blog claims seven countries that had objected before have now either decided to support Microsoft or abstain - though the sourcing of much of this is far from clear (the UK’s decision to throw its weight behind Microsoft is attributed to open source standards lawyer Andy Updegrove.)

Until the formal count is in it would be rash to predict that this saga is over. But even hard-line opponents like the Groklaw blog now seem to have conceded Microsoft’s victory and have been left muttering about possible appeals against the way the ISO decision was reached.

Google’s anti-Microsoft strategy continues to unfold. Today brings news that its online Docs applications will soon step beyond the Web and onto the desktop. (This is accomplished with the Google Gears browser plug-in, which lets you access internet applications while offline by using the hard drive as a cache - a company representative offered to “whitelist” me so I can start using it today, but the less privileged among you will have to wait until this feature becomes generally available over “the next few weeks.”)

Google likes to cloak its new product features in uplifting rhetoric: the company only looks to delight its users, it isn’t motivated by the sort of competitive strategy that other companies employ, and so on. But the evolution of Docs has always looked like a very deliberate plan hatched with its Redmond rival in mind.

Early on, CEO Eric Schmidt talked down the capabilities of Docs as a rival for Office: the main attraction was the ability to share documents, spreadsheets and other files over the Web, and anyway browser-based apps were very poor relations of their desktop cousins. 

Then, nearly a year ago, the tune changed. Having rounded out Docs into an Office-like suite of apps, Google said it was adding “applications” to its corporate mission statement (alongside search and advertising.) For good measure, Schmidt said that online apps were starting to become a real alternative to desktop software since browser technology had advanced far faster than he had expected (what a surprise!)

Extending Docs offline looks like the next step. Giving users the ability to write, edit or view files while not connected to the Web (any changes are automatically synchronised with the version on Google’s servers once the machine goes online again) removes one of the main disincentives for using Docs.

Google’s leaders have at times given tell-tale hints about the real strategy here. Last year Mr Schmidt conceded that while many companies might not yet consider adopting Google’s applications, they were still likely to use the threat of switching away from Office as a way to get a better deal out of Microsoft. Thanks to the new offline capabilities, this negotitating leverage is about to get stronger.

 So the fall-off in paid clicks on Google wasn’t a one-month phenomenon. The comScore report a month ago that the number of clicks on the search engine’s adverts had fallen slightly in January from a year before touched off fears that the Great Google Slowdown had set in. It didn’t matter that comScore itself later argued that quality improvements in Google’s ad system could account for the decline: the seeds of doubt had been sown.

The latest figures show that this was not an isolated phenomenon. The research firm now says that Google’s paid clicks in the US edged up by 3.1 per cent in February, which is at least better than the 0.3 per cent decline the month before. But this still represents a major deceleration from the 25 per cent increase in the fourth quarter of last year, and with search queries still growing strongly it points to a big change in the way searchers respond to adverts.

Only Google’s next quarterly earnings will reveal whether an advertising slowdown is setting in, but even the most rosy interpretation of events has to account for questions like these:

- Why is the click-through rate on adverts falling? It’s one thing for the number of adverts to decline - that shows that Google is pruning the least effective/ relevant. But shouldn’t that actually lead to an increase in the click-through rate? Intead, it fell 5 per cent in the latest month.

- How quickly does pricing in the Google ad market respond to quality  improvements? Higher quality ads should produce better leads, which should feed through into higher prices per click. But this won’t happen overnight. Effective as Google’s ad system is, this is not a perfect market. For now, the fall-off in clicks is the only verifiable fact (at least if two months of comScore numbers are to be believed.)

There’s an interesting new twist today to Amazon.com’s ambitious “computer-in-the-cloud” plan. From now on, companies which rely on the etailer to run aspects of their computing for them can choose where those tasks get handled.

This raises interesting legal implications. For instance, Amazon now says customers can select whether they want their computing to take place in a datacenter in the US or in Europe. So anyone concerned about the snooping eyes of Uncle Sam (think Patriot Act) might prefer to go off-shore.

And then there’s the tax angle. Will some companies try to avoid local sales tax by taking ecommerce offshore?

The most obvious purpose, of course, is to give users a greater sense of control - something so far lacking in the world of cloud computing. You can now select where you want back-up applications to reside. That might give some customers greater confidence they will be able to avoid the fall-out from failures like the one that hit a number of Web sites powered by Amazon last month. Making the cloud a bit less cloudy seems a smart move.