Will GoTo.com Become the Model Search Engine?

Auctioning off the top hits to its advertisers is a unique search engine concept that GoTo.com, Inc. hopes will capture the imagination and pockets of Wall Street. The privately held company expects to sell 5 million common shares for $11 to $13 dollars in its initial public offering — which could happen as early as the first week of June, according to Reuters.

In its filing with the Security and Exchange Commission, the Pasadena, California-based company said it plans to spend the estimated $55 million (US$) it raises to beef up its network equipment and sales efforts.

GoTo.com shuns, chat rooms, e-mail and other services offered by traditional search engines to attract users — opting instead for the hard cold cash of its advertisers. More than 6,000 advertisers, including retailers such as FTD, Amazon.com and eBay, pay per click-through. The highest bidder becomes the first Web site consumers see.

While its proponents tout this as being raw capitalism at its best, many in the Internet community view the model as abhorrent. They argue that the attractiveness of the Internet is the unfiltered information it makes available to one and all. They say once the highest bidder dictates which piece of information is served up first, the Internet becomes nothing more than haven for shills.

At Least It’s Up Front and Honest

But the creators of GoTo.com say the purity of its model is its straightforwardness with both businesses and consumers: the Web site produces more targeted results for businesses and also spares consumers a page cluttered with unwanted advertisements.

Robert M. Kavner, GoTo.com’s chief executive officer, is also a general partner of idealab! an incubator for startups that was formed in 1996. Besides GoTo.com, the idealab! recently spawned Free-PC, Inc. The company is pioneering the model of delivering 10,000 free personal computers to a demographically diverse group of consumers. In return, they’ll be served a steady diet of ads from the hard drives of their computers.

At least one analyst said both concepts remind him of a strategy successfully used for years by razor blade manufacturers: they gave you the razor so you’d keep buying the blades.

What do you think? Let’s talk about it.

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