Yahoo Drops Google Search Engine in U.S.

Yahoo Inc. on Wednesday said it dumped Google Inc.’s search engine in the United States, the first punch in a fight between Internet heavyweights.

Anticipating the blow, Google tried to steal Yahoo’s thunder Tuesday by issuing a statement saying that it recently had added 1 billion Web pages to its searchable catalog and vastly expanded its offerings of images and bulletin board messages.

Yahoo, the top Internet portal, used to pay Google, the most popular search engine, for the right to offer Google’s service to Yahoo customers. Now the two are fierce rivals, scrapping over how people access information online.

Searching the Internet has emerged as big business. As software giant Microsoft Corp. prepares to launch its own search technology, there soon will be a three-way battle to be the Internet guide of choice.

“What’s at stake is the starting point for many people’s Internet experience,” said Charlene Li, a principal analyst with Forrester Research Inc.

Also at stake is billions of advertising dollars: The so-called pay-for-placement market is expected to be $2.5 billion to $3 billion this year and could double in the next few years, according to several research firms.

“Search has evolved as the sweet spot of advertising,” said James Lamberti, vice president of marketing solutions for research firm ComScore Networks Inc. “There’s huge amounts of revenue at stake.”

Yahoo Chief Executive Terry Semel has made Internet searching integral to the turnaround of the once-struggling company.

Semel, a former co-chairman of Warner Bros., sees a strong search operation as a way to keep users inside Yahoo’s group of Internet properties -- Yahoo Finance, for example, or Yahoo Shopping -- which he has described as a “digital theme park.”

Google still powers the search engines on many of Yahoo’s international websites, but Yahoo plans to switch to its own search technology worldwide within a few weeks, said Jeff Weiner, a Yahoo senior vice president.

The search technology was developed by Inktomi Corp., which Yahoo acquired last year for $235 million.

Buying Inktomi was one of several steps Sunnyvale, Calif.-based Yahoo took as it prepared to challenge Google, the closely held Mountain View, Calif.-based company that was the first to demonstrate the draw of Internet search tools.

In addition to Inktomi, Yahoo spent $1.8 billion for Pasadena-based Overture Services Inc., whose “pay per click” service lets advertisers buy placement next to search results.

Google, which reportedly is planning an initial public offering for this spring, said Yahoo’s move was long anticipated. The “announcement really doesn’t have a material effect on our business from a financial perspective,” said Jonathan Rosenberg, Google’s vice president of product management.

Yahoo’s websites were visited by 111 million people in January, making it the most popular Internet portal, according to ComScore.

But Google is the leading search engine, with 35% of all U.S. searches. Google.com attracted 60 million visitors in January.

Microsoft relies heavily on Yahoo, using Inktomi for its regular search results and Overture for paid search results.

But Microsoft Chairman Bill Gates admitted recently that Microsoft had underestimated the importance of Internet search capabilities.

The software giant plans to build Internet searching directly into the next generation of its Windows operating system for personal computers, which could give computer users a way to bypass Google and Yahoo’s search engines altogether.

Yahoo executives don’t “have an operating system that they can build [a search engine] around, but they have the millions of people who use Yahoo as their home page and for e-mail,” said Chris Winfield, president of 10e20, a Web development firm in New York.

Yahoo has built fancy search features into its shopping site, such as pulling up results with product photos and price comparisons beside them, and plans to do the same in its travel, finance, music and job-listings businesses soon, Weiner said. Deploying its own search technology “is really just the beginning for us.”