Amazon expands into search technology

Amazon.com has formed a group to develop e-commerce search technology, in an attempt to gain a foothold in a lucrative market dominated by Google and Yahoo!. Called A9.com, the independently run unit of Amazon is charged with building a shopping search tool for internal use and for other companies. The operation is headed by Udi Manber, a well-respected computer scientist and former Yahoo! executive. Manber has been interviewing software engineers in Silicon Valley in recent weeks and plans to have a team of 30 by October. Alison Diboll, an A9 spokeswoman, would not provide any specifics on the services.

"A9.com is a new, separately branded and operated company to create the best e-commerce search technology available to Amazon and third-party websites," she said.

The formation of A9, which was first reported by The Wall Street Journal, comes just five months after Google announced that it had signed a multiyear deal to provide search services and sponsored links to Amazon. As a result, the creation of A9 could signal Amazon's intentions to compete on its own, as did Yahoo's decision this year to buy Inktomi and Overture Services. Yahoo!, Microsoft and others have recommitted themselves to web search in the past year, amid Google's success and analyst projections that the market could be worth $2bn in 2003.

Rob Leathern, director and senior analyst at Nielsen/NetRatings, said: "It speaks to the fact that the whole search space is still evolving, not only in the development of content search but for shopping search." Traffic to comparison shopping sites (such as Pricegrabber.com and DealTime) jumped by more than 100 per cent from 2002 to 2003, according to Nielsen. That compares to traffic growth of about 40 per cent at Google and auction giant eBay during the same period.

Google and Yahoo! want to enhance their presence in this specialty search market, in which they receive revenue for each person they divert to an online retailer or take a percentage of any purchases made by a shopper. Google has been testing product comparison engine Froogle since December, while Yahoo! launched its own product search site this week. Amazon's interest in web search also reflects the company's desire to have a hand in transactions outside the books, apparel and sporting goods sold through its online store. The company already attracts one of the largest audiences on the web, but it may want to play a role in guiding people to goods and services that it does not sell. It has previously talked about providing other services, including an online payment system that would allow people to use their Amazon accounts to pay for products bought from other web retailers.

A9's Diboll characterised the search move as a "reflection of Amazon's evolution from being an online retailer to becoming a technology company". Others called it a prelude to a battle between Google, Yahoo! and eBay to become the leading search and shopping site on the web. "They'll be fighting it out to be one of the prime places for people to start out online to look for products and services," Nielsen's Leathern said.

But in the process, the company risks alienating those people who are comfortable with Amazon as just a retailer - in particular, vendors who may be threatened by the move into handling web searches, Leathern said.

Although A9 has yet to clarify what it will develop, shopping search technology will probably allow people to evaluate various sellers and products simultaneously. Leathern said Amazon could confuse customers by allowing them to search and compare prices for the multiple vendors it supports. "That's a difficult model to balance. Can Amazon play both ends of the equation?" he said.

A9 is hiring software engineers to develop search technology, putting it in competition with Google, which started a hiring drive just a few miles away in Silicon Valley. Amazon hired Manber last year as vice president and chief algorithms officer, and it is unclear whether he will retain those titles as president of A9, Diboll said. Before working at Yahoo!, Manber was a professor of computer science at the University of Arizona.

Diboll would not disclose how much Amazon is investing in the search venture.

Stefanie Olsen writes for CNET News.com