NETTING IT OUT
This report recaps results at the privately-held companies on our search vendor
watch list. A separate report recaps results for the publicly-traded search
technology vendors we cover.
Customer appetite for search technology remains strong. Our clients continue
to seek help with findability, site search, intranet and portal search, and
content management.
The vendors covered in this report did spectacularly well in 1H 2007. Six reported
revenue growth over 50 percent, and two had revenue growth over 100 percent,
year over year. Roughly 800 new enterprise customers have been acquired by
the 15 privately-held companies on our watch list.
All but three, Consona, Creative Virtual, and SLI Systems, made significant
product announcements. This is an observation rather than a value judgment:
customers don’t want to deploy new releases even annually, let alone
every half-year.
All but Creative Virtual and NearbyNow have job postings on their sites. Eight
of the companies report larger staffs from year-end 2006.
Our privately-held list has grown as newcomers to the market have become notable
players, and as our focus, and theirs, has broadened. This year we have added
Consona, Coveo, ISYS, Mark Logic, and NearbyNow.
Of the vendors on our watch list, X1 will be adapting to the most significant
change in the executive suite, with a new president and new CEO. Mercado
has a new CFO, new GM of R+D, and a new VP of North America Sales. Celebros
and MetaCarta have new VPs of Sales, and Coveo has a new VP of Marketing.
Their challenge will be to maintain momentum in the aftermath of these changes,
and the aftermath of the reason for these changes.
SEARCH: FIRST-HALF CALENDAR YEAR 2007
A Current Snapshot for Privately-Held Companies
We’ve compiled a review of second-half activity from the 15 privately-held
search vendors on our watch list. Our review includes customer wins as reported
by each of the vendors, product announcements, structural changes, and financial
results where available. None of the revenue results presented in this report
have third-party verification. An upcoming report will cover the publicly-held
companies on our search watch list.
Our snapshot also highlights trends and key events. For trends, we want to
see continuing improvements in the products and growth in customer bases.
For key events, we identify those occurrences that could have a significant
impact on search technologies, applications, and the market landscape. For
example, an acquisition is a key event, as are new players and services emerging
into the market.
Recap of Suppliers and Products
We’ve expanded our watch list, adding Consona, Coveo, ISYS, Mark Logic,
and NearbyNow. Consona is the new name for MDM Holdings, the privately-held
company that acquired KNOVA. So Consona is new to this list, but not new to
our focus. Coveo, ISYS, and Mark Logic are proven companies in enterprise search
that belong on our list. NearbyNow represents a key market event: a new service
emerging into the market that deserves watching. Mondosoft did not participate
in this round. Thunderstone did not provide enough information to be included.
We hope to catch them next time.
Our expanded watch list of privately-held companies supplying the leading search
technologies, and a summary of 1H 2007 results, is presented in Table A.
Summary of Privately-Held Company Results for 2H 2006
(Please download the formatted PDF to see the table at: http://www.psgroup.com/detail.aspx?ID=850.)
Table A. This table summarizes the results for the 15 vendors on our private
company watch list.
Trend: Customer Growth Accelerates
Customer acquisition accelerated in the first half of 2007 for the privately-held
companies covered in this report. Altogether, the 15 vendors covered in this
report added roughly 800 new accounts. Fredhopper, MetaCarta, and SLI Systems
had more than 150 percent growth in customer acquisition 1H 2007 as compared
to 2H 2006. Eleven companies had greater customer acquisition this half as
compared to last half. Recommind and InQuira stayed level. Only Consona and
Endeca added fewer customers 1H 2007 than 2H 2006.
Trends: Massive Hiring
Every company but NearbyNow and Creative Virtual has job openings posted on
their Web sites. These listings are cumulatively significant; they add up
to 228 openings. In four cases, the hiring requisitions are more than 20
percent of the existing staff. We can make a few observations about this
situation that raise questions for our next report:
•
This level of hiring is extremely resource-intensive, if you actually invest
the time required. Are vendors going to hire, or will they instead focus on
developing and selling?
•
The volume of open requisitions tells us that the vendors have big plans. How
will they execute them if the positions stay open longer than expected? Or
what will get dropped?
•
Has the talent-poaching already started? Will the number of open positions
only get larger, as vendors poach ahead of requirements, and the poached-from
have to recruit more people?
Trend: International Expansion
Germany and the U.K. are hot. In the past year, Mercado and Mark Logic have
established U.K. offices; Endeca and Fredhopper have moved into Germany.
Mercado has also set up a Canadian office. The U.K. is not so daunting for
a U.S.-based search company, since it uses a language similar to U.S. English.
German, however, is one of the most daunting European languages due to its
compound words. In German, objects are often named by stringing together
existing words. In English, we use the word “raincoat,” which
is made of two familiar words. If English used the same rules as does German
for compound words, we might represent this word as “raincoat,” rain
coat,” or “rain-coat.” This is easy for us humans to recognize,
but a corker for search engines. We have to conclude that the Germans have
money to spend on finding things, enough that it is worth the effort for
vendors to add features to handle the unique challenges of the language.
Key Events
A new type of service has appeared, offered by NearbyNow. NearbyNow sells a
service to shopping malls, and to retailers within malls, to make the store
inventories searchable by phone or Internet. This service provides Internet
and mobile search for consumers, with the guaranteed commitment from a store
that an item is available and held for the consumer. This is a service that
is designed around a customer’s need for a specific product at a place
and time, rather than around your brand and Web site. For example, NearbyNow
is the best solution to “I need the last bottle of black Chanel nail
polish in the city,” and “I need a tire exactly like these other
three, to replace this flat one.” Both of these scenarios are going
to be excruciatingly painful if executed either on the phone or on the Internet,
contacting potentially dozens of retailers. It’s not so much that NearbyNow
has the greatest search algorithm on the planet, as it is set up to answer
the questions that many people need answered every day.
NearbyNow also provides mobile advertising for retailers. We see this service
as an adjunct to site search and merchandising. Today, NearbyNow is focused
on malls. There is lots of room for NearbyNow to expand once the malls are
covered. Tires, building supplies, appliances, auto parts—all those
things you don’t buy often, or you don’t buy in a mall.
CELEBROS
Our Take
Last half, Celebros had significant changes in its executive suite. We would
not have been surprised if those changes had slowed development and sales.
But Celebros had a terrific half. It accelerated its customer growth this
half and released notable new products that strengthen their merchandising
features. Its new hosted service, Qwiser Essential, opens the lower end of
the market for Celebros and positions the company for accelerated customer
acquisition in the quarters ahead.
Celebros’ challenge going forward is to learn to sell its new solution
to the lower end of the market and serve it efficiently enough to be profitable.
It is a large and dynamic market, very responsive to low-entry-cost solutions.
In this market, Celebros will be competing with similar new offerings from
Mercado, among others.
Customers
Celebros added 66 new customers, including Road Runner Sports, WB Shop (Warner
Bros.), Seton, and Reader’s Digest (U.K.). Celebros states that approximately
20 percent of customers expanded their licenses, either adding sites in other
languages or adding new services and modules. At the end of the first half,
Celebros had a total of 246 customers.
New OEM partners for the half include Screen Pages (U.K.), Econda (Denmark),
Websale (Denmark), Izanet (Spain) and UniteU (U.S.). These companies are
in the Web development and ecommerce arenas, the appropriate choice for regional
partners.
Products
Celebros had notable product news, with three releases in July.
•
Qwiser™ Essential
•
AutoComplete module
•
Cross Sell module
Qwiser™ Essential offers hosted search and navigation for sites with
up to 30,000 unique monthly visitors. It uses the core Qwiser search and navigation
self-learning technology, and includes tools for search customization, merchandising
and maintenance. This service provides an entrée to the low-end of the
market for Celebros, and we think this is a market Celebros can play well in.
It is a very numerous market world wide. It is also a very dynamic market,
with new businesses appearing (and disappearing) rapidly. The challenge for
Celebros will be to gain profit on each customer during that customer’s
lifespan, however long (or short).
Also released in July, the AutoComplete module presents frequent queries and
products, based on the first letter typed in the search box. The Cross Sell
module suggests related products based on analysis of behavior and the store’s
product catalog hierarchy. Both of these releases strengthen Celebros’ merchandising
offering. Because it also provides frequent queries, the AutoComplete implementation
also provides a usability enhancement, making it easier for customers to
ask their questions.
Celebros’ next planned release is the Recommendation Engine, scheduled
for fourth quarter. It will present product recommendations on every page shoppers
visit. The offers will vary depending upon shopper context and will be selected
based on analysis of site and shopper activity.
Company
Celebros reports a more stable executive suite this half, with only one change:
Melody King was promoted to VP Marketing & Sales for U.S. The number
of employees (75) and locations remains unchanged.
CELEBROS IS HIRING. There are three openings for professional services and
one in development.