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 our last recap report did spectacularly well during
1H2007 During the second half, the vendors covered in this report had a roughly
equivalent performance in terms of customer acquisition and product release
activity. So the second half was another great half, completing a terrific
year for search vendors.
Eight companies, roughly half, reported revenue growth of 50 percent or greater,
and three had revenue growth of 100 percent or more, year over year. Roughly
770 new enterprise customers have been acquired by the 17 privately-held
companies on our watch list, almost equivalent to the 738 acquired by the
15 companies we reviewed for first half.
Fourteen vendors made search product announcements; three presented new versions
and four presented new products. This is an observation rather than a value
judgment: customers don’t want to deploy new releases even annually,
let alone every half-year.
Two thirds have job postings on their sites. Of the companies we have covered
for more than a year, all report larger staffs as compared to 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 half we have added
Avail Intelligence, Empolis, Exalead, Q-Go, and Temis. All are European companies
establishing broader markets, including the U.S. The U.S. is an extremely
difficult market for European companies. In our experience, non-US firms
are unable to believe the importance—and expense—of U.S. marketing
efforts. In their own markets, word-of-mouth and excellence of execution
count for a very great deal. In the U.S., these are merely nice-to-haves
in a marketing toolkit. These companies’ challenge will be to overcome
their incredulity at the large sums and effort required to succeed in the
U.S.
Of the vendors on our watch list, Celebros will be adapting to the most significant
change in the executive suite. Seven of the companies have new executives
for sales, marketing and/or alliances. Their challenge will be to maintain
momentum in the aftermath of these changes and the aftermath of the reasons
for these changes.
SEARCH: SECOND-HALF CALENDAR YEAR 2007
A Current Snapshot for Privately-Held
Companies
We’ve compiled a review of second-half activity from 17 of the 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 look at
continuing improvements in the products and growth in customer bases, as
well as hiring. 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 Avail Intelligence, Empolis, Exalead,
Q-Go, and Temis.
Metacarta, Surfray (Mondosoft’s new owner) and X1 missed our deadline.
It’s unfortunate that our recap coincides with a very busy period for
search vendors, with a half dozen of the top conferences stacked into the first
three months of the year. Recommind, which, by the way, had a good half, declined
to participate, citing a change in policy on releasing data. We hope the four
vendors can rejoin us at the half year.
Mitch Kramer contributed the commentary on Consona and InQuira in this report.
Our expanded watch list of privately-held companies supplying the leading search
technologies, and a summary of 2H 2007 results, is presented in Table A.
Summary of Privately-Held Company Results for 2H 2007
(Please see the formatted
PDF for the table at: http://dx.doi.org/10.1571/ta03-27-08cc.)
Table A. This table summarizes the results for 17 vendors on our private company
watch list.
Trend: Site Search & Navigation Connects with Search Engine
Optimization and Marketing
Search should be a top marketing tool. But we have for some time observed that
search is at least four or five marketing tools: paid placement, search ads,
search engine optimization, site search, and site-search-triggered merchandising.
It’s pretty difficult for marketers to optimize investments across
these differently reported, differently controlled arenas. To our delight,
search vendors who target ecommerce sites have significantly strengthened
the search-driven marketing capabilities of their solutions over the past
year. At the very best, site search uses popularity information aggregated
from retail networks and ratings from sites like BazaarVoice PowerReviews;
dynamically generates landing pages that are optimized to search terms used
on the site; recommend search engine ads based on site search terms and product
margins; optimize URLs and Web pages for search engine spiders; automatically
select products to offer based on site and individual behavioral data; support
multivariate testing; and report revenue and conversion performance of ads,
promotions, search terms and navigation paths. Search vendors investing in
this direction include Avail Intelligence, Celebros, Endeca, Fredhopper,
Mercado, and SLI Systems.
Trend: Customer Growth Moderates
Customer acquisition accelerated in the first half of 2007 for the privately-held
companies covered in this report, with three companies reporting growth in
excess of 150 percent. Customer growth during the second half was almost
flat. Only two, Coveo and Endeca, had significantly greater customer acquisition
during second half, roughly a third greater. Nine companies had the same
or very nearly the same acquisition numbers, with three slightly up, and
four slightly down. We have no comparative first half numbers for the remaining
six.
Trend: Product Activity
Vendors, in aggregate, were roughly as productive of new releases during the
second half as the first half. During the first half, three companies released
new versions: Avail Intelligence eMarketing Suite V. G7, InQuira 8, and Mercado
4. These companies left their customers space to digest the new technology,
holding back on any significant releases during the second half. During the
second half, three companies released new versions: Empolis released e:IAS
6, Coveo released Coveo Enterprise Search V 5.0, and Q-Go released Q-Go V.5.
Point releases were delivered by Consona, Creative Virtual, Exalead, Fredhopper,
and Temis; SLI Systems also released new functionality (but not packaged
as a release). New products came from Mark Logic, Endeca, ISYS, and Nearby
Now. A key investment area is search marketing, with focus by Fredhopper,
Endeca, Celebros, Celebros, and Avail Intelligence.
Trends: Hiring Binge Moderates
After the first half, the companies on our list had 228 job openings posted
on their Web sites. These listings are cumulatively significant. In four
cases, the hiring requisitions were more than 20 percent of the existing
staff. Today, that number stands at 153. Headcount over all seems to have
increased by only 80 for the half.
After the first half’s hiring binge, we wondered if the effort and turmoil
caused by the hiring would impact execution for vendors. Customer acquisition
was pretty good, and, for the most part, development schedules stayed on track.
Development content, of course, is impossible to track. We only found three
instances of schedule moves, all rather minor: Fredhopper’s V 6.1 moved
from 4Q2007 to April 2008, InQuira’s retail banking specialization did
not ship in late 2007, and ISYS V9 did not ship during the “winter” of
2007-2008, but has moved to 2Q2008.
Trend: International Expansion
International expansion continues. Germany and the UK are still hot. The U.S.
is hotter: Avail Intelligence, Q-Go, Celebros, Exalead, and Empolis are intensifying
their focus on the U.S. market.
AVAIL INTELLIGENCE
Our Take
Avail Intelligence is new to our list. It was founded in 2001 and is headquartered
in Malmö, Sweden. The company delivers ecommerce marketing and merchandising
as hosted services, based on search and behavioral analysis. Its main markets
have been Scandinavia, the UK, Germany, and France; it is now looking at
the U.S. market. The Avail eMarketing suite contains Navigation Predictor,
Social Search Optimizer, Landing Page Optimizer, Customer Interaction Broker,
and Collaborative Searcher. Avail Intelligence collects revenues based on
performance and claims a track record of improving revenue per visitor by
30 percent by injecting merchandizing in more interactions and generating
better offers.
2007 was a great year for Avail Intelligence, with a major release of its flagship
product in the first half and 300 percent revenue growth. Avail Intelligence
had a mixed second half, with strong customer acquisition but no product
activity. Avail Intelligence’s challenge in 2008 will be to maintain
growth and customer satisfaction with their slim organization, while tackling
the U.S. market.
Customers
Avail Intelligence added 10 new customers during the second half, including
UK customers GAME, Woolworths, DVD.co.uk; France customers Becquet, ChateauOnline,
1855, ARBF; and Nordic region customers Comwir, Bestseller, and Haléns.
These new customers are in Avail Intelligence’s target markets. This
half’s acquisitions bring Avail Intelligence’s customer base
to more than 60.
Avail Intelligence also established an OEM deal with Finnish company Ineo Group.
Ineo Group will incorporate eMarketing Suite into its ecommerce platform.
Products
The last major release for Avail Intelligence was eMarketing Suite Version
G7 in April 2007. The second half saw only minor releases. The next major
release, G8, is planned for June 2008. It will include a new multi-language
administration interface, enhanced performance, and a new message handling
system.