Start Your Engines

By MICHAEL KRANTZ

Joe Kraus wants to provide your horoscope. And your mutual fund's bottom line. And your E-mail and your headline news. And your groceries, your travel plans, your greeting cards, your sports scores, your local weather, your TV listings, your friends...

Just call it your entire life online. Kraus is the 26-year-old cofounder of Excite excite.com) the Web's No. 2, "we try harder" search engine, one of those immensely useful sites that search the Internet for pages that contain whatever words or phrases you type in. This week Excite unveils its latest incarnation, centered on what the digerati call "personalization." If you want to stick with Excite's standard service, that's fine. But the more personal data you're willing to feed the site, the more the Net's teeming world of data will come formatted to your individual specifications each time you pay a visit.

It's a canny gambit in what is becoming an increasingly lucrative game. The Web has long since proved that there's money to be made simply by telling people where to go. The veteran search engines--brand names like Yahoo and Excite, Lycos and Infoseek, HotBot and Alta Vista--still dominate the Web's Top 10 traffic lists despite less than stellar performance. The journal Science reports, for example, that the best search engines sample no more than a third of the hundreds of millions of sites in existence. Yet last March, according to the Web research firm RelevantKnowledge, a startling 31 million "unique visitors" accessed Yahoo yahoo.com) making it not just the world's most popular Website but also a growing media powerhouse in its own right. Wall Street has rewarded the three-year-old company with a market valuation of $5.2 billion. Excite drew more than 16 million users last month and enjoys a $1 billion market valuation although it has yet to turn a profit. After Yahoo reported stronger-than-expected earnings last week, both stocks jumped more than 16% in one day.

To justify Wall Street's love, the big search engines will have to give their audience ever better reasons to stay tuned. Yahoo and Excite understand this, and almost since their inception have been working to transcend their origins, morphing from simple navigation aids into (warning: buzzword ahead) "portals," mega-Websites that are designed to fulfill a wired citizen's every last online need: browsing, shopping, playing, chatting, whatever. "We began with simple searching," says Yahoo co-founder Jerry Yang, "and that's still a big hit--our Seinfeld, if you will--but we've also tried to develop a must-see-TV lineup: Yahoo Finance, Yahoo Chat, Yahoo Mail. We think of ourselves as a media network these days."

Excite feels the same way about itself. Its personalization ploy is its biggest step yet in the race to catch up to its first-place rival. Yahoo and Excite have each offered a modest form of personalization for two years. Yahoo calls its service My Yahoo; Excite's is My Excite. Each loads stock quotes, news flashes and various other tidbits, along with the inevitable blinking ads, onto one customizable page. Starting this week, though, Excite has made personalization the centerpiece of its site. It's a gamble, but one grounded in experience. "People who personalize," says Kraus, "return five times more often than people who don't." What's more, these users are intensely loyal. "My Yahoo is getting 6.9 million unique visitors a month, and My Excite is getting 4.4 million," says Jeff Levy, CEO of RelevantKnowledge. "And there's virtually no overlap."

There's more than loyalty at stake, however. The first generation of search engines derived the bulk of their revenues from advertisers chasing their millions of users. But as the Web matures, more and more income will come from online transactions. And what better way to do targeted marketing than to get as personal as possible with as many of your users as will answer your questions? "It's a virtuous cycle," says Kraus. "The more you know about your customer, the more time he's likely to spend on your service and the more you can target that time more effectively for both advertisers and customers."

Will Yahoo follow suit? For now, Yang's path to portalhood goes through something called Yahoo Online, a full-bore online access service launched last month with long-distance giant MCI. Unfortunately, AOL pretty much staked out the $14.95-a-month turf years ago, and you get the feeling Yang knows it. "MCI is a way of getting our users to Yahoo faster," he says, "but it's just one of many." Like more personalization, maybe? If traffic on the new Excite starts soaring, Levy predicts, "you'll see Yahoo follow suit. The Web's rules are being rewritten weekly."

Along with its player roster. Take, for instance, MSN.com home page of the famously underperforming Microsoft Network. Later this year--if the Feds don't quash his online ambitions first--Bill Gates will launch Microsoft Start, MSN's reincarnation as a portal site. Microsoft's early Web efforts may have been feeble, but that doesn't mean the Gen-X millionaires at Yahoo and Excite won't be looking over their shoulder. "It's early in the game," says Yang. And Bill Gates tends to win in the late rounds.