Thoughts on Alexa

Last night, I blogged about Amazon opening it’s Alexa search index for public consumption via web services…

This was nice to see after my post about how distributed data providers and data driven applications will form a major part of the next “version” of the Web. I think this is a great example of how large data stores of information will be made available to drive both niche and large-scale applications that form the backbone of future web experiences.

But, this particular announcement begs (at least two) questions…

- Will Amazon be able to turn a profit with Alexa?

It will be interesting to see if charging users on a per-use basis for data to drive their businesses will translate into a viable revenue model for a company as large as Amazon. I don’t know the answer to this, and can’t even begin to speculate. In fact, the more interesting speculation is whether Amazon expects to turn a profit on providing data at all?

It’s possible that Amazon’s long-term plan with Alexa has little to do with search services, and instead could be an incubator for an alternate business model. Perhaps Amazon is looking to cash in in the distributed advertising model, and is using Alexa to drive content consumption that will ultimately serve Amazon advertisements (or other paid advertising). Perhaps Amazon is using Alexa as a testbed for a larger data distribution model, potentially involving their other search index, A9.com, or even their product catalog. Or perhaps Alexa is just Amazon’s attempt to further commoditize search and marginalize potential threats such as Google or Yahoo!

Erik Stuart (eBay Product Strategy) even suggested that Amazon should license Alexa data to some companies in return for equity stake in their business. This would ensure that if anyone got rich using the index, Amazon could share in the wealth.

I’m sure there are plenty of other potential theories out there about how Amazon will make money on this…and I’d love to hear anyone else’s thoughts…

- Who will use Alexa data and for what?

Ro Choy has expressed optimism that Alexa will inspire a whole new industry of niche search plays will ultimately drive commoditization in the space. Ro also mentions the potential for a small startup to build an AdSense competitor on top of a home-grown search engine to undercut Google and Overture.

While I don’t think anyone will attempt to build an AdSense competitor on top of Alexa (the barriers to entry for that business are much steeper than barriers to entry in the search generic business), Ro makes some great points in his post. With the ability to build a search engine in literally a matter of hours, there is little doubt that many niche or proof-of-concept search plays will likely crop up in the very near future. And while it’s unlikely that any of these niche search plays will obtain any non-trivial piece of the search market, the aggregate traffic hitting the Alexa index could very well be non-trivial. All the better to enable any of the other potential business models Amazon may choose to layer on top of Alexa.

And niche search engines aren’t the only potential consumers of Alexa data. As anyone in the eBay Developers Program can tell you, third-party software creators can be quite ingenius when it comes to monetizing new technology offerings. So, there’s little doubt (in my mind, at least) that Alexa will drive a cottage industry of innovative developers looking to build lucrative niche businesses.

All that said, I don’t believe that any large scale businesses will use the Alexa index long-term. The index is still very small (~5 billion documents), and the barriers to building a commerical scale search index aren’t so great that paying long-term consumption costs to Amazon is likely to be cost effective. Additionally, any business that needs a truly robust and scalable search index would likely license data from larger provider (case in point…Amazon’s A9 search engine is powered by Google).