Silicon Valley Musings

My most recent professional experience was as a principal with the Reuters Innovation Studio. At the studio I had an opportunity to think about different products and services that would exploit Reuters market data (e.g. stock quotes and news) assets. So it would only be natural for me to think about searches as financial instruments.

In a very real sense, searches are financial instruments. Sponsored search links allow small businesses to set their prices for each search result “click through.” I imagine the “refinance” search listing costs more than the “parrot” search listing and these prices fluctuate over time. For example I suspect the cost of the “Euro 2004″ search listing has probably just reached its peak. So searches have a current and a historical time series for their Sponsored search links price.

Searches also have volume values. The number of businesses that buy sponsored search links is one volume, another is the number of URLs that comprise the result for the search query, and the number of users that request the query (e.g. the value currently published in the Buzz Index) is another. I am sure there are some interesting correlations between these volumes that charting may reveal.

If the volatility of sponsored search links prices increase, then eventually small businesses will need to be able to hedge their listing costs. Search companies could provide a search term futures market (Securities regulations may make this idea difficult to implement). This would allow, for example, stores that carry seasonal items like Christmas ornaments to lock in the price of certain search terms at the time they order their goods. Speculators could also trade search term futures. For example, one may feel Britney Spears?s fame is waning, and buy December “Britney” puts.

Search results are bit like Volume Leaders lists in that their results are comprised of “constituent” URLs. Each constituent has an order ranking within the result, a volume of ?click throughs?, and potentially the Yahoo! revenue value (e.g. how much the people that own the URL?s are paying Yahoo! for Sponsor Listings, banner ads, etc.).

I imagine companies or those who maintain “personal Websites” (e.g. bloggers, entertainers, politicians, etc.) would be interested in tracking their order ranking within a search result over time.

The statistics for collections of search terms could be aggregated into “sector indices”. Like the Dow Jones or Standard & Poors, a search company would be responsible for adding and weighting search terms within the indices. For example, the terms “Microsoft”, “IBM”, and “Yahoo!” could form the basis for a “technology” sector index. I imagine a sector index could be crafted that would anticipate the government’s monthly consumer confidence figures.

The statistics described above could be captured in record format and syndicated (directly or through a third party like Reuters), financial institutions may be interested in subscribing to the information. A new breed of analysts could publish regular reports evaluating the trends within each sector: business, political, media, sports, etc. These reports again could be syndicated or sold along with other analyst reports.