Silicon Valley’s buzzing with Vertical Search

You can’t go two steps on Sand Hill Road, the epicenter of venture capital without some money man espousing the virtues of vertical search. So often you is it repeated that it harks back to the bubble era euphemisms like “market places,” “new paradigms” and of course my favorite, B2B exchanges. Ah… sweet memories. Still, I can understand the fascination – as broadband usage grows we will end up looking for more and more information online. Google seems to becoming quite worthless everyday given that blog entries are dominating the top results. Enter vertical search.

So what is vertical search? It is a specialized search engine that mines data for one narrow niche of the market place. Say jobs or travel. Or even high end real estate. Because the data sources are so fragmented, there seems to be an opportunity to massage the data and present it in a manner that is simple to use and easy to consume. Sort of meta search for niches. The main reason this is supposed to work is that the two older advertising models – cost per thousand (aka banner ads) and cost per click are too inefficient and fraught with fraud-related risk. Vertical search can offer a more focused audience, and thus increase the efficiency of ads on the search engine. It also presents a new kind of advertising opportunity – lets call it cost per action. If you can generate leads, or say have some sign-up for an email newsletter or a RSS feed, you suddenly have created much higher value, and thus that click is more valuable.

Fred Wilson and Danny Sullivan are among the two who have been signing the praises of vertical search for a few weeks now. Folks like Nextag, Froogle by Google, PriceGrabber are some examples of early vertical search examples, but the next generation is going to go more granular. Jupiter Research says so – so it must be true. In other words the buzz is in high gear.

Matt Marshall recently wrote about which is a riff on SideStep, a travel “vertical” search engine. Expect any minute to hear about a brand new which is making sense of all the job search data sources in the market, much like its rivals Work Zoo and Nimble Cat. (Who thinks up these names) The team behind the company includes the Godhwani brothers who sold AtWeb to Netscape back in the day for dot-com millions. No more details yet. All emails went unanswered!

Jobs is one category where vertical search makes absolute sense. The silos of information make searching for jobs tough and someone needs to step up and clean up the whole mess that is HotJobs or for that matter Monster. It, won’t work in all categories. My fear is that this whole trend is going to get out of whack – someone will start a vertical search for digital cameras or something like that. Bah! Saw it before as B2B exchanges.

I tend to mildly agree with Tom Evslin who dismisses vertical search as an oxymoron. Never mind me because you will hear more about this trend and will find more companies getting funded. Let me explain -in the late 1990s, telecom was hot and incumbents like Cisco were busy shopping. VCs funded start-ups that could be bought. Wash, rinse repeat. Now Yahoo and Google have taken over the mantle, and with MSN jumping into the fray, it is quite clear there is going to be some serious “search related shopping.” So if you are an entrepreneur who is looking to build a sustainable business, then build a vertical search tool that allows the search’s big three to search for buyout candidates.