How Three Web Titans Survived the Bust

Its development of community through efforts ranging from Yahoo! Groups to Yahoo! Finance message boards.

Its rapid rollout of features that have become increasingly and almost invisibly embedded in its customers' daily habits. As page views and time spent have risen dramatically, so have ad revenue and ad market share.

Yahoo! is about to embark on what may be its most daring and dangerous venture -- the challenge of broadcast and cable television's hegemony on entertainment media -- but investors appear prepared to give management the benefit of the doubt that it can apply its low-cost, community-building expertise to this highly difficult realm.

Google's Strengths Are Its Fatal Flaw

So how does Google match up against these bubble survivors? Its greatest asset is its greatest weakness: Its engineers developed a world-beating search engine algorithm and Web interface, and its marketing team developed clever ways to monetize it through the sale of contextual text advertising. Its purity, however, has left it looking increasingly like a one-trick pony.

Search is not a particularly difficult computer engineering task, and while it may be popular, there is no community that compels users to habitually use Google search. In a nutshell, there are no barriers to entry. A couple of kids at a Shanghai university could come up with a better search method tomorrow, and tens of millions of users around the world could switch to it from Google in a week. "It's cool, but you can't defend it," Anderson says. "It is the most vulnerable high-capitalization company in the history of the world. Even in 2000, there was no company with more risk per dollar of market cap."

In contrast to the penny-pinching ethos at Amazon and relatively meager corporate spending at eBay and Yahoo!, Google has spent heavily on employees and headquarters. In perhaps the most hubristic move, the company provides such lavish meals for workers that a "Google lunch" is now a locution in Silicon Valley that means "over-the-top spending." In this posting on its job boards, the company brags that free entrees include "grilled petite New York sirloins seasoned with Creole spices served with a Crescent City steak sauce and crispy organic onion rings." Soups include "sweet potato jalapeno bisque with corn," and dessert is "Bailey's Irish Cream cheesecake." Maybe no one told them that devs (a.k.a. programmers) do their best work on a diet of Doritos and Diet Coke.

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