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    Hosted by Leslie Walker
    Washington Post Columnist
    Thursday, April 8, 1999 at 1 p.m.
    Leslie Walker
    ".com" columnist Leslie Walker.

    Welcome to ".com - Live," a real-time, moderated discussion with the people who are shaping the Internet's emerging business strategies. I'm Washington Post reporter Leslie Walker, your host.

    My guest today is David Peterschmidt, the chief executive of technology maker Inktomi Corp. Peterschmidt (below left) calls his company the "universal arms merchant of the Internet" because it supplies search, shopping and other technologies to many of the Web's top sites. Every time you search the Internet from Yahoo!, for example, you are ringing the cash register at Inktomi, which powers all of Yahoo's searches.

    inktomi ceo peterschmidt Inktomi recently rolled out an ambitious online shopping service that 21 Web sites have signed up to use under their own names including Disney's Go Network, NBC's Snap, GeoCities, and Time Warner Inc.'s CNNfn. We will be talking about the joys and perils of designing search services used by millions of people every day to review hundreds of millions of documents worldwide. We also will be exploring how much harder Web searching becomes when it involves store inventories.

    Read more about Inktomi, or check out the early history of comparison shopping on the Web in the "Battle of the Bots."

    Discussion Transcript

    Leslie Walker: Hello everybody. Thanks for joining us today. And welcome to David Peterschmidt, who is answering questions from his office in San Mateo, California. Inktomi has three big products--search services, caching or storage systems, and comparison shopping. We welcome questions on all topics, but will start with shopping.

    Leslie Walker: Why don't you start by telling us about your newest product, the shopping service. How exactly does it work, from the standpoint of the consumer?

    David Peterschmidt: We are very excited about the new Inktomi Shopping Engine. The product, very similar to our Search Engine, will provide the back-end technology to portal sites. Today, we have more than 20 portal sites that have signed up to use the Engine such as the Disney Go Network and NBC's CNet and Snap.

    We also have 350 merchants that offer over 2 million products in our Engine and we are constantly adding to it.

    Our vision for shopping is to make the user a more informed purchaser of products. This means that our Shopping
    Engine will offer third-party reviews from Consumer's Digest and later on user recommendations.

    For the consumer, the biggest benefit is wide selection, convenience and more information in making a purchase decision.

    San Diego, California: I have tried to use Inktomi's new shopping service on a couple of sites. But I find it very frustrating because it take so many clicks to get down the the level of products, and then there are these LONG lists of products to wade through. How long will it take before this kind of searching is as easy as walking in a story and asking a sales clerk where something is?

    David Peterschmidt: A very good question. We see the shopping market as being a long-haul market where it might take a few years for all of us in the industry to get online shopping to perfectly reflect shopping in the real world.

    Having said that, we will get the speed and the responsiveness up very quickly for you against the subjects you talk about. The reason for the current preview mode from Inktomi is to see exactly the types of things users like yourselves want us to get right before we put it into production at the end of the coming quarter.

    At Inktomi, we talk about "Scaling the Internet." What we mean by that is as the Internet gets larger and the amount of content that we want to search through and access that Inktomi make it a faster process for you the user. Our development team clearly understands the need for speed and very high relevancy and it is against those two agenda items that we are focusing most of our development energies on shopping. It is my firm belief that if you and I have this conversation in the next 90 days, most of the concerns you have will be closer to being addressed.

    Washington, DC: What do you think about Direct Hit and Google, two search engines that are supposed to be smarter than the rest because they filter the most relevant stuff to the top?

    David Peterschmidt: Thanks for your question.

    Let's talk about Direct Hit first. Direct Hit is basically a popularity service which means that it gives rank order of the results based on the most frequently visited sites. That approach to relevancy -- that is finding documents that are truly relevant to what you want is much like steering a boat by the wake. What I mean by this is that you are steering the boat looking backwards to where you have been rather than to look forward to where you are going.

    That is fine for some simple searches but relevancy is about to become a very important aspect of searching for information on the Internet. Today, we have about 400 million documents on the Internet going to one billion documents in a year and 8 billion in another year. So, looking at relevancy based on past visits to past sites is not going to be as productive to the user as looking at new documents coming to the web and adding them for the user to access.

    We understand the user likes the popularity type of result and we will make sure that our partners have that capability. However, our scientists and engineers have been working on very advanced technology for the last two years to ensure that when the web is in the billions of documents range that we scale and bring even higher relevancy to answers available today to anyone.

    Stay tuned.

    Herndon, VA: I read somewhere that Inktomi runs a data operation in my community. What does it do here in Virginia?

    David Peterschmidt: The Inktomi Search Engine runs out of a data center which has a bank of high-end computers that do all of the computational work before you as an end-user gets a perfect search result.

    Today, we have four of these data centers in the United States, three in California, and one in Virginia. All of our data centers in the United States are run by Exodus communications.

    We also plan to have one set up in Europe by the end of summer to service our European customers.

    Newport, RI: How impartial is your shopping service? By that, I mean does a merchant have to pay to have products listed, or does it automatically include products for sale all over the Web?

    David Peterschmidt: Our Shopping Engine lists the products of merchants who have signed up for our service. When the merchant sign up for the service, they agree to two things: first that they will provide a percent of all sales made through the Shopping Engine back to Inktomi and second that they agree to allow Inktomi to crawl their site as frequently as necessary to ensure all relevant information on the products available is kept fresh.

    Having said that, merchants who are not signed up can still be accessed by a user as our Shopping Engine is integrated with our Search Engine. This means that if a merchant is not in our Shopping database but you want to locate them, you can click on our Search feature that will crawl the Web and give you information. As you know, Inktomi's Search Engine is the most comprehensive on the Web today.

    Leslie Walker: We have a lot of questions pending from our viewers about caching. Before we get too technical, can you tell folks what caching is and why the Internet needs it?

    David Peterschmidt: A 3,000 foot view of caching is that the Internet architecture is a weird architecture in the sense that content only resides in one location -- the origin server.

    Now, if the movie industry operated this way, it means we would all have to fly to Hollywood every Friday to see a movie because there would be no movie theaters around the world.

    What network caching does is, in essence, create for the first time the regional content libraries of the Internet on a global basis. So, we are taking Internet content and moving it out to the edges of the network closer to where the users are.

    This does two things: it gives the user a much faster response time since the content is much closer to them and it eliminates traffic jams at the origin server when breaking events such as a major story like the recent Kosovo crisis or even something as mundane as Microsoft releasing MSIE 5.0 where we are simply performing a task to facilitate using our computers more effectively.

    Baltimore, MD: CAN any site that wants to become an Inktomi partner, or do you require a minimum volume of traffic first? What I'm wondering is, do you ever help launch brand new sites with little established traffic?

    David Peterschmidt: Due to the fact that Inktomi runs large data centers that are in essence built for large volume and high traffic load environments, we have found that sites with less than 250,000 hits a day do not receive the economic benefit from our services that the higher traffic sites benefit from.

    Having said this, we do see a big trend towards specialized sites or "micro-portals" which service specific audiences. Examples of this are recently signed agreements that we have with the largest search sites in European countries or which focuses on advertising auctions.

    It is our goal to continue to expand our service offering in search to a broader population of portal and web sites on a global basis.

    Reston, VA: Inktomi has also become a dominant player in the web caching industry. What do you think about ancillary services to web caches such as SkyCaches satellite broadcast service?

    David Peterschmidt: We believe that caching will be as integral to the Internet in the coming years as the microprocessor is to the PC>

    We view networks in three environmental states: airborne, terrestrial and broadband. We believe that these three states will exist throughout the world and that each of these environments require caching to allow the networks to respond rapidly and continue to scale as more people use the Internet.

    To this extent, we fully support ancillary services for Web caches and have a partnership with SkyCache.

    Reston, VA: How soon before you open up a technology-development office in the Washington area?

    David Peterschmidt: The key today for Inktomi is what I refer to as concentration of force and mass. By that, we try to keep all of our development capability in one location so that the developers can freely interchange ideas in a real-time environment with one another and continue to leverage the work being done between the various groups in development.

    I do not foresee in the near future that Inktomi would establish development centers outside of California.

    Leslie Walker: Great questions, folks. We are only halfway through today's discussion, so keep them rolling in!

    Chapel Hill NC: Who are Inktomi's biggest competitors? What do you see as your biggest competitive threat?

    David Peterschmidt: Inktomi is in multiple businesses so its competitive environment is different depending on which business we are talking about.

    In the portal services area, which includes our Search and Shopping Engines, we see little or no competition for our Search Engine business. In fact today, Inktomi is the only company with a dedicated OEM strategy that is we are not running any type of branded site ourself but only providing our service as a back-end technology supplier and allowing our partners to brand and image their sites. This is unique to Inktomi.

    In our shopping business, we do not see any direct OEM competitor with an approach for a full-featured Shopping Engine like ours. We do see competition from portals who want to build their own shopping engine internally. In fact 1999 with shopping reminds me a lot of 1996 with search where there were 10-15 companies claiming to be search engine technologies. By the time we ended 1996, there were only 2-3 search companies that continued to have search technologies. I believe shopping in 1999 will demonstrate the same type of behavior as search did in 1996 that is the big full-featured shopping application like Inktomi is bringing on line today will only exist in 2-3 variations from companies other than ourselves. I believe all of the other variations will not be from an OEM provider but rather be internally developed captive applications at 1-2 of the major portals.

    In the network cache area, today there is only one major competitor who has a working product that is viable and who is aggressively pursuing the market with a direct sales operation. That company is Network Appliances. Now that the caching market has been validated with our success, we are seeing a lot of companies talk about entering the market with new products. I believe this is positive for the market since it heightens the awareness for the need for caching. To put much of this in perspective, last year at this time there was not a single large-scale cache deployment in the world. Today, caching is a line item on IT budgets and Traffic Server is the de facto leader.

    Today, with AOL alone, our product is handling more than 2.5 billion request a day. What this means is that every time an AOL user goes out to the World Wide Web, they are going through Traffic Server. This is what I mean by "Scaling the Internet."

    Lastly, our view our biggest competitive threat as being the technology challenge of making the Internet faster as we add millions and millions of new users and billions and billions of new documents to the Internet worldwide. But, it's going to be grand adventure so stay tuned.

    Miami, FL: This is fascinating. I never knew Inktomi ran the Yahoo searches--in fact I never even heard of Inktomi before. How does Inktomi make money if Yahoo and the other search engines are the ones doing all the marketing?

    David Peterschmidt: Inktomi today actually provides search services for more than 25 companies worldwide. These include Yahoo!, Snap, AOL's ICQ, HotBot, and Geocities.

    Inktomi's business model is that each of our partners signs multi-year contracts and the fundamental charge is a per query charge that they pay Inktomi. In essence, every time somebody hits the search button on one of our partner sites, Inktomi gets paid per that transaction. This constitutes an annuity revenue stream to Inktomi that is indexed to the growth of traffic on the Internet.

    Leslie Walker: David, you work near the technological heart of this new medium. Would you peer into your crystal ball and tell us what you think are the most important technology trends affecting the Internet's future evolution?

    David Peterschmidt: Moving forward, there are going to be a lot of exciting changes to the Internet.

    The two biggest areas of change that users will notice will be: first much more media-rich content. In essence we are going to see more streaming video and media-rich content than we have in the past. In my mind, this will be much like television going from black-and-white to color. We believe that this will drive the demand for broadband much faster than most of the current estimates for broadband adoption.

    The second big change coming is that increasingly users will be able to use remote hand-held devices to access the content and services of the Internet. We believe this devices will take many shapes and forms -- everything from unique devices specific to Internet content to devices that a lot of us use today such as hand held cell phones.

    Both of these trends bode well for Inktomi because they will increase users coming to the Internet and using the Internet in their daily lives to gain access to information, to shop and to make daily transactions a routine part of their life.

    I have been in this industry a long time and have never seen anything quite like the Interne. I believe the advent of the Internet will be seen in history as being as critical to humankind as the telephone was. The next generation and beyond will create and think of things to do with the Internet that you and I cannot even fathom today. I'm fortunate to be at the cusp and the heart of it. It's just starting and I believe it will continue for the next 25 years at the very least changing every aspect of our lives.

    Houston TX: Where did you get the Inktomi name?

    David Peterschmidt: The Inktomi name is a native American name that comes from the Lakota Indian culture. Inktomi was a mythological character that enriched the human essence of the Indian spirit. It brought art and dance and music to the culture. In essence, it was an enrichening agent to the Lakota tribe.

    When our founders -- Eric Brewer and Paul Gauthier -- created the company, they selected the name "Inktomi" because they believed our search engine technology was providing global information access to humankind.

    Arlington, VA: DOes Inktomi have any patents

    David Peterschmidt: Inktomi has multiple patents being filed in the areas of its core scalable technology and products.

    Seattle, Washington: Ethernet inventor Bob Metcalfe once made an infamous prediction that the Internet would crash under its own weight. If the Web is really going to hold 8 billion documents within a few years, as you say, can Inktomi's spider keep up? For that matter, can the Net's backbone handle the traffic?

    David Peterschmidt: Bob and I are old friends so let's see what he has to say about my answer. Here goes.

    Bob predicted that the Internet would melt down back in 1996. I actually met with Bob because I joined Inktomi in 1996 and explained to him that the type of scalable architecture and the applications like network caching that Inktomi was developing were, in fact, going to prevent that from happening.

    Bob being "the great pundit" (those are his words, not mine) challenged me to prove that. Obviously, we have been able to do that when we just look at AOL's experience of going from one billion to 2.5 billion requests a day through the Inktomi cache in less than 60 days.

    It is quite clear that the technology community now understands the challenges of scale that the Internet presents to us. At all levels, we are seeing the technology develop at a rate that will enable us to scale the Internet that is make it faster as it gets bigger even when there are 8 billion or more documents out there.

    David Peterschmidt: Thanks for all of your questions. They were most insightful.

    I have to go now but look forward to coming back online with the Post again as Inktomi continues to scale the Internet.

    Dave P.

    Leslie Walker: That concludes today's edition of .com Live. Thanks to David Peterschmidt for sharing with us his take on the fast-changing Internet technology business. And thanks to all of you for your flood of interesting questions. We will be back in two weeks for another look at business strategies on the Web. Hope to see you then.

    © Copyright 1999 The Washington Post Company

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