Don Dodge, former Director of Engineering at Altavista, once king of the hill in the internet search game, sheds some light on what went wrong in the 1990′s:
The AltaVista experience is sad to remember. We should have been the “Google” of today. We were pure search, no frills, no consumer portal crap. DEC is guilty of neglect in its handling of AltaVista. Compaq put a bunch of PC guys in charge who relied on McKinsey consultants and copied AOL, Excite, Yahoo and Lycos into the consumer portal game. It should have been clear that being the 5th or 6th player in the consumer portal business wouldn’t work. AltaVista spent hundreds of millions on acquisitions that never worked, and spent $100M on a brand advertising campaign. They spent NOTHING to improve core search. That was the undoing of AltaVista.
You need to remember the context of the time. It seemed like every week AOL was announcing a $50M deal to sell traffic. Yahoo was doing it too. The game was build traffic with search, keep them on your site with content, and sell traffic and “screen real estate” to sponsors for $20-$40M a pop up front. There was no proven search business model other than annoying banner ads that were not really contextual.