A study from the Search Engine Land reflects that year-over-year, search spend rose with 17% in Q1 of 2011.

While search engines remain the best monetizable internet properties, there are hardly any new search startups being funded for years.

I’m currently working on my second search startup and believe me it’s extremely though to raise funding for search startups. It seems almost like all VCs share the same short sighted opinion that Google can’t be beat.

Just a handfull of search startups have been funded in the past few years. Two of them are Searchme and Cuil, both heavily funded but failed startups. Powerset on the other hand was acquired by Microsoft for a measly $100M just over two years ago. The most recent funded search startup that still has to prove itself is Blekko.

The sad conclusion that we have to make is that about one search startup every year is raising funding. It’s no miracle why Google still hasn’t been thrown of its throne – there simply aren’t enough fresh competitors produced.

The contextual intent-based advertising platform that generates search engines revenues has remained and will remain the most important advertising medium for the next couple of years.

Search Spending Q1 2011

While search spending keep rising and one company dominates almost the entire market, why aren’t more search startups being funded? Isn’t that odd?

Now, I might be biased – but I think this is the perfect time for VCs to fund new search startups. Over the past few years Google has been conservative in producing truly innovative search products. The SERP might have been slightly upgraded but hasn’t changed much either. Google the chairman of the search industries throne, so why would they care right? it works… Wrong, Google is currently stalling innovation in the search industry because of the limited competitors it faces. While search as a problem hasn’t even closely been solved. Search engines can and have to become richer more accurate and vertical oriented.

Because Google is too eagerly on its quest of finding new revenues streams to keep their shareholders happy, they invest more time in exploring new markets, while neglecting continuing innovating the search industry like they did in the early days. Their latest distraction is: social.

Even after two miserably failed attempts Google is again desperately trying to force itself into the social space. Don’t get me wrong. Social actually is very important for search engines, however Google shouldn’t try to compete with Facebook and Twitter. They should for example go after the social space that they could easily dominate: Social Data Mining. In this age of information we’re generating huge amounts of social data. Why isn’t Google instead focusing on solving this huge problem that actually is in line with their expertise?

While Google is fighting the wrong battles abroad(Facebook, Twitter, TV, etc) it currently isn’t protecting its own borders anymore. This creates the perfect environment for a range of new search startups to successfully capture a piece of the lucrative search pie. There are enough youngsters working in their basements on solving our great search problems but will the VCs fund them?

I think I’ve provided enough food for thoughts on this subject. What do you think? Besides all the obvious reasons, why are there hardly any search startups funded, while the search industry is one of the most profitable industries?