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I am preparing to have my web application in a private beta. The application when fully live will have a lot more content than in beta. Currently our plan is to release it to limited users with limited content to ensure that all the business functions are working fine.

We plan to use Google to power the search within the application. My question is will there be any negative impact in future (in terms of page rank or reputation) if we let Google crawl it in its present state? Or should we wait till it is fully functional to let Google crawl it.

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That's perfectly fine. All you're doing is adding content to your site which is what most sites do every day. A perfect example of that is this page right here. By asking this question and by me answering it we're creating new content for this site. So letting Google find your site with less content then you plan on ultimately having is common and normal. Google will keep coming back to find new content so it can index it and hopefully rank it well.

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Thanks John. Out of curiosity, if initially we have only junk data, would you still recommend Google? –  rest_day Jun 18 '11 at 1:29
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If it's junk data I would probably not include Google as newer sites get crawled less frequently and it will take longer to get that data out of Google's SERP and cache. If at all possible have your first set of users try to populate it with legitimate data. That way you're off to a good start and don't have to worry about things like Google. –  John Conde Jun 18 '11 at 1:34
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