With One Sweep, Yahoo Regains Search Engine Dominance
by Andy Beal

Monday July 14th may very well go down in history as the day 
that the Search Engine industry grew up and finally gained the 
respect it so deserved. It was this day that Yahoo announced 
that in a deal, comprising of $1.63 billion in cash and stock, 
it had acquired the popular pay-per-click company Overture.

With rumors circulating for some months that Yahoo had 
built a "war-chest" and was preparing to make a significant 
acquisition, investors have been watching and waiting for the 
Sunnyvale, California based company to make its move. With 
Google increasing its audience reach and MSN announcing that 
it had recently started spidering the web, with the intent of 
launching a revamped search engine, Yahoo knew that in order to 
compete in the search engine industry it would have to make a 
move to increase its arsenal and improve investor confidence.

It appears that this acquisition is just the ticket for Yahoo, 
with the purchase broadening the company’s focus and increasing 
advertising revenue from search services, especially in shopping, 
travel and yellow pages categories. The deal will also provide 
an audience of more than 88,000 Overture advertisers who will 
now be encouraged and enticed to purchase the many advertising 
services already offered by Yahoo. While the deal looks to be a 
good fit for Yahoo, which needed a new channel to generate 
additional revenue, and Overture, which has faced fierce 
competition from other "pay for performance" companies; is this 
announcement good for Overture's customers?

While it is too early to determine the full impact of Yahoo 
acquiring Overture, there are some concerns already being raised 
about the future of Overture's thousands of customers. Overture 
advertisers have already seen the loss of valuable exposure at 
AOL and Netscape, with both of those search engines turning to 
Google's popular Adwords service for its sponsored listings. In 
addition, Looksmart recently announced a partnership that would 
see it providing its new Looklistings ads to Lycos, which could
ultimately replace or at least reduce the impact of the current 
deal with Overture. With Yahoo now taking over the reins at 
Overture, there is a definite possibility that MSN will not seek 
to renew its partnership with Overture, choosing not to share 
revenue now that the company is owned by one of their biggest 
online competitors. If this theory turns into reality, Overture 
advertisers could see a drop in the amount of traffic they 
receive with some estimates indicating a 30% reduction in 
traffic levels. If this holds true, then it will not only reduce 
the value of a pay-per-click campaign with Overture, but could 
also reduce future earnings that Yahoo had hoped to achieve from 
the deal.

So if buying Overture means that MSN and perhaps other search 
engines pull the plug on their partnership, is this a bad deal 
for Yahoo? Actually, not only has Yahoo likely considered 
all outcomes from making such an acquisition, it has probably 
already factored in the loss of large Overture partners such as 
MSN. However, with the acquisition of Overture's pay-per-click 
technology, Yahoo can now offer its own advertisers a PPC model 
that many suspect will ultimately mimic that of Google’s Adwords. 
No longer having to rely on a third party technology, Yahoo can 
utilize this valuable advertising model and further improve its 
revenue, keeping its customers and investors happy. With the 
recent purchase of Inktomi and its crawling technology, Yahoo 
can now stand against rivals such as Google and MSN and offer a 
complete package to both the search engine user and search engine 

There are many directions that Yahoo can now take, with Overture 
and Inktomi safely under its belt. My personal opinion is that 
Yahoo will not be able to sustain many of the relationships that 
Overture has developed over the years. This will be partly due 
to partners such as MSN not wishing to continue a relationship 
with a company now owned by a competitor and partly because more 
and more of Overture's competitors are developing their own 
internal pay-per-click or sponsored listing technology. I see a 
future where, just as Overture planned to use the technology of 
AltaVista and AllTheWeb for its benefit, Yahoo will in turn use 
Overture's technology not to continue down the path of acquiring 
external partnerships, but to provide Yahoo and it's advertisers 
a new opportunity for increasing revenues. Many people will 
disagree and say that Yahoo can continue to make Overture work 
and will continue to add partners. But the world would be a very 
boring place if we all agreed now, wouldn't it?

Andy Beal is Vice President of Search Marketing for 
KeywordRanking.com and ProRanking.com, global leaders in 
professional search engine marketing. Highly respected as a 
source of search engine marketing advice, Andy has had articles 
published around the world and is a repeat speaker at Danny 
Sullivan's Search Engine Strategies conferences. Clients include 
Alaska Air, Peopleclick, and Jos. A. Bank and NBC. You can reach 
Andy at andy@proranking.com.