News Spotlight: Yahoo! Buys Overture

Warning: This column contains forward-looking statements and scientific guesses that involve risks and uncertainties in the search-marketing universe.

Here’s something new, consolidation in search. Only a few short months after Sunnyvale, California-based Yahoo! rediscovered itself as a portal, it announced a plan to acquire paid listing giant Overture Services for 1.63 billion in stock and cash, Monday. The announcement caused the biggest landslide of hype and conjecturing as to the future of search marketing as we know it since at least, last week when a few other search sites merged. By show of hands, who didn’t see this one coming?

Online marketing is still a whining toddler and, according to the recent “Mount Rushmore of Search” Ad:Tech panel, search was rated between 1-3 (on an evolutionary scale of 1-10) by the faces, which would make search a wet-diapered infant.

Strap yourselves in as I once again attempt to slice and dice the hype in order to provide you with useable information should the proposed action come to fruition sometime in the fourth quarter of this year.

What Does It all Mean, Basil?

My apologies for the Austin Powers reference, but it seems quite appropriate when you consider opportunistic tendencies of some firms when announcements like this are made. Before I could draft an announcement for our clients Monday morning, a search firm sent one of them a note proclaiming that Overture was about to lose almost half of its traffic. I missed that in the press releases and conference call with Overture and Yahoo! senior executives.

It is no secret that in our little online advertising industry slump, the revenue generated from Yahoo! carrying Overture’s paid listings was great news for Yahoo! and its stockholders. Placing aside for the moment the possible impact for paid-search listing syndication, this acquisition is great news for the two behemoths.

This leads me to perpetuate the use of the single most over used word in advertising today, integration. Yahoo! offers everything search and so much more on the site: Shopping, Yellow Pages (search, for the rest of us) in addition to creatively placed ad units. Since a big portion of Overture advertisers are small businesses, offering them a one-stop solution in, say a Yellow Pages ad and the wildly successful Yahoo! Store is a winning concept. This must have been what Terry Semel, Yahoo!’s Chief Executive referred to as “combining Overture’s world-class monetization platform… with Yahoo!’s already robust search business”. To that, I can only respond; buzzword, buzzword buzzword, revenue-- buzzword, buzzword value.

But seriously folks, this deal is a smart move on both ends. Yahoo! is a bright search site. In recent years I have been impressed with its innovation, along with its uncanny ability to embrace the concept of working with agencies in the traditional way to help create an effective media plan for the ultimate benefit of clients. Certainly, offering Overture’s small businesses with ancillary site offerings like Web hosting is a great way to go, but plans to speed integration of paid listings into Yahoo!’s vertical areas (contextual paid search) like autos and travel make this plan pure genius. I would also vehemently support the melding of Yahoo!’s world-class professional acumen with Overture’s entrepreneurial spirit.

Onward Little Paid Search Doggies

Some forty-eight hours into the announcement, there are a few Chicken Little-esque prognosticators out there worrying about Overture’s share of the paid-search market beginning a slow donkey ride to disaster. comScore qSearch data to the rescue.

Monday morning, comScore released traffic share numbers for Overture and competitor Google. Google currently represents about 54% of U.S. searches while Overture’s paid search affiliate network shows about 45%. Further, according to qSearch analysis of top five search properties for May, 2003, 32% of Internet users in the United States used Google, 25% used Yahoo! (Overture paid listings), 19% went for AOL (Google AdWords listings), 15% used MSN sites (Overture listings), and 3% found white glove search service on AskJeeves (also, Google AdWords).

Within these figures, we discover the true nature of consolidation in paid search and some Dramamine for the “sky is falling” people. While other listings are served onto these sites with Looksmart providing inclusion services to MSN and “editorial”, or “natural” search results” abound, the factored fear stems from MSN deciding to build its own paid-search model, pink slipping Overture, thereby extinguishing the MSN portion of the traffic. Newsflash; MSN already has its own performance-based listings offering. In May, MSN accounted for 33% of searches conducted on the Overture affiliate network, according to comScore qSearch.

The only missing links for MSN are a lower cost of entry, and a tuned-down, large-scale (for small business) user-driven interface. MSN has some big plans in the works and a variation of this may be part of it. If this occurs, would Overture’s 88,000 largely small-, to medium-sized advertisers simply migrate to MSN? Not likely, since businesses of this size care about (among other important things) sales from click traffic or otherwise. They didn’t point the wagons at AOL and Netscape when Overture lost those partners and the valuable suite of offerings like Yahoo! Store, Shopping and Yellow Pages vertical combo package may just compensate for that if it happens.

The big fat remaining dilemma rests with the searchers who went to MSN to click on Overture listings. Since Yahoo! has no doubt prepared for this potential loss as well, we are left with large corporate advertisers who need to reach MSN searchers. These advertisers are represented by search marketing firms who will advise clients in the most relevant, appropriate means possible, to consider purchasing the MSN paid listings already on the site, as they do with site-centric paid listings on AskJeeves.

Précis

Will Overture lose some of its advertisers if MSN goes solo? Maybe. Will MSN build a better mousetrap and ultimately keep its advertisers and investors happy? Most likely. Will MSN pink slip Overture’s listings because of competitiveness? Only time will tell, but one thing is certain: Paid listing clickers worldwide will not go hungry for sponsored links tonight.

About the author: iMedia search columnist Kevin Ryan’s current and former client roster reads like a “who’s who” in big brands; Rolex Watch, USA, State Farm Insurance, Farmers Insurance, Minolta Corporation, Samsung Electronics America, Toyota Motor Sales, USA, Panasonic Services, and the Hilton Hotels brands, to name a few. He is currently Director Market Development of IPG’s Wahlstrom Interactive where he provides guidance in directional online marketing to Wahlstrom’s prestigious list of clients and sister agency brands.

 

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