Yahoo-Overture Deal

Yahoo bought Overture for USD 1.63 billion in cash and stock, or about 10% of its market cap. WSJ interviews Danny Sullivan of Search Engine Watch, who says:

The main thing that surprises me, is having just talked to people at Microsoft’s MSN, and hearing them continue to be so positive about working with Overture, without putting any qualifications out there to prepare the audience. It makes you think MSN didn’t realize this was happening.

I think ultimately, you will see things like you get at Google Inc. ( If you do a search at Google, everything you get back — paid and unpaid — comes from Google. I would expect by the end of this year, when you do a search at Yahoo, the things that come back will come from Yahoo, and by some time next year, when you do a search at MSN, the results you come back will come from MSN, including paid listings.

For Google, it opens new possibilities of being able to partner with other people. Google probably didn’t have a chance of being a partner with MSN because MSN had been positioning itself so much as a competitor. Now, it’s a completely different situation, because Overture is owned by an MSN competitor. “Yahoo for now will face off most directly with Google, but analysts said the wild card will likely be Microsoft. MSN is Overture’s biggest partner, delivering as much as one-third of Overture’s revenue this year, or an estimated $350 million. As a result, many industry watchers say that it is only a matter of time before MSN takes stock of its alternatives, including replacing Overture with Google on its Web sites and hastening efforts to build its own Web search technology.”

Interesting times in the Search Kingdom. I wonder why Microsoft still cannot make an open all-cash offer for Overture, along the lines of what Oracle is trying to do with PeopleSoft. All that Yahoo’s offer means is that Overture is in play – am not sure it is the last world. Having Overture out of the game would leave it a race between Google, Yahoo and MSN, with the latter now having a lot of catching up to do.

Wonder what Microsoft Research with all its multi-billion dollar spends was doing as the world of search was evolving. Goes to show that money does not necessarily translate into good ideas. It is still possible for the small, smart companies to win.

I had pooh-poohed Overture’s model of paid search placements when they had started many years ago. I was wrong. I always felt that search is what you give on the basis of what’s there on the web, not what people are willing to pay for it. Today, paid search is the fastest growing segment of the business.


Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.