BUSINESS
Yahoo to buy Overture Services
14-07-2003
by
Internet giant Yahoo has announced plans to buy search company Overture Services in a USD1.63 billion deal.
Though only announced on Monday, the implications of the much-rumoured deal are expected to be wide-ranging, and the move represents a significant shift in the Internet search sector.
Yahoo said it will pay Overture shareholders 0.6108 shares of Yahoo common stock and USD4.75 in cash per share, making the purchase worth about USD1.63 billion, or USD1.52 billion excluding the cash Overture had on hand as of 31 March. The buy offers a 13 percent premium for Overture shareholders compared to the company's closing price on Friday.
Yahoo also said it expects break even for Overture within year one of the purchase. Ted Meisel will continue to head Overture, reporting to Dan Rosensweig, Yahoo's COO. Earlier this year, Overture opened its European headquarters in Dublin, where around 50 are currently employed.
Though the move gave New York markets a lift with the Nadsaq up over 2.20 percent to 1,772.31 before lunch, the most notable aspect of the revelation is the complex web it creates involving some of the Internet's biggest players.
Overture, previously GoTo.com, is the top provider of paid-for, performance-driven search listings -- these are ads that appear alongside search engine results and are linked to the keywords that users searched for. Overture and its competitors have tens of thousands of advertisers and dozens of agreements with top Web sites like AOL, MSN, Yahoo and CNN that see the search providers sell keyword ads in one of the strongest and fast-growing segments of the e-advertising sector, set to be worth over USD5 billion by 2005.
The other big player in this space is Google, the Internet phenomenon whose name has literally become synonymous with Web searching -- "to Google" or "Googling" -- due to the popularity of the Web site. Currently Google is embroiled in a lawsuit launched by Overture over the patents for paid-for search technology.
Interestingly, Yahoo uses some Google technology for its normal searches and the two companies have a history that saw Yahoo encourage the search start-up years ago whilst also licensing its intellectual property. Meanwhile Overture, Google's arch-nemesis, draws much of its revenue from Microsoft, thanks to its deal with MSN, which only weeks ago was reaffirmed.
What's more, Yahoo earlier this year bought search company Inktomi for about USD250 million, which had also been a partner of MSN, making Monday's buy of Overture the company's second stab at Microsoft.
"I think that by the end of the year, these things will all work themselves out," commented Danny Sullivan the editor of Searchenginewatch.com, an industry publication. In Sullivan's view, the MSN/Overture deal is unlikely to last, as is any lingering relationship between Google and Yahoo.
"But this does put some pressure on Microsoft," Sullivan told ElectricNews.Net, suggesting that an MSN buy of Google could be in the works. The downside, he added, is that millions of people may stop using Google "simply because it's owned by Microsoft." Other options for the company include link-ups with smaller firms such as Findwhat.com, which recently bought Espotting.
For his part Yahoo chairman and CEO Terry Semel said the deal would create the "the largest global player" in the growing Internet advertising sector. "Together, the two companies will be able to provide the most compelling and diversified suite of integrated marketing solutions around the globe, including branding, paid placement, graphical ads, text links, multimedia, and contextual advertising," Semel said.
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