Overture to Buy More Search Assets
The pay-for-performance search pioneer said yesterday that it signed an agreement to acquire the Web search unit of Norway-based Fast Search and Transfer for $70 million in cash and up to $30 million more over the next three years based on performance.
The deal, expected to close in April, comes just a week after Overture announced plans to acquire search engine AltaVista from CMGI for $140 million in cash and stock.
The market has reacted unkindly to both deals. Overture's share price immediately dropped about 20 percent on the AltaVista announcement. And yesterday, Overture's price dropped 12 percent, or just over $2, in afternoon trading to a little over $15.
Some think the moves are defensive, as Microsoft was rumored to have been eyeing AltaVista and FAST.
Overture generates revenue by letting more than 80,000 advertisers bid on keywords for placement in its search results. When an advertiser's keyword is used in a search, Overture displays the results to consumers in order from the highest bidder on down. The advertiser pays Overture its bid price every time a surfer clicks through to the advertiser's Web site.
Overture syndicates these results to other Web sites. For example, Overture provides Yahoo with paid links in the first four slots of its search results pages. Advertisers bid on those links, which are labeled "sponsored matches," to get top ranking. Advertisers pay per click for these listings. Overture shares revenue with Yahoo for featuring them.
Through these latest acquisitions, Overture claims it will complement its core paid-search business with algorithmic search, where the search engine scours the Web and returns results in response to users' queries.
"Through this combination, Overture expects to be at the forefront of the industry in offering a full suite of paid placement, paid inclusion and algorithmic Web search products and services for syndication to portals, ISPs and other destination sites," Overture said in a statement.
"By leveraging the algorithmic Web search technology of both FAST and AltaVista, the company will be able to provide three types of search offerings to its current and prospective distribution affiliates: Overture's paid placement product, a paid inclusion product and algorithmic search," the statement continued.
However, Overture CEO Ted Meisel said the company's focus will remain on paid search.
"I don't think we've changed our competitive profile very much at all," he said.