Lycos Dumps Overture, Files Suit

Unhappy with the Yahoo-Overture Services marriage, Web portal Lycos swapped out Overture's paid search listings for those from rival Google this week. The Waltham, MA, subsidiary of Terra Lycos also filed suit against Overture on Oct. 17, claiming Overture breached its contract by linking up with a Lycos competitor.

The turmoil is a further threat to Overture's distribution network following its merger with Yahoo. Overture already took German Internet service provider and portal T-Online to court for ending its contract and defecting to Google.

In its complaint filed in U.S. District Court in Massachusetts, Lycos alleges its Overture service agreement required Overture to get its consent to continue their relationship if Overture were acquired by a Lycos competitor. The complaint says Lycos explicitly identified Yahoo as a competitor.

“Overture's assignment of the agreement to Yahoo leaves Lycos in an untenable position by which it is dependent on a major competitor for an essential service and that competitor may manipulate and take advantage of Lycos in a number of critical respects,” Lycos charges in the suit. “Overture will inevitably disclose Lycos's confidential and trade secret information to Yahoo.”

Lycos asked the court for $800,000 in paid search revenue it claims Overture owes it.

Jennifer Stephens, an Overture spokeswoman, said the company thought the action by Lycos was without merit.

“We understand Lycos filed a lawsuit, and as a result they have removed Overture's listings,” she said. “We do not believe they have a right to do that, and we are currently exploring our options.”

Lycos representatives did not respond to requests for comment.

The Lycos U.S. portal now returns up to six Google AdWords paid listings at the top of its search results page. Lycos also displays paid search listings on the right side through its Lycos InSite paid search program that is powered by technology from Terra Lycos Europe sites still return Overture listings.

Lycos is the second Overture partner to express unease after the Yahoo acquisition, which officially closed Oct. 7. On Sept. 13, T-Online switched to Google from Overture, claiming its contract allowed for the shift in event of a change in control. Overture promptly took T-Online to court in Germany and won an injunction against T-Online removing its listings on Sept. 1.

Stephens said that, for the most part, Overture's distribution partners have accepted its position as a Yahoo subsidiary. The biggest endorsement came from Microsoft, which Oct. 17 renewed MSN's paid search agreement with Overture in the United States and United Kingdom through June 2005. Most analysts think MSN eventually will replace Overture with a homegrown paid listings product.

Lycos and Overture first signed a paid search agreement in September 2001, which the two companies extended this past April, three months before Yahoo announced the Overture acquisition.

However, the relationship soured after Yahoo bought Overture, according to court filings. The complaint says Overture sent Lycos a letter Sept. 25 that the Yahoo acquisition would not affect the agreement. Less than a week later, Lycos signed a deal to distribute Google's contextual paid listings on 11 U.S. sites. The two companies signed a similar deal for distribution of contextual listings in Terra Lycos Europe in June.

Lycos is a small presence in the U.S. search market, garnering less than 1 percent of monthly searches in August, according to comScore's qSearch service. Lycos's search sites received a total of 4.8 million unique visitors in August, comScore reported.

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