Yahoo buys Overture

By Steve Malone

Posted on 14 Jul 2003 at 15:54

Yahoo! has acquired sponsored search company Overture Services in a share swap deal worth $1.63 billion.

The move is the latest in a series of mergers and acquisitions this year which has seen a number of companies, including Inktomi taken over by Yahoo, and FAST and Alta Vista swallowed by Overture.

Paid for placement in search results is the fastest growing area of the internet. According to numbers from Piper Jaffray released by Yahoo, the value of 'commercial search' will grow from $2 billion to $5 billion by the end of 2006.

This deal makes Yahoo much more master of its own destiny and is a major step towards its stated goal of becoming a complete end-to-end integrated search provider able to generate, distribute and monetise search results.

At the beginning of the year, Yahoo was getting its search results from Google and its sponsored links from Overture while its traditional directory business was increasingly unable to scale in the increasing growth of the internet. Now, following the earlier acquisition of Inktomi and now Overture with its own search engine technologies from FAST and Alta Vista, Yahoo has all the technology and businesses it needs to take on Google.

With the market growing so rapidly, it would probably have taken Yahoo several years to catch up with the market leaders Overture and Google. In one swoop, Yahoo has got the technology it needs to match Google while at the same time getting hold of the brand leader in pay for placement search. Furthermore, Overture's expertise in contextual advertising will go a long way towards bringing in revenue from other Yahoo properties such as Yahoo Autos, Health and Yellow Pages. Finally it allows Yahoo to roll out sponsored search in areas of Asia and Europe.

Overture will also bring with it a global customer base of 88,000 advertisers and a global affiliate distribution network and a not insubstantial set of patents. The two companies say they expect to close the deal by the end of the year.