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Overture & Inktomi Out, Google In At AOL

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Overture & Inktomi Out, Google In At AOL

By Danny Sullivan, Editor
The Search Engine Update,
May 1, 2002

Google has been selected by AOL to provide editorial search results and paid listings to AOL's various search properties in the United States, including AOL Search, Netscape Search and CompuServe Search.

The deal ousts Overture, which has provided AOL with paid listings since October 2000. The listings have appeared under the "Sponsored Links" heading on the AOL Search site in the US, as well as appearing in places on the Netscape and CompuServe search sites.

Inktomi also loses out in the deal. The company has provided editorial results to AOL Search since July 1999, but these are now to be phrased out when the current AOL-Inktomi deal expires this August.

Google Brand Was Key Factor

Google said it won the AOL partnership due the quality of its search, the high recognition of its search brand and the ability to help AOL monetize its search listings.

"We were the underdog, it's true, but the major factor was the search we were packaging with our paid listings. It will be a very good user experience," said Sergey Brin, Google's cofounder and president, technology. "Secondly, when we sat down and looked at all the metrics, we had very competitive monetization," Brin added.

In a conference call today about the AOL deal, Overture confirmed that Google's brand identity helped it win the account.

"It represents an attempt to capitalize on Google's search brand, and paid listings just came with the package," said Ted Meisel, Overture's president and CEO.

Ironically, many analysts had considered Google's brand recognition to be a weakness, perhaps causing major portals to view it as competition. However, it was the Google brand that helped it win the Yahoo account two years ago, and it has come through once again with the AOL deal.

Brin also stressed that the company does not see itself as competitive with portal partners, and that this isn't part of Google's business plan.

"We havent grown through promotion of our own site," he said. "It's not like we take the money [earned from partners” and run ads saying, 'Come to Google'."

Overture Gets Defensive

Overture is understandably sensitive about the loss. A growing darling of Wall Street, due to the record profits it keeps setting, Overture doesn't want to appear to be losing its dominance in the paid listings marketplace.

To defend itself, Overture suggested during its conference call that Google was prepared "to lose for the ability to appear on someone elses search pages," described AOL as "far from our largest partners" and didn't see a need to develop editorial results to complement its paid listings as "were not getting a strong demand for that."

Overture also had previously stated that its rosy financial guidance for the remainder of the year did not assume that the AOL deal would be renewed. Given this, Overture should still be on track for a year of record profits, which has many stock analysts excited over the company. In addition, Overture just renewed an unprecedented three-year contract to continue providing paid listings to Yahoo.

Overall, Overture put out the message that losing AOL was a "minor setback" but that it believed no other paid listing provider could help partners earn as much as Overture.

Google's Brin dismissed such a statement, which he said even AOL initially believed.

"Nobody can make as much money as Overture, but thats not true," Brin said. "As they learned, they felt more comfortable about it."

Brin also added that Google may provide other services to AOL beyond what was announced today.

"We're a tech company, so theres opportunity for all types of other kinds of new services," he said, though he wasn't able to provide specifics.

And Then There's Inktomi...

So much attention has been focused on whether AOL was going to renew its deal with Overture, which expired today, that the fact the Google deal impacts Inktomi seems to have been lost.

Inktomi provides editorial results to AOL Search and CompuServe search, and now the company will be losing that distribution at the very latest by August, when its current contract expires.

"We're not pleased about it, but as a division [Inktomi's search division”, well still remain profitable without AOL," said Vishal Makhijani, Inktomi's general manager of web search.

Makhijani also added that even if AOL switches over to Google earlier before the Inktomi contract expires, Inktomi will still receive revenue guaranteed to it.

"From a revenue perspective, were getting paid through August," said Makhijani.

Inktomi could get good news in June, however. The company confirmed that is competing to win the Yahoo account back from Google, which is lost in 2000.

"We are aggressively competing for that business product," said Makhijani.

A key factor in this may be monetization. The recent deal between Yahoo and Overture appears to prevent Google from running AdWords listings on Yahoo, if it wanted to make this part of a future deal. In contrast, Inktomi -- a long-standing Overture partner -- does not appear to be prevented from showing paid inclusion URLs.

What this means is that Inktomi is potentially going to be coming to Yahoo with a pitch that it can make money by carrying its results, while Google may have to convince Yahoo that its brand is strong enough that Yahoo should continue paying for results.

I'll be looking at this issue in more depth for the May 6 issue of the Search Engine Update, so watch your mailboxes.

Making The Transition: AOL Search

At AOL Search, Google's paid AdWords listings are already appearing. As for Google's editorial results, it remains up to AOL as to when these will start, Google said.

AOL has yet to announce a schedule, but I would expect to see the transition begin in the early summer, so that AOL will be moved over fully to Google before the Inktomi contract expires in August.

Be aware that only about 20 percent of AdWords listing have been "enabled" to run on AOL. This is because AOL has its own editorial guidelines about paid listings that must be met, before ads can appear there.

Brin said that AdWords advertisers yesterday received an email informing them of new guidelines that must be followed, such as unnecessary capitalization, punctuation, and symbols. These new guidelines are designed to ensure that all AdWords listings meet both Google's and AOL's requirements.

In addition, Google's editorial staff is reviewing all listings at the moment, Brin said. As ads are deemed to be meeting AOL's standards, they are enabled to run in distribution on AOL. Brin expects that within a week, all ads should be reviewed.

So, until that happens, you may be confused about the order of ads you see on AOL Search. The top three listings in the "Sponsored Links" area may not correspond to the top three AdWords listings on Google itself. However, when the review is done, that should be the case.

There is one final exception. Only ads in the cost-per-click AdWords Select program are being distributed to AOL and Google's other paid listing partners. So, any ad in the old or "classic" CPC based program wouldn't appear.

Also be aware that Google ads on AOL Search are geotargeted, just like at Google itself. This means that if you are outside the United States, you will not see ads targeted at those in the US, and so on. See the How Google Works page below for more about the Google AdWords program and how geotargeting operates within it.

Also, though Overture is now out as the paid listings provider for AOL in the US, its deal to provide paid listings to AOL sites in the United Kingdom, Germany and France remains unaffected.

Making The Transition: Netscape & CompuServe

Overture listings do continue to appear in the "Partner Search Results" area of Netscape Search in the US, but these are to be phased out by August, according to Overture. As for editorial results, Google already provides backup results for Netscape Search when there are no matches out of the AOL-backed Open Directory Project's listings. However, Netscape confirms that in the near future, Google will shift to delivering the service's primary results.

At CompuServe, Overture results are supposed to have been removed from the "Sponsored Links" section of CompuServe, but they remain there as well. I'd expect to see these removed shortly. Google's AdWords have already been on CompuServe over the past couple weeks, in what was a beta test that has now turned into a formal agreement.

Editorial results at CompuServe currently come from Inktomi, but as is the case with AOL Search, I expect you will see this phased out in favor of Google, as summer approaches.

Big Win For Google; Don't Count Overture Out

The AOL deal is a giant step forward in Google plans to play in the distribution space that Overture has until now dominated. Advertisers already seek out Google because of the huge amount of search traffic its own site generates. Gaining distribution on AOL's popular search sites only makes the company's ad programs an even more compelling prospect, in terms of reach.

The big win for Google doesn't necessarily translate into a big loss for Overture. The company definitely wants people to believe that losing AOL isn't an earth-shattering event, and in many ways, this is correct. Overture remains a major force that online advertisers simply cannot ignore, given the sheer amount of distribution it maintains.

How Google Works
http://searchenginewatch.com/subscribers/google.html

Details on the Google AdWords program can be found here, as well as links to past articles about Google's deal with Yahoo.

Google
http://www.google.com

Overture
http://www.overture.com

Google Press Release
http://www.google.com/press/pressrel/aol.html

Overture Press Releases
http://www.corporate-ir.net/ireye/ir_site.zhtml?ticker=OVER&script=400&item_id='109'

Overture has emailed their press release on the AOL deal but not yet posted it. Watch this page, where it should appear shortly.

AOL Search
http://search.aol.com

Netscape
http://www.netscape.com

CompuServe
http://www.compuserve.com

Searching For Solutions
Dotcom Scoop, May 2, 2002
http://www.dotcomscoop.com/050202.html#search

Rumor is that AOL wanted more than Overture was willing to pay, so Google got the nod. On the other hand, the suggestion that Yahoo has few alternatives but to buy Ask Jeeves to have Teoma replace Google is absurd. There are plenty of alternatives for Yahoo if it decides to forgo Google, with Inktomi the leading contender and others such as FAST and Teoma who would also be willing. Nor would they need to be purchased.

Google flexes muscles with AOL search deal
USA Today, May 2, 2002
http://www.usatoday.com/life/cyber/tech/2002/05/01/aol-google.htm

Losing AOL will cost Inktomi about $2.5 million per quarter, about 8 percent of its revenue.

Overture bows to Google in AOL deal
News.com, May 1, 2002
http://news.com.com/2100-1023-896152.html

Lots of analyst reaction.

You've Got Google!
InternetNews.com, May 1, 2002
http://www.internetnews.com/ent-news/article/0,,7_1025971,00.html

More coverage of the deal.

Overture Raises Guidance, Ends America Online Pact
Reuters, May 1, 2002
http://biz.yahoo.com/ri/020430/tech_overture_urgent_1.html

Rundown from the Overture press release, with additional details about Overture's financial performance this year.

Overture Boosts Full-Year Estimate,
Says U.S. Pact With AOL Deal Expires

Dow Jones, May 1, 2002

Another early story on the announcement.

Overture Scores on Earnings, Yahoo
InternetNews.com, April 26, 2002
http://www.internetnews.com/IAR/article/0,,12_1016411,00.html

Background on the recent Yahoo deal and Overture earnings.

Overture beats Street, extends Yahoo deal
Reuters, April 25, 2002
http://news.com.com/2100-1023-892770.html

Another story with details on the Yahoo deal and Overture earnings.

Google Takes On Overture With Pay Per Click Ads
The Search Engine Report, March 4, 2002
http://searchenginewatch.com/sereport/02/03-google.html

Google's new pay-per-click payment option for its "AdWords" program may make it more attractive to some advertisers -- as well as establishing the company as serious competitor with Overture.

Google to power AOL search
WebmasterWorld.com, May 1, 2002
http://www.webmasterworld.com/forum6/915.htm

Overture Ends Deal w/ AOL
WebmasterWorld.com, May 1, 2002
http://www.webmasterworld.com/forum6/913.htm

URLs above lead to two key threads at WebmasterWorld.com, where the new deal is being discussed by search engine marketers.

Pay For Placement?
Compendium of articles from Search Engine Watch and other sources about paid listings on search engines.

Overture Wins Yahoo, What Will Happen With Google?
The Search Engine Update, May 6, 2002
http://searchenginewatch.com/subscribers/articles/02/05-yahoo.html

Overture had a major win last month by extending its initial five-month deal to provide paid listings to Yahoo to an additional three years. In addition, Overture being named Yahoo's exclusive paid listings provider may impact whether Google will get to renew its editorial partnership with Yahoo that expires next month.


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