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Overture To Buy AltaVista

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Overture announced today that it intends to purchase AltaVista in a $140 million cash and stock deal.

Overture is one of the leading providers of paid listings to search engines and portals, but the company has long had a weakness in not being able to provide a combined editorial and paid listing product, to partners seeking an "all-in-one" solution.

The acquisition of AltaVista will solve this problem and make the company more competitive, especially when fighting for deals against Google. Last year, Overture lost partnerships with Earthlink and AOL, where Google became the sole provider of both paid and editorial search results.

Will Partners Fear Competiton?

At the same time, the move potentially opens Overture to be seen as competing with some of the same portals it wishes to partner with. The AltaVista web site has massively dropped in popularity over the past years, especially losing many of its former loyal users to Google. However, it still does show up on the popularity radar screen, especially in terms of search hours, a measure of usage.

To allay fears, Overture suggests that the AltaVista site will be mainly used to "test and refine new products." Overture President and CEO Ted Meisel also said that Overture's current major partners had been informed of his company's acquisition plans, were "pleased" that Overture was moving to enhance its services, and the question of whether Overture should now be treated as a competitor would be judged by its partners based on Overture's "actions going forward."

What Now For MSN?

The purchase may influence what MSN decides to do when Yahoo's acquisition of Inktomi, a rival crawler to AltaVista, is completed within the next few weeks. MSN is seen as unlikely to continue taking some of its results from Inktomi, once that company is owned by MSN-competitor Yahoo. To date, MSN has offered no comment about its plans relating to a Yahoo-owned Inktomi.

MSN has an existing partnership to take some of its editorial results from LookSmart, which supplies MSN with human-powered results. However, LookSmart acquired the WiseNut crawler-based search engine last year, and many are wondering if MSN will be convinced by LookSmart to also take WiseNut results, as a replacement for Inktomi's.

AltaVista's Long History

The Overture purchase of AltaVista may hurt those chances. WiseNut remains an unproven product, while AltaVista is the oldest crawler-based search engine operating. The service began in December 1995 and was owned by Digital, then by Compaq, when that company purchased Digital in 1998, then later spun off into a private company, which is majority-owned by CMGI.

For several years, AltaVista was the "Google" of its day, in terms of providing relevant results and having a loyal group of users that loved the service. However, the multitude of owners, a misstep to turn the service into a portal in 1998 and a drop in its relevancy caused the company to lose users.

Over the past year, AltaVista has worked to rebuild both its relevancy and coverage of the web. But despite this, there are many that would argue AltaVista's competitors FAST and Teoma offer better results. So while AltaVista might have the edge over WiseNut for a possible MSN partnership, FAST and Teoma can't be counted out. Google can, given that MSN has on many occasions said that it views the company as a competitor.

How Much To Buy A Crawler?

Overture intends to pay AltaVista in stock valued at $80 million, as well as $60 million in cash. The $140 million deal is just over half what Yahoo is to pay for Inktomi, an all cash deal of $230 million. However, both deals are incredibly more than the paltry $4 million the Ask Jeeves-Teoma deal was valued at or the $9 million for the LookSmart-WiseNut sale.

Neither Teoma nor WiseNut had an sizable audience at the time they were sold, which is one reason for the low values. In addition, neither player had any income from paid inclusion programs when they were purchased, while both Inktomi and AltaVista are generating millions in revenues.

The high values assigned to AltaVista and Inktomi also reflect that fact that search continues to be recognized as a potential money maker and that there remain relatively few good crawler-based search engines that can be purchased by larger companies.

Those Pesky Patents

As part of the deal, Overture will also acquire AltaVista's patents relating to web search. AltaVista once made noise about potentially trying to enforce its patents, but that quickly died amid over protests. However, Overture has ongoing disputes with Google and FindWhat relating to patents it holds over paid listings. It's possible that the company might try to take similar actions over those who gather crawler-based results.

If so, there may be enough prior art in the searching space to negate such action. While AltaVista is the oldest web crawler operating, it most definitely was not the first. Others, such as Infoseek, Lycos and WebCrawler, were established first.

Infoseek is now defunct, while Lycos no longer operates its own crawler and WebCrawler has been turned into a meta search engine. However, all are just some examples of how web crawling existed even before AltaVista.

Overture buying AltaVista
WebmasterWorld.com, Feb. 18, 2003
http://www.webmasterworld.com/forum33/1387.htm

Comments on the sale by search engine marketers.

Overture to buy AltaVista
News.com, Feb. 18, 2003
http://news.com.com/2117-1023-984968.html

Similar coverage to the article above can be found here, but the story includes more quotes from Meisel about the deal.

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