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Overture Wins Yahoo, What Will Happen With Google?

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Overture had a major win last month by extending its initial five-month deal to provide paid listings to Yahoo for an additional three years. In addition, Overture's 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.

Yahoo wouldn't say if this is the longest search deal it has ever signed, but it certainly seems unprecedented. Previous partnerships for crawler-based results from AltaVista, then Inktomi and the current one with Google were for two years. Now for paid listings, Yahoo has locked itself into a three-year deal.

"Three years is generally on the longer side for Yahoo, and that speaks to the quality and success weve had so far [with Overture” and the plans we have to monetize this space," said Elizabeth Blair, Yahoo's senior vice president of listings.

The deal continues as before, with the first three paid listings from Overture for a particular query also appearing for that query in the "Sponsor Matches" section of the Yahoo search results page. Listings four and five from Overture also appear at the bottom of the Yahoo results page, in the "More Sponsor Matches" area.

There was speculation that Google might become the paid listings provider for Yahoo, given that Google already provides Yahoo with some of its editorial-results. Now that Overture has won the deal, does that preclude Google's paid listings from appearing even on pages that contain Google editorial results, the "Web Page Matches" listings?

Yahoo wouldn't come out and specifically deny this. Instead, Blair stressed that Overture had an exclusive deal for Yahoo.com's web search results pages, even on pages carrying Google listings.

"They are the only provider of paid listings within Yahoo Search," Blair said.

This presents a problem for Google. Yahoo currently pays Google for each search request that Google handles, which happens if there is no answer in Yahoo's own editorial database. However, the trend since the Yahoo-Google deal was signed two years ago has shifted to the portals getting money to carry a search provider's results. If Google can't run its own ads, because of the Overture deal, then it would seem stuck asking Yahoo to continue paying for its results.

In contrast, Inktomi says it is competing to take over the Yahoo contract from Google. Inktomi has paid inclusion income that it shares with portals, money it receives from listings that are included in its editorial results but which probably would not seem to violate Yahoo's deal with Overture, given that paid inclusion listings have no guarantee of ranking well for particular terms. So, instead of asking Yahoo to be paid, Inktomi may be able to pay Yahoo for distribution.

Which way will Yahoo go? "Maximizing and monetizing search is one of the top three priorities for [Yahoo chairman and CEO” Terry Semel this year," Blair said, which would lead you to think that Yahoo's choice will be simple -- go for the money with Inktomi.

Don't count Google out. For one thing, Yahoo could decide, as AOL just did this month and as Yahoo did two years ago, that Google's brand awareness for quality search is worth paying for. After all, Yahoo does have a monetization strategy in place even for the pages with Google results, the paid listings it carries from Overture. Revenue from those may more than offset what Google will charge Yahoo, and Yahoo would still get the intangible benefit of being associated with Google's brand.

As you might expect, Yahoo's not commenting on what will happen but certainly is not ruling Google out.

"We have a terrific and long standing partnership with Google," Blair said. "We and Google are looking to see how we can expand those relationships."

As for Google, it is hoping that the quality of its results will again be a deciding factor in getting the deal renewed.

"The big thing that well be thinking about as we go into this deal, and that I hope Yahoo will be thinking about, is how does this affect the user experience and how important that is to them," said Sergey Brin, Google's cofounder and president, technology.

A longer, more detailed version of this article is
available to Search Engine Watch members.
Click here to learn more about becoming a member

Will Google, Yahoo renew their vows?
News.com, May 3, 2002
http://news.com.com/2100-1023-898266.html

Nice rundown on the issues coming up with Yahoo and Google, including Yahoo's estimated 5 percent ownership of Google made at the time the initial deal was signed.

Yahoo Proxy Statement
http://eol.finsys.com/edgar_conv_html/2002/03/15/0000912057-02-010171.html

We finally find out how much Google is making from Yahoo for search services through this proxy statement filed in March. Google earned $7.2 million in 2001 from Yahoo, while Yahoo got $1.1 million from Google for unspecified "branding, advertising and promotional services." Not shown but confirmed by Google is that Yahoo also made a small investment in Google, at the time of the deal.

Semel rises to Yahoo challenge
News.com, May 1, 2002
http://news.cnet.com/investor/news/newsitem/0-9900-1028-9817362-0.html

Review of changes to Yahoo, a year after CEO Terry Semel took over.

Overture & Inktomi Out, Google In At AOL
SearchEngineWatch.com, May 1, 2002
http://searchenginewatch.com/sereport/02/05-aol.html

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. Inktomi also loses out in the deal. Brief comments here from Inktomi on how it hopes to win in the battle for Yahoo.


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