Overture To Buy AltaVista

Overture President & CEO Ted Meisel offers comments
on his company's acquisition plans in this article
available to Search Engine Watch members.

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

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 Competition?

Ironically, the move also 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 said that the AltaVista site will be mainly used for testing a combined product that it hopes to primarily distribute through partners.

"This acquisition does not change our strategy to reach consumers through partners," said Overture president and CEO Ted Meisel, during a conference call about the deal. "AltaVista.com gives us a test bed for accelerating new product development for our partners."

Meisel also said that Overture's major partners had been informed of his company's acquisition plans

"Our partners were measured. I think their response was, 'We're pleased that you are taking this step to enhance your products and services. We're looking forward to that, and the proof about whether you are a competitor or not will be in your 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 some who 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 they were such bargains. 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.

Building To The Purchase & "Algorithmic" Search

Meisel was asked during the conference call about how the deal with AltaVista developed, but the response he gave was more general about Overture's quest to come up with an editorial search solution.

"We have been looking at whether and how to add algorithmic search to our arsenal over the past year," Meisel said. "We decided wed be better served by going with an existing, established player," he explained, adding that building a solution in house had been ruled out.

In saying "algorithmic search," Meisel was using a term that's been popularized by the financial community, which has looked to understand how search engines such as Google have differed from Overture. The idea is that rather than payment determining ranking, the job is instead performed by an algorithm.

In my opinion, it's a terrible term. Any search engine has some type of algorithm that works behind the scenes. Whether you are sorting through paid listings, listings that come from having crawled the web or listings gathered through human beings, some search algorithm is used to retrieve the relevant results and rank them in a particular order. Everything is "algorithmic search."

Instead, the point is that Overture needed an editorial search component to complement its paid listings. AltaVista gives it a crawler-based system to generate those editorial listings.

AltaVista's Future

As mentioned, the plans for AltaVista in the future is for Overture to use it for testing purposes. And while some might think web search is a mature business, Overture's pushing the idea that there's much more to come.

"This is a very young industry and a very young product, and we feel like there's a lot of innovation to go," Meisel said. "We needed a place where we could test our ideas more fully, before we asked partners to launch them on their own sites."

AltaVista will be that place, and Meisel advised, "I think you'll see that site change rapidly."

What's that mean for those who currently love AltaVista? Hard to tell. The idea of it being a test bed may please advanced searchers, who often love to try out new ideas. However, one of the frustrations with AltaVista over the years is that it has constantly been changing. Change now looks to continue as the norm.

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, using AltaVista's patents against others like Google that crawl the web for 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 before it.

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

Comments on the sale by search engine marketers.

Overture President & CEO Ted Meisel offers comments
on his company's acquisition plans in this article
available to Search Engine Watch members.