On Feb. 18, Overture, which claims to be the "world's leading provider of Pay-For-Performance search to Web sites," announced that it had acquired AltaVista, a pioneer Web search engine. A week later, Overture announced that it had acquired all the Web search assets of Norwegian-owned Fast Search and Transfer (FAST; http://www.fastsearch.com), including FAST Web Search, AlltheWeb.com, and FAST PartnerSite. FAST retains its enterprise software sales program. Both acquisitions should be completed some time in April. With the December acquisition of Inktomi by Yahoo!, this leaves only Google and AskJeeves' Teoma as top Web search engines not operating under a strictly advertiser/sponsor-driven business model. Observer reactions to the news have been mixed.
Pasadena, California-based Overture, formerly named Goto.com, originated the Pay-For-Performance search engine technique. In the fourth quarter of 2002, the company had 80,000 advertisers paying when consumers click to their listings, an event that occurred some 563 million times during that quarter. The company also redistributes screened search results to tens of thousands of sites, including Yahoo!, MSN, and InfoSpace.
Overture acquired AltaVista from CMGI, Inc. for $80 million in Overture common stock and $60 million in cash, while assuming certain of AltaVista's liabilities. Headquartered in Palo Alto, Calif., AltaVista currently has approximately 250 employees worldwide. No plans were announced for staffing changes by Overture.
In announcing the acquisition, Overture stated its aims of offering enhanced Web search services to portals, Internet service providers (ISPs), and other sites, as well as expanding marketing opportunities to Overture's large advertiser base. AltaVista already offers paid inclusion products, which Overture plans to enhance and provide "vehicles intended to drive targeted customer leads." In particular, Overture plans to build on AltaVista's patents in advanced algorithmic search technology as a complement to Overture's own commercial search technology. Additionally, Overture plans to use "AltaVista's Web site to test and refine new products and services in a live setting" and syndicate products to its distribution network and potential new partners.
FAST sold its Internet Business Unit to Overture for $70 million in cash, plus performance-based cash incentive payments for up to $30 million over the next 3 years. Besides the acquisition of FAST WebSearch, AlltheWeb.com, and FAST PartnerSite, Overture also acquired related intellectual property rights and data centers and equipment in Sacramento, Calif., and in London (U.K.). FAST will continue to market scalable integrated search technology to enterprises. In fact, Overture has licensed FAST DataSearch, joining other major sites, such as Dell, FirstGov.gov, Reed Elsevier's Scirus.com and Ei, and Reuters.
With the acquisition of FAST and AltaVista, Overture plans to provide three types of search offerings to distribution affiliates: Overture's paid placement product, a paid inclusion product, and algorithmic search. Advertisers should see consolidated reporting, billing, and a single interface for campaign management of both paid placement and paid inclusion products. Overture will use the AlltheWeb.com site as a test site for improved search technologies. FAST retains usage rights for intellectual property relating to its enterprise search technologies.
Both FAST and AltaVista also possess advanced linguistic capabilities. FAST operates in almost 50 languages and has worldwide operations under way, which are predicted to serve Overture internationally. For example, FAST has relationships already in place in the U.S. and overseas with key Overture Web partners, such as Terra Lycos, InfoSpace, Deutsche Telekom's T-Online, and Freeserve.
"Search is in a rapid growth phase which we believe will continue for years to come," said Ted Meisel, Overture's president and CEO. "Offering a broader, more complete range of products and services to our distribution network and advertisers will allow us to capitalize on that growth and build on the strong competitive advantages we already possess. Combining AltaVista and FAST's Web search business provides us with what we believe is the quickest and most cost effective path to market."
FAST accesses an index of over 2.1 billion documents with a flexible and scalable Web search architecture, while AltaVista has advanced searching capabilities, such as text analysis, duplicate removal, anti-spamming techniques, and advanced clustering. With the new acquisitions, Overture plans to create a next generation Web search platform, an effort headed by Dr. Gary Flake's research and development team.
Reactions to the acquisitions started rolling in quickly from information industry observers and searchers. Industry observers saw the move as a part of Overture's battle with leading search engine Google, which recently replaced Overture on America Online using a combination of open Web searching and advertiser-connections based on search results. The acquisitions have positioned Overture to supply feeds-accompanied by advertising opportunities-to large Web site services such as MSN (which currently uses a feed from Yahoo!'s Inktomi). Despite the apparently clear business strategy, investors did not react well to the acquisitions. Overture's stock lost 33 percent of its market value in the days following the two announcements.
The searcher community worried about what Overture planned to do with the services, what would stay and what would go. Gary Price of Freepint.com pointed out, "In terms of raw search power, the features that power searcher's love, AltaVista's technology remains the most powerful of all general Web search engines."
Marydee Ojala, editor of ONLINE, commented on the AltaVista acquisition: "AltaVista was doing the most innovative things in the search engine arena. Now they'll become a 'pay to play' search engine. There goes the neighborhood."
Looking at the double acquisition, a worried Tara Calishain of ResearchBuzz.com (and "Emmerce" columnist for Searcher Magazine) stated: "I will watch this one carefully. AV had been doing some nice stuff in the last couple of months…and AlltheWeb has been extremely proactive in adding interesting features to its site. They were both doing things that could act as competitive nudges to Google--AV with its excellent news search engine and syntax set, AlltheWeb with another good news search engine, interface skins, and some nice search options (including directory depth for search results). It would be a shame if that innovativeness were to be abruptly ended."
Of course, searchers could just go to Google. That had already occurred. At present, AltaVista handles about 18 million search queries each day while FAST's AlltheWeb.com handles some 2.5 million. Google, on the other hand, handles 150 million. Nonetheless, expert searchers always want alternatives. The move led to a spate of conjectures on Google's future, ranging from scenarios in which Microsoft buys Google to ones in which Overture fails to integrate its two acquisitions effectively and Google just enjoys the elimination of two competitors at no cost to itself. Only time will tell.