Overture Wins Yahoo!, What Will Happen With Google?

  |  May 29, 2002   |  Comments

Will Yahoo! pay for search results and stick with Google, or shop around and get paid?

Overture had a major win last month, extending an additional three years its initial five-month deal to provide Yahoo paid listings. Also, naming Overture as Yahoo's exclusive paid listings provider may impact whether Google will renew its editorial partnership, which expires next month, with Yahoo

Yahoo won't say if this is the longest search deal it's ever signed, but it seems unprecedented. Previous partnerships for results from AltaVista, then Inktomi, and the current pact with Google lasted two years. Yahoo is now locked into a three-year deal for paid listings.

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

Terms are unchanged. The first three paid listings from Overture for a given query also appear in the "Sponsor Matches" section of the Yahoo search results page. Listings four and five from Overture appear at the bottom of the Yahoo results page, in the "More Sponsor Matches" area.

There was speculation Google might become Yahoo's paid listings provider, given the company already provides some editorial results. Now that Overture has won that deal, are Google's paid listings precluded from appearing, even on pages containing Google editorial results (the "Web Page Matches" listings)?

Yahoo won't specifically deny this. Instead, Blair stressed Overture had an exclusive deal for Yahoo's Web search results pages, even on pages carrying Google listings.

"They're the only provider of paid listings within Yahoo Search," she said.

This is a problem for Google. Yahoo currently pays Google for each search request processed. This occurs if there's no answer in Yahoo's own database. The trend since the Yahoo-Google deal was signed two years ago has shifted to portals being paid to carry a search provider's results. If Google can't run its own ads because of the Overture deal, it would be forced to ask Yahoo to continue paying for results.

Inktomi is competing with Google for the Yahoo contract. Inktomi's paid inclusion income is shared with portals. It receives revenues from listings included in editorial results, but these probably wouldn't appear to violate Yahoo's deal with Overture, given paid inclusion listings have no guarantee of ranking well for particular search terms. Instead of asking Yahoo to pay, Inktomi might 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 leads you to think Yahoo's choice is simple: Go for the cash with Inktomi.

Don't count Google out. Yahoo may decide, as AOL did this month and as Yahoo did two years ago, Google's quality-search brand awareness is worth paying for. Yahoo has a monetization strategy in place, even for pages with Google results: the paid listings from Overture. Revenue from those may more than offset Google charges. Yahoo would enjoy the intangible benefit of association with the Google brand.

Yahoo's not commenting, but it isn't ruling Google out either.

"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."

Google hopes the quality of its results will again be the deciding factor in securing the deal.

"The big thing that we'll 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?" says Sergey Brin, Google's cofounder and president, technology.

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