MSN Renews With Overture — for Now

Microsoft today extended its three-year-old agreement with Yahoo to provide Overture paid listings on MSN sites in the U.S., Canada, Europe, and Asia through June 2006. The previous agreement ran through June 2005.

Microsoft has been working feverishly to increase its own exposure in the search space. It launched a beta of the new MSN Search service last week, which is expected to displace the Yahoo-owned technology currently powering its algorithmic search as soon as the end of this year.

“Our timeline is driven by the quality of the service. When we feel the product has effectively incorporated the consumer feedback we receive, we will release the final product. At this point, we are aiming to release the final service early next year,” said an MSN spokesperson.

Despite the recent flurry of activity, the move to extend what could be MSN’s last Overture agreement doesn’t come as a surprise, according to industry watchers.

“A one-year extension can be categorized as a ‘soft landing’ of Overture’s agreement with MSN — not flicking off one switch and flicking on another and having a gap in advertising revenue, but blending results going forward from MSN and Overture,” said Niki Scevak, a Jupiter Research (a Jupitermedia Corp. division) analyst.

MSN Search currently offers advertisers the opportunity to purchase Search Featured Sites (SFS), which are features on top of Web listings within the search results page. An MSN spokesperson would not comment on any plans to phase out Overture listings, but said, “Today, we sell some advertisements directly, and we work with Overture as well. We expect that type of approach to remain relevant.”

The agreement is worth hundreds of millions of dollars, but it’s been having a diminishing impact on overall Yahoo revenue, he said.

“MSN is still deep in getting the editorial system in place. This gives them more breathing room,” added Danny Sullivan, editor of Search Engine Watch. “I’ve heard various rumors that MSN wanted to do its own paid listing program, and I’ve no doubt the intent is there. If they feel they should own the editorial technology, it’s extremely odd to think they would still want to let Yahoo have control of the advertiser.”

The company has a few options for technology that accepts bids and bills advertisers. It could build a solution in-house, which would presumably be simple enough for its army of programmers. It could alternatively license technology from a third party, like FindWhat’s private label offering, or acquire a company that has the needed technology.

“The cost outlay and differentiation between the technology platforms is very small,” Scevak said.

Microsoft is also working on a desktop search tool. Desktop search has attracted Google’s interest. The company debuted its own tool last month. Yahoo made its own efforts known earlier this month. A number of smaller players are also working to make their marks on the desktop.

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