Overture’s Buying Spree

The series “Ending the Cloaking Debate” continues next week.

In the past two weeks, Overture announced its intention to purchase two crawler-based search engines: FAST’s AllTheWeb.com and AltaVista. Both deals are expected to close in April.

AltaVista was acquired for $140 million. FAST’s Web search unit, which provides results to other search engines such as Lycos.com, was sold for $70 million in cash, with the possibility of another $30 million paid over three years through a performance deal.

Why Both?

The AltaVista move makes a lot of sense. Overture has long needed an all-in-one search solution providing both editorial and paid listings. AltaVista will be a technological base on which Overture can build the editorial side of its operations.

FAST largely replicates the technology Overture gains from AltaVista. Overture suggests owning both companies will allow it to combine the technologies to “create the next generation of Internet search,” as the press release puts it. That’s a weak justification.

The reality is rather than combining technologies, Overture will instead likely focus on further developing only one — probably FAST’s, given many feel the company provides better results than AltaVista. Sure, Overture will gain from the combined knowledge of both companies. But it doesn’t necessarily need them both to succeed.

Consider a puzzle analogy. The AltaVista acquisition was the missing piece of a puzzle. Overture had to complete the all-in-one search solution it wants to offer to partners. Acquiring FAST means Overture gets an extra puzzle piece that isn’t required for the company to complete its search products picture.

Defensive Move

Snapping up FAST does withhold that crucial search puzzle piece from competitors. In particular, paid-placement provider Espotting has seriously challenged Overture for leadership in the European paid-listings space. For instance, though Overture has a deal with Yahoo in the U.S., it’s Espotting with the deal for many of Yahoo’s European Web sites.

Last month, Espotting announced a deal to partner with FAST to provide all-in-one search solutions to search sites and portals. Overture’s ownership will almost certainly end that deal and crimp Espotting’s distribution plans.

In addition, it becomes harder for Espotting to find a replacement partner. AltaVista is out of the running, given the pending Overture acquisition. The company already fights for ad spend against LookSmart, which operates the WiseNut crawler. Google offers a crawler, but Espotting competes with Google for advertising deals, too.

Espotting could perhaps partner with Yahoo-owned Inktomi. That might not go over well with potential partners that compete against Yahoo That leaves Ask Jeeves, with its Teoma crawler, as the remaining good choice.

Partner Fears

Snatching away the FAST puzzle piece may hurt Espotting, but it may also damage Overture’s partner relations, in particular with MSN. It’s emerged that MSN was interested in purchasing AltaVista, as reported by the New York Post.

If MSN wanted AltaVista and couldn’t get it, FAST would have been an obvious second choice. MSN may have lost that option — and a puzzle piece Overture has less ability to defend as necessary. That’s not something you’d think would make MSN exceedingly happy.

For its part, MSN said in a Search Engine Watch interview it had examined AltaVista but was not “serious” about buying it. In fact, MSN said for the time being, outsourcing for its search results seems the best option.

“We’re looking at all of our strategic options right now. What’s the best thing to do long term, not short term?,” said MSN Search general manager John Krass.

What’s left for MSN to acquire? Potentially, the company could go after Overture itself. Realistically, it’s more likely to consider LookSmart. It’s already an MSN partner, so communication lines are strong.

MSN could consider Ask Jeeves, which operates the Teoma crawler. A long shot (but one that can’t be dismissed) is MSN might consider Google. Microsoft certainly has the cash to make an attractive offer. If you’ve decided owning technology is important, why not purchase what’s widely regarded as the best? In addition, it’d pick up Google’s widely popular sites in the U.S. and around the world while potentially hurting chief competitor AOL.

Of course, Google may not want to be purchased. Even if it did, there would be the real fear a Microsoft-owned Google could taint Google with the public fear of dominance many already have regarding Microsoft. Google already has enough of a challenge combating this fear without a Microsoft connection.

AllTheWeb’s Future

FAST used the AllTheWeb as a showcase for its technology and to test new technologies. Overture says it intends to continue that.

Overture previously said it would keep the AltaVista site operating, also as a place to test new technologies. Why operate both?

To be honest, Overture itself probably doesn’t know yet what to do with them. The company has said the focus on AllTheWeb will be to “test and experiment with advanced approaches in search,” while AltaVista will be used to “refine implementations for new products and improve presentation to consumers.”

AltaVista has a much larger audience than AllTheWeb. The latter doesn’t even register in terms of search hours, so testing how consumers react to things at AltaVista makes sense. I suspect it’s likely AllTheWeb will be allowed to wind down in terms of the support Overture provides it. It’s unlikely we’ll see new ideas such as AllTheWeb’s skins emerge there.

Related reading

site search hp
Space Shuttle Launch