Overture, Google Race for Japanese Supremacy

Overture Services' (OVER) star is rising in Japan, though the company can't quite shake its major competitor.

Overture, which operates a search engine supported by pay-per-click advertising, said Monday that it had reached a deal putting its service on Yahoo! Japan, the largest Internet portal in Japan. The nonexclusive agreement, says Overture, solidifies the company's position for its planned December launch of its Japanese product, the first the company is offering in Asia.

Meanwhile, Overture rival Google said Monday that Yahoo! Japan, owned in part by Yahoo! (YHOO), would soon start running the paid search advertising service that Google launched this summer.

The announcements indicate how the paid search model -- one in which advertisers bid on keywords so their listings or ads will pop up when an Internet user searches for a particular term -- is being exported from the U.S. throughout the globe, similar to the case with Internet business models devised earlier.

Overture's shares were up 17 cents Monday, trading at $24.65.

Johannes Larcher, general manager of Overture's international business, called the deal "particularly important," given that the company sees Japan as the second-largest Internet market in the world, in terms of search volume and business opportunity. He noted that the Yahoo! Japan deal covers a minimum of 18 months, in contrast to Yahoo!'s first deal with Overture in the U.S., which was for a term of three months.

Overture's shares have fluctuated dramatically over the past year as investors have struggled to quantify the business risk to the profitable, revenue-increasing company by its competition.

Overture's forthcoming Japanese service, says Larcher, has faced challenges unlike those in its services launched previously in the U.S. and Europe. One of those is processing and recognizing a more complex character set than used in Western alphabets; another is adjusting to the dominant role of advertising agencies in Japan in controlling online marketing. "We have focused very strongly on building very good relationships with those agencies."

Larcher estimates that roughly half of Overture's Japanese business will be conducted with large advertisers. In the U.S., where Overture began as a small advertiser phenomenon, the company says 60% of revenue comes through online sales -- presumably small to midsize advertisers.

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