Google Grabbing at Content-Based Ad Market

A new front is opening in the pay-per-click advertising market, signaling a larger potential market for Overture Services (OVER Quote) as well as increased competition.

Google, Overture's prime competitor in the pay-per-click online ad business, says it is launching a new service that would automatically tailor advertising to Web pages by serving ads relevant to the page's editorial content.

The program, for which Google will start charging advertisers next week, builds on Google's current business of selling advertising keyed to the search terms people type when they use Google's Internet search engine.

The new program competes with Overture's plans, announced last week, to develop its own program for what it calls "contextual advertising," or serving ads based on a site's content rather than search engine queries.

While some outsiders have questioned Overture's business model, saying that the company will be squeezed by Internet publishers demanding an increasing share of the ad revenue brought in through their sites, Overture insists that any risk of contracting margins is offset by the untapped size of the search market. The industry's best days "are ahead of us," Overture CEO Ted Meisel said on a call last week.

On Tuesday, Overture's shares rose 20 cents to close at $17.01. Google is privately held, though it's widely expected to file for an initial public offering of stock once IPO market conditions improve.

First Service

In the new product, Google says it is using the same technology it uses in its automated search engine to find pages that are relevant to the terms an online user plugs into the search engine.

"We look at the page, we understand the meaning of the page, and we serve the right ad," says Susan Wojcicki, director of product management for Google.

Google, which has been testing the ad program since late last year, says the program benefits advertisers by extending the reach of their advertising online without affecting the price per ad they pay.