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TheStreet Open House

Overture Chief Sees Clear Sailing Ahead

Now that Overture Services (OVER) is being acquired by one of its biggest business partners, some investors worry that Overture's relationships with its other online partners will sour.

But Overture Chief Executive Ted Meisel calls this a misguided notion.

Following Overture's agreement last month to be acquired by Yahoo! (YHOO - Get Report), there's a sense, Meisel says, "that because Overture is now part of a portal ... somehow that diminishes the value, to affiliates, of what Overture does."

Not true, he says. Yes, in the past, the pay-per-click search-engine operator has gotten Web site affiliates to host Overture's search results in part by arguing that it wasn't competing with them for advertising dollars by operating its own destination search engine.

In fact, Overture has used its decision not to develop a consumer brand as a distinguishing feature in its competition with privately held Google, the ever-popular search engine that competes with Overture for both affiliated Internet sites and advertising dollars.

But now that Overture is being taken over by Yahoo! -- a company that, with Microsoft (MSFT - Get Report), supplies Internet traffic to Overture, amounting to two-thirds of the search company's revenue -- Meisel says losing that disinterested status will be no big deal. "We compete on several factors," says Meisel, including search monetization, quality and customized service. "No-branding, or private label, is one -- only one -- of the factors."

Affiliation, along with competition from Google, the benefits of the Yahoo! deal, and new efforts in context-based and locally targeted advertising were among the topics that Meisel covered in a conversation with last week.

With Overture's stock trading in tandem with Yahoo!'s since the companies' deal was announced, it's unlikely that any of these issues will have a major effect on Overture's stock before the deal closes, as expected, by the end of the year. But given that pay-per-click is online advertising's biggest growth area these days -- with Overture accounting for about 20% of Yahoo!'s revenue in the first half of the year -- it's likely that they will play a significant role in Overture's and Yahoo!'s future for years to come.

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