You can't argue with the success of Overture Services ( OVER). But there's still room for some of its customers to snipe. The Internet advertising firm has wowed Wall Street recently with its uniquely strong, by Net standards, financial performance. But conversations with some advertisers that use Overture's pay-per-click search listings suggest a recent change in editorial policy is stirring customer turbulence. This dissatisfaction suggests that even as investors worry about risks associated with Overture's distribution via Internet properties such as Yahoo! ( YHOO) and EarthLink ( ELNK), there are potential sales and editorial risks as well.
Overture, which on Tuesday
announced year-over-year revenue and earnings growth way beyond Wall Street's expectations, jumped $5.25, or 19%, to close at $32.91 Wednesday. The company, formerly known as GoTo.com, saw its shares plunge earlier this month over worries about the cost and extensiveness of affiliation agreements with properties such as EarthLink and AOL Time Warner's ( AOL) America Online. These deals give those companies a cut of Overture's ad sales in exchange for placement on their sites. Tuesday's rebound erased the last of last week's loss, though Overture's shares are still below their January 52-week high of $43.16. The problem, say some Overture customers, is that some of the relevancy guidelines, at least as implemented, don't make sense. One company that has bumped up against the new guidelines is the Sanders Big Bear Lodge , a fishing lodge in Cooke City, Mont., near Yellowstone National Park. That Web site was recently turned down when it tried to bid on phrases such as "fishing resort," "fishing trip" and "fly fishing vacation," according to Dave Lerner, president of WyomingNetwork, a Web site design and Internet marketing company working with the lodge. The reason behind that rejection, which was reaffirmed in Overture's advertiser appeal process, was that a fishing lodge in a particular location isn't an appropriate answer for geographically nonspecific searches like "fishing trip," says Lerner. That might make sense if there were a national chain of fishing lodges, he says, but there isn't. Furthermore, says Lerner, often people who are interested in a fishing vacation don't have a particular geographic area in mind when they start searching. "Overture is saying 'fishing lodge' is not relevant for someone who is searching for fishing lodges," he says.
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Overture's fall and rise