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Overture Services

( OVER) fell as much as 23% Wednesday, following a report that the pay-for-placement Internet search engine didn't renew a contract with one of its affiliates.

Though the size of the contract doesn't seem huge, and though Overture has announced deals to add new business in recent days, investors may have the jitters about the company's valuation, as well as about the threat to Overture's growth from a competitor that's a polar opposite: Google, a search engine with a reputation for returning results that are singularly objective and difficult for third parties to influence.

At midday, Overture Services -- previously known as -- was trading at $24.61, down $5.81. In 2001, as one of the few advertising-based Internet companies to be reporting happy news, the company's stock nearly quintupled, rising from $7.31 to $35.43.

At issue was a story that appeared on


Tuesday evening, saying that the Internet service provider



had replaced Overture with Google as the company's default search engine, after failing to extend a contract with Overture that expired at the end of 2001.

Overture says the immediate impact of losing EarthLink as an affiliate isn't material. "If the deal had expired in the third quarter, we would not have had to revise guidance for the fourth quarter," said an Overture spokesman.

About 95% of the traffic to Overture's search engine comes from affiliates, including

AOL Time Warner's


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. In return for carrying Overture's service, these affiliates get a split of the revenue that Overture reaps from advertisers who pay for prominent placement in the Web site listings that pop up in response to searches for particular keywords.

But perhaps investors are worried about Overture in the long run. Though it recently announced new contracts with


( BLS) and

AOL Europe

, Google's EarthLink win -- which includes an advertising revenue sharing arrangement with the ISP -- represents competition for Overture's ability to help other Web sites make money from the searches people conduct through their sites.

That may make Wall Street a little more nervous about Overture's run-up; before Wednesday's decline, the stock was trading at 60 times Thomson Financial/First Call's bottom-line estimates for 2002.

Overture has already signaled to Wall Street that it will exceed expectations with its fourth-quarter financial results, which are due for release next Tuesday.