Updated from 7 a.m. EDT

Shares in

Overture Services

( OVER) were swinging Wednesday on news that its relationship with

America Online

(AOL)

has ended. But as usual, they probably will swing too far.

So says someone who has a unique, though not necessarily objective, perspective on pay-per-click search-engine operator Overture: Craig Pisaris-Henderson, CEO of

FindWhat.com

( FWHT), a pint-sized knockoff -- think of the Mini-Me character from the Austin Powers movie -- of Overture.

From an investor's point of view, says Pisaris-Henderson, it makes sense that Overture's stock might fall on the news that it has lost a distribution partnership with major affiliates that use Overture's pay-for-placement search engine on their Web site. (Pisaris-Henderson doesn't actually own stock in the rival company.)

After all, he says, each of the major affiliates is responsible for a significant chunk of the Internet traffic that Overture turns into advertising revenue when people click on paid listings in its search results. (Note that Overture also raised revenue guidance at the same time it announced the AOL pact had ended.)

But the swings in the past, says Pisaris-Henderson, have been far out of proportion to any one deal's economic effect on Overture. "The volatility is not justified," he says.

One prime example of the Overture overreaction, he says, is when Overture's shares

plummeted in February following news that EarthLink had ended its partnership with the company. On the upside, Overture's shares

jumped last week on a positive earnings surprise and the news that

Yahoo!

(YHOO)

had extended an affiliation agreement with Overture for three years. On Tuesday, Overture's shares rose $1.55 to close at $34.19; Wednesday morning it was sliding $8.69 to $25.50.

Busy Month
Up and down at Overture

Now the fate of its agreement with

AOL Time Warner's

America Online unit is known; that agreement, originally slated to end in March, has been extended twice as Overture and AOL have been unable to negotiate a new agreement.

By reacting so violently to the affiliation news, says Pisaris-Henderson, investors are ignoring another key element of the pay-per-click search business: the advertisers. Overture reports it had 60,000 active, paying advertisers as of the end of March, but that's only the beginning, says Pisaris-Henderson: "There are probably over a million potential advertisers who can come into their business model."

Of course, Pisaris-Henderson believes that leaves plenty of growth for FindWhat.com, too, which he has unabashedly tried to position, among both advertisers and investors, as a smaller, cheaper version of Overture. In an attempt to draft off of the publicity and attention created by the well-financed Overture (originally known as GoTo.com), FindWhat.com started trading publicly, through a merger with a shell company, at about the time that Overture went public in 1999.

FindWhat.com, which claims 16,500 active advertisers, reported first-quarter revenue of $8.7 million, compared with Overture's $142.8 million.

While FindWhat.com doesn't reap as much ad revenue per click as does Overture, Pisaris-Henderson says it can make more profit from lower-priced clicks than can Overture.

And one distinctive advantage that FindWhat.com has over Overture, says Pisaris-Henderson, is that, with none of its affiliates responsible for more than 10% of its ad revenue, it has greater leverage than does Overture in negotiating ad revenue splits with its affiliates -- a negotiating position that

some Overture short-sellers have pointed to as the company's Achilles heel over the long run. FindWhat.com hands over about 50% of its ad revenue to its affiliates, while Overture paid 54% to affiliates in the first quarter.

But one major cloud hangs over FindWhat.com, admits Pisaris-Henderson: litigation with Overture, which says that FindWhat.com and Google have violated a patent Overture holds covering pay-per-click search engine advertising. Pisaris-Henderson, who says the litigation is in its early stages, asserts the patent should be found invalid and unenforceable.