Overture Racing to Keep Pace With Google - TheStreet

Overture Racing to Keep Pace With Google

A new product puts the paid-search company on the map in an expanding niche on the Web.
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Overture Communications (OVER) is taking another step to diversify its revenue and fight back against a major rival.

The operator of the pay-per-click search engine announced the launch of a long-expected contextual advertising service Monday.

Overture's new service, dubbed Content Match, enables advertisers to not only have their Web sites listed in response to Internet users' search-engine queries -- Overture's traditional business -- but also be listed on relevant nonsearch pages.

The company hopes that the new service -- similar to one already offered by the privately held

Google

-- will not only drum up more business from current advertisers, but also make Overture more attractive to its partner Web publishers by giving them more opportunity to make money from their sites.

"This will enable us to deepen our relationships with both partners and advertisers," says Bill Demas, general manager of Overture's Partner Business and Solutions Group.

The company, which estimates that the paid-search industry will grow from a $3 billion market in 2003 to an $8 billion market in 2008, suggests the nascent contextual advertising market could amount to $2 billion in additional annual industry revenue in five years.

The company's shares, which have ranged between $10.42 and $31.30 over the past 52 weeks, fell 21 cents Monday to close at $18.13.

Overture's shares have faltered since the beginning of 2002, as investors have assessed the threat to the company's business both from rivals and from Internet publishers who split ad revenue from Overture in return for displaying Overture's search results on their sites.

In a sign that the new product could indeed shore up Overture's relationships with Internet publishers, Content Match debuted on various Web properties operated by

Microsoft

(MSFT) - Get Report

and is being tested on other properties operated by

Yahoo!

(YHOO)

.

In the first quarter ended March 31, nearly two-thirds of Overture's revenue came from ads it placed on either Microsoft's or Yahoo!'s properties. That degree of reliance on traffic supplied by those major partners has kept alive the specter of their demanding ever-increasing portions of the revenue Overture reaps from their sites.

Demas compared the Content Match service favorably to Google's rival AdSense program, which also places ads on content sites. Currently, Content Match ads are placed via a combination of automation and human intervention, says Demas, and publishers can filter advertisements based on their decisions about what is appropriate for their particular site.

The threat Overture faces from Google continues to be a subject of debate. Overture bears have seen Google's rise as a threat to Overture's margins, but the company and its supporters say that the prospects for pay-per-click advertising's growth outweigh the possible injury that Google could do to Overture.