stumbled Tuesday on news of an impending executive departure.
Tim Cadogan, an executive who has worked on building partnerships with the Web sites that carry Overture's pay-per-click search engine, is leaving to join Overture's biggest such partner:
The news, reported Tuesday morning by SoundView Technology Group analyst Jordan Rohan, hurt Overture's shares to an extent that a departure of the company's chief executive might have. Citing concerns about Overture's partner relationships and increasing competition, Rohan cut his price target from $29 to $22.
After falling as much as 8%, shares were trading at $21.94 Tuesday, down $1.45, or 6.2%. (Rohan rates the stock underperform; SoundView hasn't done banking for Overture.)
The stock's decline illustrates continuing investor jitters about the pay-per-click advertising firm's business model. While Overture has enjoyed success that's atypical for both Internet and advertising-dependent businesses, detractors of the company's stock say Overture is at the mercy of the Internet properties, such as Yahoo!, on which Overture's search engine appears.
Those skeptics say that Overture will have to hand over an increasing share of its revenue to its partners in return for placement on their sites -- either to fight off competition from search rivals such as Google, or as a reflection that larger Web sites like Yahoo! might outsource less of their paid-search business.
In his note, Rohan speculates that Yahoo! will extract concessions from Overture by threatening to drop Overture as its pay-per-click supplier when the companies' latest agreement expires in 2005.
But Rohan also says he believes Cadogan will be instrumental in building a search product separate from pay-per-click advertising, in which advertisers pay each time an Internet user visits their Web site after their listing pops up in search results.
This other search product is known as "paid inclusion" and enables advertisers to pay a flat fee to be included in search results, although they don't have as much control over where they're placed as they do in the pay-per-click setup. Yahoo! is gaining a paid inclusion business through its pending acquisition of
A Yahoo! spokeswoman wasn't immediately reachable for comment. An Overture spokesman said, "We have an excellent relationship with Yahoo!, and expect and look forward to working with Tim, in his new role, to strengthen and deepen our relationship with Yahoo!."