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Tuesday, February 25, 2003

Overture Grows Again: Grabs FAST's Internet Business

The non-enterprise side of FAST Search and Transfer has just been snapped up by Overture.

Translated, this means that three major competitors to Google in the business of crawler-based, algorithmic search of a whole web index have been swallowed up by larger companies in the past couple of months. Inktomi became part of Yahoo for approximately $235 million, AltaVista sold to Overture for approximately $140 million, and now, part of FAST joins Overture as well for up to $100 million depending on future incentive payments.

Google's other competitor, Teoma, was also acquired last year, by publicly-traded Ask Jeeves, which is still hanging on profitably but which also seems now more than ever to be an acquisition target.

We have to feel vindicated. In reviewing the search space just over a month ago, Traffick saw limited differentiation and appeal in the offerings of the also-rans, opining that AltaVista was "yesterday's search engine" and that "it would be better for AV to scatter its ashes and make way for a regrowth of something fresh and hot." We gave a lukewarm response to FAST's positioning as "#3, supplying search results to the #4 portal," with the bright side being that "custom work for the enterprise sector is a nice honest living." FAST will continue to do business in the enterprise sector - which, surprise, suprise, was generating 75% of the firm's revenues - after selling off its Internet divisions.

It's tough to sort out who wins and who loses here. Long term, consumers lose different sources of innovation, and must trust in the almighty powers of Google. Metasearchers will have fewer and fewer independent, unpaid indexes to include in their metasearches.

Short term, Overture shareholders suffer, since Overture's acquisitions, intended to keep them even with Google in the race for advertising dollars, will no doubt entail integration headaches and accounting ambiguity (not a good thing in today's market environment).

It's a wash for Google, I think. The demise of their competitors is something that already happened, and this is merely post facto recognition of that reality.

Perhaps the biggest winners are advertisers. Consolidation of some me-too search and paid inclusion offerings under the aegis of Yahoo and Overture will make it easier on advertisers and marketing consultants. They'll deal more and more with the big guys: Overture, Google, and Yahoo

So who are the up-and-comers in the search space? Given the current powerful dynamic, a better question is probably "who are the up-and-comers or lingering threats in the pay-per-click search space?" LookSmart, Search123, Business.com, and FindWhat will all make their share of noise in the coming year - and numerous niche players and some also-rans will try to get noticed in a business increasingly dominated by the big two.

The Big Two - in terms of brokering keyword-targeted online advertiser dollars - are without question Google and Overture. They are two very different companies, but clearly, neither is going away anytime soon.

Posted by Andrew Goodman




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