Overture Warns
In today's earnings call, Overture Services warned that while revenues would continue to be strong in 2003, profit would be significantly below expectations for the next few quarters. International expansion costs, acquisitions, and rising "traffic acquisition costs" (revenue shares to syndication partners like Yahoo) are to blame. Also being blamed is the slower-than-expected pace of increase in the average price per click.
This rough patch could be a blessing in disguise for Overture. It has been leaning too heavily on bidding wars and rising costs per click on a narrow band of keywords. Because of its inflexible keyword matching options, Overture monetizes a relatively small percentage of the overall keyword inventory. I've never been clear on the reasons behind Overture pursuing this type of strategy, or why they have been so slow in offering features like broad matching. But now's the time for action. Keyword advertisers want additional flexibility and control over the massive keyword inventory that is available.
Overture's warning is also said to anticipate potential losses of partnerships, but just because a company warns something might happen, doesn't mean it has happened or will happen. If Overture simultaneously broadens its keyword base and renews key partnerships, the warnings may turn out to have been overly conservative.
I'm sure you can dig up the relevant news accounts on your own. For fun though, have a look at this trader's comments on the Overture board at Yahoo Finance. The joie-de-vivre and admirable lack of partisanship ("Thank you God! I love America! I love G Bush and B Clinton"!) will surely take this individual a long way in his trading pursuits.
Posted by Andrew Goodman
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