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Saturday, May 03, 2003

Yahoo-Overture? Not at this Price

Since they first bubbled up amongst the eternally hopeful and terminally biased cheerleaders for Overture's stock on the Yahoo! Finance discussion boards, I've felt that the speculation about Yahoo acquiring Overture is, well, dumb.

Yes, Yahoo! raised $750 million in a bond financing. There are a lot of undervalued opportunities in the marketplace right now, so why shouldn't an established leader double down and consolidate its position by making a few key acquisitions of undervalued companies?

Yahoo! has made big acquisitions before, but they haven't been Overture. And the next one is unlikely to be Overture.

A purchase price in the range of $700 million assumes the continuation of Overture's long-term deals with companies like Yahoo, MSN, Lycos, Infospace, and AOL overseas. Without their large distribution partners, Overture is nothing, zilch, nada.

Problem is, if Overture was owned by Yahoo, those MSN, AOL, and Lycos deals would be in serious jeopardy. Without them, Overture is worth much less than $750 million. In fact, with its high overhead and big head-count, Overture would be bleeding cash all over the place if it lost those deals.

A more likely scenario, made even more plausible by the fact that some observers think they've seen Yahoo testing their own pay-per-click keyword ads, is that Yahoo will turn the screws on Overture a bit more in the next negotiation, by threatening to go in-house. Another thing Yahoo could do would be to briefly make a deal with Findwhat (as Lycos did) to "private label" their PPC service. This would deliver an additional 20,000 advertisers to Yahoo's database, which would be a decent kick-start towards offering their own service down the road.

Doesn't matter, anyway. Overture can talk all they want about their 90,000 advertisers. If Yahoo goes ahead with their own pay-per-click program, advertisers and their agents will open accounts faster than you can say "disintermediation."

So who is Yahoo going to acquire? IMHO it'll be either something strategic like Earthlink, or another cash-flow generating channel (like HotJobs). Yahoo makes good, steady profits in niches like Personals. There are sure to be other channels where an acquisition would pay off, such as travel, books, or well, you name it. I don't think Yahoo's going to be snapping up anytime soon (valued at $11.5 billion), but it's nice to see indications that they're thinking big. So why all the fascination with Overture, which has value only as long as its portal partners decide it does?

Posted by Andrew
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Friday, May 02, 2003

Rumors about Yahoo Bagging Overture is speculating, as other writers have done recently, that Yahoo may have Overture in its sights as an acquisition target. Why else would it raise $750 million last month? To buy new office furniture?

I don't have much insight into why or why not Yahoo would snap up Overture, but if that was the case, I doubt Overture would have bought up AltaVista and AllTheWeb, especially since Yahoo just finalized their purchase of Inktomi.

But, if Yahoo did actually buy Overture, they would own more than half of the paid search market AND search engine market overnight. Hmm... maybe they will absorb Overture, after all...

Posted by Cory
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"Will they Sell Adword Positions?" No, Doc.

An interesting and telling article by Doc Searls was posted Wednesday comparing Overture and Google pay-per-click advertising with Linux because "it lowers the threshold of market disruption for companies that take advantage of [its] extreme technical economies." (I think that means it lets the little guys play on the same playing field as the big boys.)

Searls is impressed by the fact that Google Adwords (since being relaunched as a pay-per-click service in March, 2002) now determines ad position on the page partially based on the relevance (clickthrough rates) of ads. Little wonder that this Cluetrain co-author would understand that anything relating to online commerce absolutely must build the user experience into its design. As Sheryl Sandberg, the first director of the Adwords program, explained to me last year, the editorial policies enforced by Google Adwords staff are also part of that long-term approach that aims to ensure that users don't get so turned off by the ads that they stop using the search engine.

Google saw early on that they'd need to screen out the types of ads which were "merely disruptive" - those which might get clicked on, but which might lead to very poor sales conversion rates. Once one moves away from the realm of interruption marketing, into a realm where every advertiser is tracking their sales conversions, it makes sense for all concerned to set up a framework that prevents the "merely disruptive" ad from diverting too much attention from the regular search results, or other advertisers' ads.

In any case, Doc is a bit late to the game; finally discovering the unique user-centered principles that are built into search engine keyword advertising. Jakob Nielsen was probably the first to clearly explain the unique properties of Google AdWords in this respect. The rest of us caught on a bit later. And the majority of businesspeople and journalists are just now starting to catch on.

More recently, Nielsen made another "discovery" (or at least put forward a compelling proposition) about text-based ads: the superior response rates of text-based ads where appearing next to content may be a short-lived artefact of the novelty effect. [Will Plain Text Ads Continue to Rule?, April 21, 2003.] At the same time, he argues, text ads next to search results may continue to resonate with users for the foreseeable future, because "search engines are the one type of website that people visit with the explicit goal of finding someplace else to go."

As an imaginary personification of Yahoo might tell anyone who asks: "I've been rich and I've been sticky. Rich is better." Paid search is here to stay.

[Thanks to Cam Balzer for noticing the Doc article.]

Posted by Andrew
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Wednesday, April 30, 2003

More Meaningless Metrics?

The numbers reported by comScore Media Metrix's "new" search traffic measurement service (qSearch) seem to be the meeting with healthy scepticism from some observers (and, of course, comScore's competitors).

My issue with the numbers is that they seem to be bending over backwards to give Yahoo a favorable rating. I will leave you to speculate as to why they might do this. The claim that "Yahoo’s domestic leadership is driven primarily by the strength of its channel offerings, such as Yahoo! Finance and Yahoo! Yellow Pages" raises a red flag. Who told comScore to go and include those channels in their methodology? Is it 100% clear what is being measured? Is Yahoo actually getting too much credit as a search property for the normal activity that might be associated with content channels within a busy "portal"? Did comScore measure activity on Google's other channels, like Google Groups, Google News, Froogle, etc.? Perhaps even more importantly, to what extent are users willing to continue using Yahoo Search because it is powered by, well, Google?

Some other metrics seem contrived, as well. Before April 28, I had never heard of the "visitor-to-searcher conversion ratio." Sounds impressive, right? It puts Infospace's Dogpile and Metacrawler properties in a nice position of well-deserved leadership. And no doubt it is a stab at MSN, which enjoys a lot of visits from confused Internet Explorer users. But the fact of "converting" a visitor to a search engine site to a visitor who actually performs at least one keyword search is like calculating the ratio of high school students attending at least one class to students who enter the school on a given day. More meaningful info in that context would be whether the learning converts to high test scores. And in the e-commerce arena, at least from the search engine marketer's standpoint, anything short of knowing how many of those searchers convert to sales constitutes inconclusive data.

Oddly, then, small boutique "marketing laboratory" consultancies such as and Drilling Down seem to do a much better job of studying metrics with "teeth" than the established metrics agencies do.

Posted by Andrew
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Monday, April 28, 2003

Search Engine Blog's PPC Series Comes to a Close

Part 5 of 5 has been posted. Hats off to Peter at for an excellent roundtable discussion with several PPC industry experts, including our very own Editor, Andrew Goodman.

Posted by Cory
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AOL, Microsoft and Yahoo Unite to Crush Spam

After letting the problem fester for years unfettered, AOL, Microsoft and Yahoo announced a coalition to liberate the people of the world from the tyranny of "e-mail of mass distraction."

It's about time, too, especially since a large part of the problem had been caused by AOL Mail, Hotmail and Yahoo Mail and the ease with which spammers are able to abuse those mail systems.

Alas, I doubt much will come of it, but I must remain hopeful. When you're dealing with hundreds and hundreds of mass e-mail sent every day by unscrupulous losers with plenty of ingenuity and zero morals, it's difficult to do much to slow them down. They'll undoubtedly devise some clever way around the new practices.

Still, this development is promising. It looks like these companies are going to make it harder for people to register anonymously and send mass e-mail to others. There are several other interesting parts to this alignment, and it's worth looking into. So, if you're a spam sufferer like me, be sure to read up on it!

Posted by Cory
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Wall Street Gets Nailed Over Internet Stock Fraud

From CNNMoney:

"An investigation into wrongdoing on Wall Street climaxed Monday when 10 securities firms agreed to pay $1.4 billion and change the way they conduct business by separating stock market research from investment banking....

Two analysts who followed boom-and-bust sectors of the late 1990s were named. Henry Blodget, who covered Internet stocks for Merrill Lynch, and Jack Grubman, a telecom analyst at Salomon Smith Barney, have been barred from the business. Blodget will pay $4 million to settle the charges against him; Grubman is handing over $15 million."

Wow. Good things do happen to bad people!

Posted by Cory
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Sunday, April 27, 2003

The Keyword Sandbox: A Quick Way to Get Keyword Suggestions for AdWords

You may already know about Overture's free Search Term Suggestion tool, which you can access at a direct URL without having to log in and type in that 4-digit code. But did ya know that Google has one, too? I just stumbled upon the Keyword Sandbox, and it certainly helps with the brainstorming when I'm too darn lazy to log in!

WordTracker's got more features and works wonders and all, but when you want to get quick ideas, these tools are pretty handy.

Posted by Cory
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