MSN Re-Ups with Inktomi

Search provider Inktomi, recently acquired by Yahoo! , renewed its contract with MSN through December 2005, according to its filings with the Securities and Exchange Commission (SEC).

According to the filing, MSN renewed its contract with Inktomi to provide paid-inclusion services for the portal’s search results. MSN has a number of search partnerships, including another for paid inclusion with LookSmart and a paid listings deal with Overture.

The move comes as a surprise, since MSN will now rely on longtime rival Yahoo! for services in search, which emerged from 2002 as the hottest sector in interactive marketing and a key to the portal giant’s growth plans.

While it has been slower to catch marketers’ imagination than paid listings, paid inclusion is seen as an important growth area in search marketing. In paid inclusion, a business can pay to have specific Web pages included in the database that is crawled by a search engine.

Despite assurances from Yahoo! that its $235 million acquisition of Inktomi last Decemberwould not change its partnerships, most industry watchers anticipated the move would alter some of the messy relationships in the search industry, where rivals are often partners at the same time. MSN was expected to dump Inktomi, while Yahoo! was expected to end its relationship with Google for algorithmic search.

The deal could be a further blow to Overture, which figured to look to expand its search partnership with MSN in the wake of its $140 million acquisition earlier this week of search engine AltaVista. Overture said the deal would give it not just editorial search services but paid inclusion as well. The company said a more complete offering would allow it to deepen its relationships with existing partners and compete with rival Google.

No two Overture partners matter more than Yahoo! and MSN, which combined to account for 66 percent of Overture’s revenues in the fourth quarter.

Since announcing the deal, investors have hammered Overture’s shares, questioning the price tag for the acquisition and how much AltaVista will hurt the company’s earnings this year.

According to the SEC filing, MSN paid Inktomi $5.1 million for its paid-inclusion services in the fourth quarter, accounting for 74 percent of its revenues from paid inclusion. The filing said Inktomi expects MSN will continue to be its largest contributor of revenue.

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