Overture Ekes Out Another Week in AOL Deal

Pay-for-placement search provider Overture has secured a one-week extension for its soon-to-expire distribution agreement with AOL Time Warner , allowing negotiations on the two companies’ contract to continue.

Their $50 million deal, under which the Pasadena, Calif.-based firm has syndicated its paid search engine listings to AOL’s America Online and its other U.S. Internet properties for the past two years, originally had been slated to expire near the end of March.

However, as negotiations between the two companies on a possible contract renewal threatened to continue beyond the expiration date, AOL and Overture agreed to a one-month extension.

Now, with a second reprieve, Overture will continue providing paid search listings to AOL at least through May 1.

Further details of the extension, and of the negotiations, were not disclosed. Originally, Overture paid $50 million to AOL to provide it with search listings — a figure that the company is believed to have more than made back through cost-per-click revenue from the deal.

Despite the big numbers involved, the company routinely downplays the notion that the loss of a major partner would have a disastrous effect on its business, since Overture has “tens of thousands” of affiliates — including AOL competitors Yahoo! and Microsoft-owned MSN.

Yet even if the loss of AOL doesn’t pose an immediate, severe threat to the company’s bottom line, many believe that the development would hurt Overture competitively in the long run, as rivals like LookSmart FindWhat , and Google would be keen to take on the business, which they could leverage in promoting their network to advertisers.

San Francisco-based LookSmart, which has been boosting its search engine technology through recent acquisition activity, already distributes its results to Ask Jeeves and AltaVista. FindWhat, headquartered in New York, services InfoSpace and Search.com, while Mountain View, Calif.-based Google, a recent entrant to the field, took over an Overture contract with EarthLink earlier this year.

Google, which, like FindWhat, is being sued by Overture for patent infringement, also is working with AOL’s CompuServe unit to test distribution to its portal, supplementing its Overture-delivered listings.

Additionally, AOL isn’t the only concern of Overture’s at the moment. The firm also is contending with the potential loss or defection of Yahoo!, whose contract expires at the end of June. While the portal renewed its quarter-to-quarter agreement with Overture in March, executives at Yahoo! have said the company is looking into running a paid listings service itself.

There’s also the possibility that Yahoo! can tap another provider for the technology, such as Google — which already powers the sites’ unpaid search engine.

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