Overture Inks Search Pact with MSN Japan

Paid search leader Overture Services announced on Thursday a deal with MSN to provide commercial search results for its Japan properties, as Overture continues its push abroad.

The exclusive deal follows a six-month test agreement between MSN calls for Overture to provide paid search results for both MSN Search Pane, a search feature on Microsoft’s Internet Explorer browser, and MSN’s Japan site. The Search Pane agreement applies only when searches are done via MSN — Explorer users can set it to search via other search providers, although MSN Search is the default — and expires in December 2003. The MSN Japan agreement expires in December 2004. Financial terms of the agreement were not disclosed.

“This is a very important deal for us,” said Johannes Larcher, Overture International’s general manager. “It really solidifies our market-leading position in Japan.”

By signing up MSN’s Japanese sites, Overture notched another win in its battle with rival Google to expand the paid-listings business to international markets. In November, the two companies agreed to an unusual arrangement with Yahoo! Japan to share an 18-month paid-listings contract. Yahoo! Japan was able to try both companies as a result of its huge presence in Japan, where it is by far the No. 1 Internet site. Yahoo! Japan attracted 14.5 million unique visitors from home in January, according to Nielson//NetRatings. MSN.co.jp had 8.5 million.

Overture officially launched its Japanese operations in December 2002, and the company said it already has 1,000 advertisers for the service. Thus far, it has deals with Infoseek Japan, Lycos Japan, and NTT’s goo.com. With the MSN deal, Overture now reaches 89 percent of the Japanese Internet market, the second largest in the world.

Google has been in Japan for two years, opening a Tokyo office in 2001. It began offering a Japanese version of its AdWords paid-listing product in July 2002 and has since inked paid-listings deals with NEC/BIG GLOBE and Excite Japan.

The Overture/MSN pact also deepens the relationship between the two companies. Overture already has deals to provide paid listings to MSN Search Pane and MSN sites in the United States, Canada, United Kingdom, German and France. MSN, along with Yahoo!, accounts for nearly two-thirds of its revenues.

“This really fortifies our privileged status of having MSN as a global partner,” Larcher said.

Overture CEO Ted Meisel, speaking earlier this month during the company’s fourth-quarter earnings call, said the company would continue to focus on international expansion as a way to grow its business — and eventually diversify its revenue streams away from relying on Yahoo! and MSN for so much of its business. Initially, however, Overture’s relationships with MSN and Yahoo! make them ideal launching pads for entrie into international markets, since both have seen the financial benefits of paid search in the U.S.

Speaking at Yahoo!’s analyst day yesterday, CEO Terry Semel said Yahoo! was interested in expanding its paid search business, which netted the company $140 million last year, further abroad.

“We are certainly interested in expanding that relationship in Europe and potentially Korea,” Larcher said, while declining to expand on talks with the portal.

Meisel said Overture would speed up its international expansion, despite the short-term costs that would keep earnings flat in the first half of 2003.

Two weeks ago, the company expanded its relationship with AOL Europe, and it plans to launch operations in Italy, Spain and other European markets this year. In a few months, Overture will begin operations in South Korea, where it has signed up the top portal, Daum.net, in January.

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