Overture Readies New Search Products

Overture Services said it would release its paid inclusion and contextual marketing offerings in the next three months, as it tries to expand and diversify its product line.

The announcement came at the company’s annual presentation for financial analysts, a little more than two weeks after Overture shocked investors by cutting its earnings forecast for the current year in half, in part because of a longer and more costly development of new products.

While making its name as the leading provider of keyword-based paid listings, Overture has embarked on overhauling the company to be a one-stop provider of a variety of search services, including algorithmic search, analytics, paid inclusion and contextual advertising. Paid inclusion and contextual ads will expand Overture’s reach beyond the three or four keyword listings that appear on partner sites.

“The rest of the page represents an opportunity to us,” said Ted Meisel, Overture’s chief executive. “It gives us the opportunity to create a better search experience.”

Meisel, which described the new products as part of “Overture 2.0,” sees big opportunities in search, which he estimated could be a $15 billion market by 2008.

Unlike paid listings, where a client is guaranteed placement on the results page, paid inclusion advertisers pay to have their Web pages crawled during a search. Contextual ads are served on content pages next to relevant text. For example, a sports-related Web site might carry keyword listings for team paraphernalia next to a story about a hockey game.

Overure’s paid inclusion offering will be a hybrid of the paid inclusion technologies from Overture’s two major search acquisitions earlier this year, Alta Vista and the search unit of FAST Search and Transfer. The two units will offer their paid inclusion products separately until then.

(As a result of the Alta Vista and FAST integration, Overture said it would cut 100 positions, mostly from sales and finance.)

In the paid inclusion market, Overture faces entrenched competition, although not from Google. The market leader for paid inclusion is LookSmart, which has felt the pinch of rising competition. Earlier this week, the company cut its earnings outlook on account of higher spending on product development to stay ahead of the competition.

Overture said it would release Content Match, its contextual advertising service, later this quarter. Content Match also faces stiff competition, in this case from Overture nemesis Google. In late February, Google released its Content-Targeted AdWords. Already, the company has inked a number of deals, including a distribution agreement with Knight-Ridder Digital and ad networks Burst Media and Fastclick. Google upped the ante further with its acquisition last month of Applied Semantics, a contextual advertising pioneer and Overture distribution partner.

Like Google, Overture will allow advertisers to opt out of its contextual advertising scheme. Overture has not announced any distribution partners for Content Match.

Likewise, paid inclusion is not without its concerns. Advertisers are not guaranteed placement, but their Web pages appear without a searcher knowing they were included for pay. For this reason, Google has said it has no plans to offer a product.

In addition, Overture is at work on a local search product that will allow advertisers to target customers in a geographic area. The company said local search would be released by the end of the year.

Overture said the new products would boost its flagging earnings beginning next year. The company said 2004 earnings would be about double the 35 cents to 42 cents per share expected this year.

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