Overture Gleeful Over Yahoo!-Inktomi Deal

Having notched a series of recent wins against Google for paid listings contracts, Overture was pleased to learn its rival might soon feel even more pressure, this time in its core algorithmic search business, now that Yahoo has purchased search technology company Inktomi.

Overture’s chief financial officer, Todd Tappin, said the commitment by Yahoo to make search a core part of its business will strain its relationship with Google, which currently provides Yahoo’s algorithmic search results. Overture’s relationship with Yahoo, however, is not considered to be in jeopardy, because there’s no indication that the portal intends to go it alone in the paid listings space.

“We think it’s pretty exciting. This is going to provide some very interesting developments in the future,” he told investors yesterday at Morgan Stanley’s media conference. “As Yahoo and Microsoft and some of the others look to expand their strategies in search, and start branding themselves as a destination for search, I think that will accrue a benefit to us.”

Last month, Yahoo plunked down $235 million to buy Inktomi, a veteran search provider that competes with Google in the search technology market. Although Yahoo’s chief executive, Terry Semel, said the deal would not immediately affect the company’s partnership with Google, industry analysts predicted that Yahoo would eventually supplant Google’s algorithmic search services with its own in-house search technology built from Inktomi’s platform.

Meanwhile, Google in the past year has attempted to expand its business into the paid listings space, which has been dominated by Overture. After opening eyes with its early wins of former Overture clients Ask Jeeves, EarthLink and AOL, Google has faced a string of setbacks in the mostly untapped international market, losing out most recently to Overture for a deal with Britain’s largest Internet service provider, Freeserve.

“Why are we winning a lot of our distribution deals?” Tappin asked at Morgan Stanley’s media conference yesterday. After listing Overture’s strengths, he added a final reason: “lack of a conflict of interest.”

Overture has long said that Google faced inherent conflicts with its partners because the Google site competes with them for traffic. Google has recently expanded its popular search site, adding a news section, a comparison-shopping engine, and other portal-like features. In contrast, Overture does not operate a destination site.

“We’re not a portal, so we’re not competing with our portal partners,” Tappin said, adding that sites interested in protecting their brand would choose Overture over Google, which commands one of the strongest brands on the Internet.

Now, he said, Yahoo has decided to deeply embed search in all parts of its vast portal — a move that its competitors are likely to follow.

“This is going to put pressure on [Google],” he said. “[Google] has to start to spend real marketing dollars that in the past they didn’t have to spend.”