Overture Plans New Products

With all the buzz Tuesday about Overture Services’ second purchase of a search technology company in less than a week, little notice was taken of the company’s plan to roll out new search products.

In the coming year, Overture plans to offer contextual advertising, in order to capitalize on the success of its pay-for-performance advertising, as well as local search products.

“We see tremendous opportunities,” Overture CEO Ted Meisel told investors at a Goldman Sachs conference Tuesday afternoon. “From our perspective, we think that each of the pieces contribute to the greater whole. We don’t think of these as entirely separate product lines.”

Meisel said local search and contextual advertising would work with the company’s new analytics capabilities acquired via its purchase of Keylime Software in January to “represent the growth phase of the company.” The three services represent a new generation of products that Meisel believes will change Overture’s business from serving keyword advertising to the larger mission to “create new and powerful ways to connect businesses and customers on the Internet.”

These new services are dependent on Overture’s huge investment in algorithmic search. In a week, the company has spent up to $240 million acquiring algorithmic search capabilities through its deals for AltaVista and the Web search unit of FAST. Meisel said with algorithmic search, Overture could develop more robust search offerings in local search and contextual advertising.

To further the rollout of these services, he said Overture would spend between $10 and $12 million on product development this year. By 2004, it expects the services will be breakeven.

The idea behind Overture’s contextual advertising product is to take the vast amount of information it has about a page’s contents in order to match up an ad with that content. As an example, Meisel said a sports page on a portal could contain a number of targeted links from an Overture advertiser.

Overture also plans to roll out local search services. Meisel did not go into detail about how the services would work, but an Overture representative said it would match up businesses and consumers based on geographic location.

“The time is right to begin to roll out local search products,” Meisel said.

Meisel said Overture had begun to test some of these initiatives with its partners, including MSN and Yahoo.

“It would be fair to say that some of the reasons we’re interested in the internally developed products is to serve them,” he said.

In addition, the acquisitions of AltaVista and FAST’s search sites could speed the rollout of new products. Overture plans to use AltaVista.com and FAST’s AlltheWeb.com as testing grounds for its new ad products and a showcase for partners.

Meisel said the company’s development of new products had been hindered by the amount of testing its partners were willing to do.

Finally, Overture will add in its analytics offering, which the company acquired through Keylime to buff up its Direct Traffic Center, which gives its 80,000 advertisers metrics on their paid-listings campaigns.

“We know that our advertisers are asking for analytics products,” Meisel said. “They simply can’t calculate their ROI in the best possible way.”

He said the more its partners find out about the return on their campaigns with Overture, the more business they send the company’s way.