Yahoo Inc. made the boldest move yet in the consolidating Web search space, announcing plans Monday to buy commercial Web search services company Overture Services Inc. in a cash and stock deal valued at $1.63 billion.
The deal will give Yahoo Overtures paid search business, which lets advertisers buy placement on search results Web pages. Paid search has revived the Internet advertising industry. Investment firm Piper Jaffray values paid search as a $2 billion business set to grow to $5 billion by 2006.
Overtures services are already used at Yahoos search site as well as search engines at MSN.com, Lycos and InfoSpace, among other sites. Those affiliate partnerships will remain intact post-acquisition, Overture officials said.
Both Yahoo and Overture had been active in consolidating the Web search space, with Yahoo earlier this year buying Inktomi Corp.s commercial Web search businessand Overture buying AllTheWeb.com and AltaVista.com.
Terry Semel, chairman and CEO of Yahoo, said in a statement that the combined assets of the two companies will make Yahoo the largest Internet advertising company.
"Together, the two companies will be able to provide the most compelling and diversified suite of integrated marketing solutions around the globe, including branding, paid placement, graphical ads, text links, multimedia, and contextual advertising," Semel said.
"By combining Overtures world class monetization platform and complementary Web search assets with Yahoos already robust search business, we will further improve our ability to offer the highest quality search experience," he said.
Together, the two companies will expand Pay-for-Performance search into vertical properties, such as shopping, travel and yellow pages; integrate contextual advertising throughout Yahoos network, including its sports, real estate and automotive Web properties; and offer Overtures 88,000 advertisers (the majority of which are small and medium-sized businesses) a range of additional Yahoo services such as Yahoo! Store and Yahoo! Web Hosting, according to company officials.
The combined entity will also eye opportunities overseas, including in Europe, Korea and Japan, where both companies have a strong presence, officials of the two companies said.
Overture will become a wholly owned subsidiary of Yahoo, and its operations will remain in Pasadena, Calif., following completion of the acquisition. Overture President and CEO Ted Meisel will continue to head up Overtures operations and report to Dan Rosensweig, Yahoos COO.
The transaction is expected to be completed by the fourth quarter of this year.