Commentary: Eye on the search prize

By Charlene Li, Principal Analyst

In the race for consumers and marketing dollars, Yahoo's acquisition of Overture will separate it from America Online and Microsoft's MSN. But Google is the prize--and chief rival--for portals and Internet service providers.

Yahoo announced on Monday that it will purchase Overture for $1.63 billion in stock, which will add paid search capabilities to its already strong marketing services portfolio. This positions Yahoo squarely against Google--which has gained users in the past year at the expense of Yahoo and other portals. The acquisition also does the following:

• Gives Yahoo the best integrated marketing solution. With paid search in-house, Yahoo will expand beyond simple listings, integrating search into areas like yellow pages and product search. The appeal: A one-stop online marketing solution for businesses. Yahoo also provides the perfect proving ground for contextual search--inserting paid listings into content like news and sports.

• Leaves MSN out in the cold. MSN currently has three search partners: Overture (paid listings), Inktomi (algorithmic search), and LookSmart (Web directory). With two of those partners now

		Related Story Yahoo to buy Overture for $1.63 billion The Web portal plunks down a sizable sum to acquire the the search specialist in its battle with Google, Microsoft.

• Sounds the bell for Google's initial public offering. Google will continue to be the undisputed search champion with its wide distribution network (including AOL), strong consumer brand and product innovation (like its product search Froogle and contextual advertising service AdSense). But now is the time to cash in for two reasons: First, search usage--and marketers' interest--has never been higher; and second, it gives Google the cash to position itself as the paid-listings ad network for online publishers. Turning up the heat on the IPO is a financial no-brainer. And it'll bring back memories for many of us.

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