February 5, 2002 5:40 PM PST

Google challenges pay-for-play search

Paid-search company Overture Services has some new competition: Google.

EarthLink quietly relaunched its search page last month using Google technology and advertisements after the Internet service provider decided not to renew its relationship with Overture, formerly known as GoTo.com. EarthLink and Google plan to formally announce the relationship later this week. The two companies would not disclose financial terms of the deal.

For Google, the partnership marks its first foray into advertising syndication. The company said earlier this year that its AdWords--text-based ads that are triggered by keyword searches--would be offered as an optional benefit to its many search partners, which include Yahoo and Sony. EarthLink is the first of its syndication partners.

The move pits search purist Google against the purely commercial engine of Overture. Google has long cloistered itself from the growing leagues of paid-listings services by generating search results according to a proprietary formula that does not include commercial criteria. The company has also sought to distinguish its AdWords from rivals' advertising, arguing that they are highly targeted and clearly marked. By syndicating its ads as "sponsored links" on partner sites, however, the company is tapping revenue once thought only the purview of commercial search.

"It's an interesting shot across the bow for Overture because Google is now saying that it can play in this space too," said Chris Sherman, editor of SearchDay. "It could have profound implications if it catches on." SearchDay is part of industry newsletter and Web site Searchenginewatch.com, which first reported the change.

An Overture executive said the company was unable to reach favorable terms with EarthLink, but it would not rule out the possibility of striking another deal down the road.

"We're a leader in paid search, and Google's a great leader in algorithmic search. That distinction will continue. With regard to the business, we're sorry not to be working with them, and hopefully, we will pick up the business in the future," said Tim Cadogan, Overture's vice president of search.

Overture began providing search results to EarthLink in October 1999 in a deal worth about $10 million. Throughout the duration of the partnership, subscribers that searched on EarthLink would be directed to Overture's site, featuring commercial listings and natural results from Inktomi as backfill. The deal with Google lets EarthLink keep consumers on its own branded page.

"The contract with Overture was up on Jan. 1, and the new deal terms were very different from two years ago," said Tore Steen, EarthLink's director of strategic partnerships.

A new look
By making this choice, he said, EarthLink is shifting its Web site to become more like a portal for subscribers when they first log on to the Internet. Steen added that EarthLink plans to release new iterations of its search product in the coming year to improve the experience for consumers and bolster revenue.

"Under the new environment, we get the brand name (of EarthLink) and Google, one of the most relevant search engines known for its pure results," Steen said. "We wanted to move away from being purely pay-for-performance."

But EarthLink is not abandoning paid listings altogether. Steen said that because of Google's syndicated advertising "we get the best of both worlds. We're not going to walk away from a revenue stream."

Neither is Google.

The deal comes at a time when pay-for-play search services are taking heat for their practices. Last week, a diet pill maker filed suit against Overture and others, charging that the companies violated its trademark by regularly producing "misleading" search results when Web surfers performed a query on its name. Last year, a consumer action group also filed a complaint with the Federal Trade Commission that said paid-listing services were not always up front about clearly marking advertising.

Google was not named in either of the complaints.

Search experts say that these headaches may cause Overture and others to lose business at a time when Google may be poised to take it away.

The lawsuits "could mean Overture has to re-engineer the way it does its search results," SearchDay's Sherman said. "If Google happens to step into the vacuum while Overture does it's re-engineering, that has big implications. There's a competitor there that might be there to take advantage of it."

For its part, Google is focused on selling syndication to partners as a potential moneymaker.

"This is our first publicly announced syndication relationship," Google spokesman David Krane said. "The benefit to this program is that our partners gain access to Google's high-quality, relevant results and also have an opportunity to generate more revenue on these pages."

 

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