April 23, 2003 5:28 PM PDT

Google snaps up Applied Semantics

Google said Wednesday that it acquired Applied Semantics, with the goal of bolstering its search and online advertising programs and perhaps also throwing of a roadblock in the path of archrival Overture Services.

Terms of the deal were not disclosed.

Applied Semantics, a 4-year-old company based in Santa Monica, Calif., offers technology that understands, organizes and extracts information from Web sites. The company, through its AdSense product, will deliver text advertisements to Web pages based on keyword relevance to the page. This type of content targeting is an area Google entered last month, spurring partnership discussions with Applied.

"We've been speaking for a couple of months, and the notion of an acquisition is more recent...when we realized our products were complementary," said Sergey Brin, Google co-founder and president of technology there.

Google plans to run a number of tests over the next three to six months and pick the best of each company's technology to develop a unified product, Brin said.

In the meantime, the buyout casts a dark cloud over Applied's partnership with Overture, Google's chief rival in commercial search and in navigation on the Web. Applied works with Overture to serve pay-per-click advertising links to pages owned by various domain name registries, including Register.com. Applied serves Web pages with Overture commercial links anytime a Web surfer types an unregistered domain name of one of its partners into the navigation bar.

Overture declined to comment.

Gil Albaz, Applied's chief information officer, said arrangements with its partners have yet to be worked out.

But Danny Sullivan, editor of SearchEngineWatch.com, said he's highly skeptical Overture and Applied will keep their contract intact.

"Overture is not a Google partner like Yahoo or AOL. These two companies fight to win over potential partners...As soon as Applied can get out of its contract, it will sever the relationship with Overture," Sullivan said. "It will have a harsh impact on Overture because it will take away traffic, and that's a lot of traffic."

Applied draws about a half billion unique impressions a month across its domain-name network, with a click-through rate of 50 percent on many of the listings. The company collects fees on the commercial links and splits the money among itself, the registrar and the commercial ad network.

Applied has about 100 customers. It recently entered the online advertising business with its AdSense technology. AdSense uses search algorithms to understand the context of a Web page related to keywords. For example, it will boil down the content of a page so it can be matched up to a keyword about Java technology, as opposed to a cup of coffee or a travel getaway to the Pacific.

Web publishers, including USAToday.com, use AdSense to push text-only ads onto news pages that are related to the pitch.

AdSense's system for analyzing the context of a Web page is similar to Google's latest advertising product, Content-Targeted Advertising, which was unveiled last month. In the meantime, Overture has been testing Applied's technology for its own content-targeted advertising product, which it plans to introduce later this year. Google's acquisition could change that relationship.

The buyout also will serve to clarify Applied's business. Until now, Applied has remained autonomous in search-advertising analytics and has somewhat straddled the fence on its business approach.

Applied CEO Jordan Libit has called it a "flexible company." On the one end, it has sought partnerships with Web publishers such as USAToday.com to deliver its analytics technology for the use of advertising, and only then has it brought in pay-per-performance ad listings from a network such as Overture, FindWhat or Sprinks.

Applied does not sell advertising listings. On the other end, it has sought relationships with the ad networks themselves to be their back-end analytics technology.

 

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