January 15, 2003 11:01 AM PST

Overture buys into search analytics

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Overture Services has quietly purchased a Web analytics company in an attempt to help advertisers better understand the value of paid search.

Pasadena, Calif.-based Overture bought Keylime Software of Carlsbad, Calif., for about $9.5 million in cash and assumed debt. Overture plans to publicize the acquisition, which closed in early January, when it introduces new reporting and analytics tools for its more than 73,000 advertisers later this year, said Erik Hovanec, Overture's vice president of business development. Web analytics is the process of making sense of data compiled from cookies and other information-gathering techniques.

Overture auctions off search-result placement to advertisers. When Web surfers visit sites that host Overture results and click on the links, advertisers pay the company a price per click, and the company in turn shares that revenue with its distribution partners, which include Yahoo and Microsoft's MSN. Improving its ability to analyze the results of such ads could help Overture attract more advertisers and possibly bump up rates.

Other companies also are poised to improve their analytical skills. DoubleClick, a leader in Web advertising technology and analytics, is looking into building features into its Dart For Advertisers technology to allow marketers to more easily manage and report on paid-search campaigns.

"Analytics stuff will be crucial to companies like Overture and others for growing the business," said Danny Sullivan, editor of newsletter SearchEngineWatch.com.

"Time and time again, you see that companies don't have access to good analytical information for (online) advertising or the ability to measure the return on investment for spending when it comes to listings--which is the popular segment of the online ad industry," he said.

Despite this blind spot, such advertising has soared in the past year. According to the Interactive Advertising Bureau, keyword advertising jumped to 9 percent of total online ad spending in the second quarter of 2002, up from 3 percent in the same period a year before.

By comparison, banner advertising dropped to 4 percent during the same quarter, down from 36 percent the year before. Anecdotally, some ad agencies say growth in search marketing has grown nearly 1,000 percent in the last year.

Cashing in on clicks
Advertisers are increasingly drawn to buying ad links to product-related keywords such as "long distance" and "books" in search engines because they can be sharply targeted to consumers' interests. Advertisers often only pay for the links if people click on them.

But managing such campaigns can be convoluted, with companies having claims to multiple keywords in multiple search engines. What's more, businesses bid for placement in keyword listings, so each term has a different price that adjusts to demand. The time and resources it takes advertisers and agencies to manage bids and understand what's working and what's not can be enormous, they say.

As a result, paid-search companies such as Overture are building tools that simplify the process while providing data on the campaign's effectiveness. Higher rates could follow.

"If advertisers understand how much they can afford to spend to gain a customer, then they may be inclined to spend that amount right away, rather then bid slowly up to it," Sullivan said.

Other products such as Go Toast and Highlander's Inceptor help ad agencies manage pay-per-click (PPC) campaigns, but some customers say they do not go far enough. Agencies use such technology to set parameters on bidding costs on search services, but they say they are still looking for tools that would integrate reporting across multiple sites.

"We would welcome any tool that would help us manage the PPC programs," said Matt Straznitskas, a director of special services at ad agency DigitalEdge. "The challenge is to centralize all the reporting so that you can make a clear choice as to what is performing the best."

He added that the industry lacks good demographic information on searchers and how they respond to paid listings.

With new bid-tracking tools, Overture is aiming to connect the dots for advertisers by showing them how certain keywords relate to online sales.

Keylime's technology tracks the effectiveness of online marketing campaigns, including the ability to know when a consumer has seen an ad and has followed up with a purchase.

"Keylime represents our efforts to provide branded tools to advertisers," said Overture's Hovanec. "We wanted to continue our strategy to help advertisers understand the value of Overture marketing campaigns."

Keylime, a 20-person company founded in 1997, will maintain its headquarters in Carlsbad and continue to work with its approximately 50 customers, which include Hewlett-Packard and Adobe Systems.

 

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