June 26, 2002 1:45 PM PDT

Overture takes page from Google

Overture Services, a commercial listing search service, has retooled its advertising bidding system as it faces increased competition from Google.

The Pasadena, Calif.-based company said Wednesday that it has introduced a new auto-bidding tool that lets advertisers edge out rivals by 1 cent to jump to the top of its listings.

The change takes a page from the playbook of search sweetheart Google, which earlier this year introduced auto-bidding technology for keywords that generate ads alongside its mathematical search results. In contrast, Overture allows marketers to vie for keyword placement directly within its search listings, with top bidders also featured in search results on major portals such as Microsoft's MSN and Yahoo.

In recent months, Overture has felt increasing pressure from Google, which has been racking up licensing contracts as it introduces new opportunities for advertising revenue to partners. In May, Google won a valuable contract with America Online formerly held by Overture. It also scored a partnership with EarthLink at Overture's expense.

Overture's new bid management tools are aimed at garnering favor with its 60,000 advertisers by delivering what it hopes is a more convenient system. In the past, the company let advertisers enter "fixed bids," which allowed them to pay any amount for a keyword in search results--a system that did not make allowances for overbidding. For example, a company might pay $3 for a listing when a Web surfer searches on the term "books." However, its next closest rival might only pay $1.50 for the same.

Under the new system, an advertiser will only pay a penny higher than its nearest competitor. The advertiser also can set a maximum amount that it will pay into the system for any keyword.

The system is similar to Google's. But Google's program, called AdWords Select, ranks ads based partly on how much an advertiser pays and partly on popularity, or click-through rates. Like Overture, AdWords Select requires advertisers to pay only when a visitor clicks on the ad.

The similarities in service, however, have prompted Overture to file a lawsuit seeking to protect its patents on ad bidding tools.

In its update, Overture has developed a new ad management system that lets marketers see campaign data such as click-through rates, total costs of the campaign, and competitive bids more easily.

While advertisers say these updates are welcome, some say they are still not transparent enough.

"Our concern with a maximum bidding system is that there's a potential for another advertiser to be so high on their cap that we could never outbid them," said Tolithia Kornweibel, marketing manager for car insurance site Esurance, who said her company buys placement in Overture's search results for about 100 keywords. "It could take a lot of time to figure out what the actual cap is."

The system could favor big marketers by allowing them to snap up the best terms for the most money, she said.

Still, Overture said the efficiency will benefit all its customers, who have asked for updates to the search-listing service.

"This gives advertisers the best possible position for the lowest price," said Lisa Morita, senior vice president of online business and marketing for Overture. "We're focused on making it easier for the advertiser. Way before Google came out, it was important to us to serve the customer best."

 

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