MSN extends Overture deal News

Search rivals hit as MSN extends Overture deal

London, October 17 2003,

Microsoft announced today that it has extended its paid listings agreement with Overture, now owned by one of its biggest rivals Yahoo, until June 2005.

The new agreement will see Overture continue to provide its paid placement results to US and UK users of MSN Search, and could potentially be expanded to include additional countries.

The announcement is good news for Overture, and its new parent, since MSN accounts for about one third of Overture's revenue (about $350m).

Analysts and industry watchers had been expecting Microsoft to opt for a different paid listings supplier, or even buy up one of the smaller players, after Overture decided to sell up to Yahoo.

However, the company has decided to stick with Overture, for the next 18 months at least, which will come as bad news to the likes of LookSmart and FindWhat, which may have been hoping that MSN would choose their paid listings instead, although MSN has axed LookSmart listings from its entire search results services.

One industry source predicted that the announcement would have an immediate effect on FindWhat's stock, and sure enough, at the time of writing, FindWhat's shares had already fallen around 5%.

FindWhat's future already looks uncertain, as its planned merger with European firm Espotting could still collapse if it fails in its renegotiation of the deal. If this happens, the future looks pretty bleak for both FindWhat and its would-be bride, neither of which can hope to compete against the global might of Overture and Google on their own.

As for LookSmart, the company has barely recovered from the news last week that Microsoft has decided not to renew its agreement to use LookSmart's search tools. MSN accounted for two thirds of LookSmart's revenue, but the company has decided to use its own newly developed search technology alongside Overture's paid listings, which it claims gives better results.

The move also suggests that Microsoft may have decided to stick with Overture for longer to give it more time to develop its own paid search technology. The software giant has made no secret of its desire to become a major player in the search market, and is investing heavily in the area.