"The combined assets position Yahoo! as the largest global player in the rapidly growing internet advertising sector," said Terry Semel, Yahoo!'s chairman and CEO. "Together, the two companies will be able to provide the most compelling and diversified suite of integrated marketing solutions around the globe, including branding, paid placement, graphical ads, text links, multimedia, and contextual advertising."
Within the internet advertising market, commercial search is seen as the most dynamic and fastest growing segment, by offering adverts that are relevant to what the user is seeking.
According to securities firm Piper Jaffray, the segment is estimated to grow worldwide from approximately $2 billion by year-end 2003 to approximately $5 billion by 2006, a compound annual growth rate of approximately 35%.
Overture was the first company to make significant profits from the commercial internet search market, notwithstanding Google's higher traffic figures and higher profile.
Overture's system, formerly called GoTo.com, invites advertisers to bid at auction on a cents-per-click basis to position their ads under specific search terms. The company had more than 88,000 advertisers globally as of the end of the first quarter of 2003.
Yahoo!'s decision to purchase is not a surprise. Overture has already been partnering with Yahoo! and providing its search results, contributing around 19% of the portal's sales. Last week, Yahoo! reported a doubling in its profits, paving the way for what will be one of the biggest internet takeovers of the year, and encouraging speculation that the sector is at last picking up again.
Overture also powers the search results of Microsoft's MSN – although observers predict that following the Yahoo! deal, MSN will either switch to partnering with Google or launch its own paid-for search alternative. Given that Microsoft has enormous cash reserves, there has already been speculation that Bill Gates's company might attempt to buy Google. Against that argument, some say the world's most popular search engine, which is still privately owned, could make even more from a stock market flotation.