Overture Services has agreed to buy search technology company AltaVista for $US140 million in cash and stock.
Overture offers a service in which companies place bids to have their advertisements displayed among search results at sites operated by Yahoo, Microsoft's MSN unit and others.
Buying AltaVista would help Overture to enhance those commercial services, the company said.
Overture also had its eye on the AltaVista Web site, which it would use to test out new search products and marketing services for its advertisers in a "live" setting, the company said.
Overture's statement that it would use the AltaVista site mainly as a testing grounds also served to assuage fears that it could compete with some of the portals it partners with, editor of SearchEngineWatch.com, Danny Sullivan, said.
AltaVista's search technology uses algorithms to crawl the Web and track down results for end users. The company offers "paid inclusion" services that ensure that business's Web sites are included in the results.
Overture said it planned to enhance those services.
AltaVista, established in 1995, was a pioneer in Internet search technology. It has about 250 employees worldwide and offers search results in 25 languages. AltaVista is a majority-owned operating company of CMGI.
The company has faced increased competition from popular upstarts such as Google.
In November it revamped its service with new search tools for consumers and new marketing opportunities for businesses. However, despite AltaVista churning out updates and new features to keep itself in the game, it has waned in popularity in recent years.
Indeed, Overture's buy of the search veteran pales in comparison to some similar deals.
Subject to customary approvals and "certain other conditions," the purchase was expected to close in April and be accretive to Overture's earnings by mid-2004, the company said.
It would pay for AltaVista with Overture common stock currently valued at $US80 million plus $US60 million in cash.
The $US140 million deal is almost $US100 million less than what Yahoo paid for Inktomi's search technology last December.
Furthermore, the acquisition comes nowhere near what CMGI paid Compaq Computer to become a majority shareholder in AltaVista in 1999. That complex financial deal, which also made Compaq a premium CMGI partner, was valued at nearly $US2.3 billion.
Still, Overture's purchase trumped Ask Jeeves’ $US4 million buy of the Teoma search engine in 2001, Sullivan said.
What would be interesting about the deal, Sullivan said, was to see whether Overture began producing more balanced search results that offer both paid and unpaid listings. If it offered a balance, Overture would be able to sell itself as a one-stop shop for search results.
He said that something else to watch out for was whether Microsoft's MSN saw fit to purchase its own Web crawler.
"Who knows, [MSN] may put up a huge chunk of money to buy Google, or be content to play one provider off of another," he said.
One thing was for sure - the solid revenue opportunities presented by Internet search services have caused a lot of movement in the market in recent months.