Google rival gets closer to AOL Europe

Overture Services said yesterday it has expanded its deal to provide pay-for-placement search results for AOL Europe's websites, a move that intensifies the company's competition with rival Google.

AOL Europe, a division of media giant AOL Time Warner, will now use Overture's commercial search results in web directories for its UK, French and German sites. When people visit the web directories, which organise sites by topic, Overture will present up to four sponsored links at the top of the page. Overture will also provide three sponsored links on AOL subsidiary Netscape's French and German sites as well.

The deal is an extension of an existing agreement struck in January 2002, under which Overture offers its links in search results pages. Overture's agreement with AOL Europe lasts until 2005.

Overshadowing this deal, however, is the presence of Google, whose logo is branded on AOL Europe's search boxes and results.

Google's presence on AOL's US flagship properties is even more pronounced. In May 2002, AOL struck a deal for Google to offer its commercial and algorithmic search results throughout its online services and its websites. Overture was dropped as a result.

Competition between Overture and Google has heated up in the past year, especially in the realm of commercial search. Amid a shaky online ad environment, both companies have been critical sources of cash for their partners such as Yahoo, MSN and Ask Jeeves. Last month, Yahoo reported its third consecutive profitable quarter, helped by its deal with Overture. Ask Jeeves last month also reported a profitable quarter thanks to contributions from its paid search deal with Google, according to Wall Street analysts.

Both companies auction off search results placement to advertisers on a fee-per-click price. When web surfers visit partner sites and click on Overture or Google links, the two companies pay their partners a percentage of the money they receive from the advertisers. Because sites such as Yahoo and MSN attract millions of visitors a day, these payments have totalled tens of millions of dollars a quarter, according to MSN executives and Wall Street analysts.

Realising the financial potential, these major websites are playing the two companies off each other. In November, Yahoo Japan struck a commercial link deal with both Overture and Google. Other companies such as AOL are using Overture for commercial search and Google for algorithmic search in some markets and then Google for commercial search in others, as seen in Wednesday's announcement.

In the meantime, Overture and Google are continuing to team up with content sites trying to profit from these revenue-sharing arrangements. On Tuesday, Overture announced a deal with ESPN.com. Overture struck a similar agreement with CNN in December.