Business as usual for Yahoo! rivals
Business as usual for Yahoo! rivals
by David Shabelman in San Francisco
Updated 07:14 PM EST, Jul-15-2003
Although Yahoo! Inc.'s $1.63 billion deal for Overture Services Inc. ups the ante in its battle for control of the Web search sphere, archrivals Google Inc. and Microsoft Corp. each have strong hands to play in the contest, analysts said in wake of the merger.
"I don't know that this changes anything for Google at all," said Danny Sullivan, editor of Searchenginewatch.com. "Yahoo! has assembled the pieces to be more Google-like, but Google already had them. They have lots of people, they have lots of money, they have a head start on Yahoo! Meanwhile, Yahoo! has to figure out how to fit all kinds of pieces together from its acquisitions."
One effect of the deal could be a delay in long-rumored plans by the privately held Google to go public, said Rob Lancaster, a Yankee Group senior analyst.
The merger is "a glitch, a disturbance in the competitive landscape," he said. "Now instead of one big competitor and one fairly big competitor, Google has got one huge competitor, and IPOs are not just something you go out on a whim and do. They're carefully planned, and the competitive landscape is something they'll evaluate."
Lancaster also said Google might raise less in a public offering because the Mountain View, Calif.-based company could be viewed as less competitive following the Yahoo!-Overture tie-up.
Google has kept mum on its IPO plans, and some experts question the benefits of such an offering.
"I've read that they'll need to have deeper pockets — to do what"? Sullivan asked. "I don't know if they suddenly have to go out and buy somebody or have to make a serious investment in their technology. They're well-situated to be doing what they're doing."
Ken Marlin, managing partner with M&A advisory firm Marlin & Associates, said Google could feel pressure to enter the public markets to deliver a return to its investors. But he noted that the company's profitability and the still lackluster IPO markets make it unlikely Google will go public anytime soon.
"This isn't the right time for an IPO, and the venture capitalists aren't feeling any pain from their investment in Google," he said. "The company is doing fine. The time for them to do an IPO is when the IPO market is stronger and the tech market is stronger."
A Google spokesman declined comment.
Google received $25 million in financing in June 1999 in a round led by Kleiner Perkins Caufield & Byers and Sequoia Capital, both of Menlo Park, Calif. Officials at the firms could not be reached for comment.
Reflecting the divided opinion on the competitive impact of the Yahoo!-Overture deal, Derek Brown, analyst with Pacific Growth Equities, said the merger could in fact make Google even more valuable. That's because it could reap the benefits if some of Overture's partners, such as Microsoft, decide to take their business elsewhere.
Pasadena, Calif.-based Overture earns revenues chiefly by collecting fees from customers for placement in Web search results that are distributed through Internet search and content providers such as Yahoo!, Microsoft's MSN and CNN.com.
The search engine merger is even less likely to rattle Microsoft than Google, many analysts contend.
The Redmond, Wash., software colossus "is well down the path toward creating its own search platform," said Jordan Rohan, analyst with Soundview Technology Group, adding that there is no pressure on the company to buy another commercial search provider as long they remain partners with Yahoo!
Indeed, Rohan noted that Microsoft already provides paid-search services. Typing in a keyword, such as "flowers," at search.msn.com turns up an online flower delivery service and other "featured sites" chosen from among sites belonging to MSN affiliates, partners, sponsors and advertisers. Below those listings are "sponsored sites," which Rohan said surface in searches conducted by Overture.
Rohan said he expects Microsoft to have launched its own search platform by the end of 2004 or even earlier.
Such a scenario throws water on speculation of a possible deal between Microsoft and Google, which Sullivan said has shown "it doesn't want to be bought by anybody." Microsoft is more likely to target companies such as performance-based search provider FindWhat.com of Fort Myers, Fla., if it pursues and acquisition.
A Microsoft spokeswoman said Yahoo!'s acquisition of Overture "has no near-term impact on the MSN search business," noting only that the company will evaluate its options.