November 17, 2003

Japan has become a key battleground in the paid-search business, with rivals Overture and Google vying for a crucial partnership with the country's top Web property, Yahoo Japan.

Yahoo's Japanese subsidiary is considering how to revamp its search business and has a few likely options: Go it alone; team with Overture and Google; or choose just one of the Internet search companies as a partner in a potentially lucrative alliance.

The decision could have a significant financial impact for the companies involved, as paid-search listings have become a rare success story in an otherwise ailing online ad industry. Yahoo's earnings received a $30 million boost last month as a result of a recent partnership with Overture, according to analyst estimates.

Google and Overture have pinpointed international expansion as key to continued growth. Aligning with an online powerhouse like Yahoo Japan--which reaches nearly 78 percent of the Web population in that country--could be a catalyst for expansion efforts. "People (in the search industry) are definitely looking to see who is going to get this deal," said Jeff Fieler, an analyst at Bear Stearns. "Whoever gets (it), they will own the Japanese market."

Pasadena, Calif.-based Overture has become profitable by inviting marketers to bid to have search terms, or words used in a search, bring up their Web site in the search results; they pay only when Web surfers click on their link. A commercial search kingpin, it licenses search listings to and shares revenue with Yahoo and Microsoft's MSN portals, and numerous smaller Web sites.

Despite this success, analysts are still closely watching Overture's expansion efforts overseas and the increased competition it faces from Google, a relevancy-search site that is a popular destination for Web surfers. In the past year, Mountain View, Calif.-based Google has unveiled an ad-listing service similar to Overture's and has won contracts for that service from Internet service providers America Online and EarthLink.

Last week, concern over Overture's shrinking margins and the threat from Google caused the company's share price to drop by more than 16 percent in a day to around $23. Analysts from Merrill Lynch and U.S. Bancorp Piper Jaffray quickly reiterated their "buy" recommendations on the Overture stock, citing market overreaction. Those events have put overseas development on investors' radar. In addition to seeking growth in European markets, Google and Overture are entering Japan, which has the second-largest Internet audience in the world after the United States. The country also has a thriving e-commerce industry that is ripe for search-engine marketing.

Google quietly opened an office in Tokyo in 2001 and started selling AdWords--a bid-for-placement listings program--on Google Japan in late July. Earlier this year, Overture announced it would launch in Japan in the first quarter of 2003, but in September moved the launch date forward to the end of this year.

Both companies face the challenge of gathering enough Japanese advertisers to their listings to make their services attractive to license for the likes of Yahoo Japan.

Founded in 1996 and partly owned by Softbank, Tokyo-based Yahoo Japan is the dominant Internet presence in the country--reaching nearly 20 million people a month, or 78 percent of the Japanese Web population, according to research firm Nielsen/NetRatings. By contrast, Google reaches about 18 percent of the country's market, and MSN about 48 percent. Yahoo Japan is so entrenched that failure to compete with its auction service caused auction giant eBay to close its division in Japan.

To continue reading this article, click here.

        

Read Serge Thibodeau's daily blogs on search engines at Serge Thibodeau Live. We strongly suggest you bookmark our web site by clicking here.

Get your business or company listed in the Global Business Listing directory and increase your business. It takes less then 24 hours to get a premium listing in the most powerful business search engine there is. Click here to find out all about it.

Rank for $ales strongly recommends the use of WordTracker to effectively identify all your right industry keywords. Accurate identification of the right keywords and key phrases used in your industry is the first basic step in any serious search engine optimization program. Click here to start your keyword and key phrase research.

You can link to the Rank for Sales web site as much as you like. Read our section on how your company can participate in our reciprocal link exchange program and increase your rankings in all the major search engines such as Google, AltaVista, Yahoo and all the others.