- The Washington Times - Monday, July 14, 2003

SAN FRANCISCO (AP) — Internet portal Yahoo Inc. is buying Overture Services Inc., which pioneered a pay-for-placement search engine, in a $1.6 billion deal announced yesterday.

The deal would further Yahoo’s strategy of moving from being a mainly advertising-supported site.

That model fell apart with the Internet bust.

Yahoo would become a more diversified company that makes money from its search engine and a variety of subscription services.

The services would include such things as online matchmaking and premium e-mail.

The addition of Overture will supplement Yahoo’s $279.5 million acquisition of another search-engine maker, Inktomi, earlier this year.

“We now own all the crucial elements of an end-to-end search offering,” said Yahoo’s chief executive officer, Terry Semel, yesterday during a conference call with analysts.

Under the system employed by Overture, formerly known as GoTo.com, advertisers bid for the right to have their links displayed along with specific search results. The auction determines the order in which the links are displayed on the Web page.

Pasadena, Calif.-based Overture licenses its results to a wide range of Web sites — including Yahoo and MSN.

The sites then take a cut of the fees generated whenever someone clicks on an advertiser’s link, displayed in a section typically labeled “sponsored results.”

The cash-and-stock deal initially valued Overture at $24.82 per share — a 15 percent premium above the closing price of the company’s stock last week.

Overture’s shares gained $2.54 to $24.05 in trading yesterday on the Nasdaq Stock Market, where Yahoo rose 1 cent to $32.20.

Overture will receive $312 million, or $4.75 per share, and 0.6108 shares of Yahoo stock for each of its 65.7 million outstanding shares.

After the acquisition is complete, Overture will become a wholly owned subsidiary of Sunnyvale, Calif.-based Yahoo.

Overture’s chief, Ted Meisel, would then report to Dan Rosensweig, Yahoo’s chief operating officer.

The deal requires regulatory and shareholder approval.

That could be completed by the fourth quarter, the companies said.

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