The bottom line is that Google was lacking what Overture had, so they added paid listings. Overture was lacking what Google had, so now they have just added algorithmic searches. The big properties are secured, so now all that is left to see is who can do a better job at it. Both companies have their strengths, but as I pointed out before, Overture has the edge in that the nature of their listings command higher average bid prices. Google's "wildcard" system does save money on the cost end of things (hiring people to process term relevancy, etc) but it also results in less value per click for the advertiser. I speak from vast first-hand experience on this one.
Regardless of which company "wins", there is room for both. As the analyst in the Street article points out, the importance of search technology is only going to continue to explode over the coming years. It is THE way that surfers find what they want... there really arent many viable alternatives. Unless you thing "this web thing" is a fad, the only logical conclusion is that more surfers and more reliance on the internet will mean a continued boom in search revenues. The PPC model is expanding even more rapidly internationally, and Overture has a great foothold there. Earnings may be modest (75 cents or so) for 2003 (which by the way, is only a PE of 20 or 25... not high at all for a growth company), but in 2004 and beyond when the acquisition of these new engines will be accretive to earnings, you should see earnings of $1.50+. This isnt that far off and while it is not certain, it is likely enough that OVER would be fairly valued around 30 right now.
I will be shocked if investors dont sober up and realize these recent announcements are actually GOOD news and cause a rebound in price for the remainder of this week. |
