Search site Overture has big plans

PASADENA, Calif. — People scoffed a few years ago when Overture Services Inc. vowed to build an Internet search engine that sold the top spots in its rankings to the highest bidders.

The ridicule seems absurd now that ad-based search results have turned into an online gold mine. Overture has become one of the Internet's biggest moneymakers this side of eBay.

Yet the skepticism about Overture persists. Even as Overture's annual revenue heads toward $1 billion, Wall Street is worried the 6-year-old company will become obsolete almost as quickly as it emerged as a pioneer.

"There are quite a few wild cards facing Overture," said Derek Brown of Pacific Growth Securities, one of several analysts who have recently soured on the company's prospects.

The doubts have weighed heavily on Overture's stock, which has slumped while the shares of less prosperous Internet companies have soared. Through June 11, Overture's stock had plunged 39 percent this year. During the same period, the Dow Jones Internet index climbed 52 percent.

Pasadena-based Overture has no doubts about its future, promising to deliver more breakthroughs that will diversify its business, delight Web surfers and unnerve its biggest foe, the far-better-known Google.

"Five or 10 years from now, we are going to look back at the current state of Web search and be embarrassed, like we are now when we look back at old technologies like Betamax VCRs and 8-track tapes," said Gary William Flake, Overture's chief science officer.

As a prelude to its next big push, Overture recently snapped up more search artillery by buying AltaVista for $107 million and Alltheweb.com for $100 million.

The company plans to use those sites as test labs for exploring new ways to probe the Internet, parlaying what it has learned from its commercial search engines to develop better algorithmic formulas.

"When you have a great product like we do, it's certainly tempting to sit back and rest on your laurels, but we're not going to do that," said Ted Meisel, Overture's chief executive.

Since dot-com entrepreneur Bill Gross launched the company in 1997, Overture's bread and butter has been a commercial search system known as "pay-for- performance."

While the technology for running pay-for-performance systems is complex, the concept is simple: Advertisers bid for the right to have their links displayed under specific search terms. The auction determines the order in which the links are displayed on a Web page.