In a development that is sure to alter the dynamics of the search engine world, the pay-per-performance giant Overture announced that a deal to purchase AltaVista would be finalized by April 2003. The purchase cost a mere $140 million, which, in comparison to CMGI's purchase of AltaVista in 1999 for 2.3 billion, is yet another example of the massive fall-out from the dot-bomb stock drop.

According to a press release dated February 17, Overture made this purchase to acquire AltaVista's powerful search-related technology patents. Overture has not provided many specifics yet, but it is expecting to use the AltaVista.com web site as a well branded testing ground for new search technologies while incorporating the current technology so that it can offer enhanced search services to its many portal partners. Coupled with its recent purchase of FAST's search division, AltaVista's name and brand are likely to be heavily relied upon as Overture looks to broaden its competitive edge against Google.

AltaVista was one of the few surviving founders of the search engine industry. Initially launched in 1995 by the Digital Equipment Corporation (now Compaq), even then AltaVista's search database once powered such giants as Yahoo! and CNet's Search.com (see the original AltaVista). Overture's acquisition of AltaVista is another indication of the contraction in the search engine marketplace. Much like Yahoo!'s recent purchase of Inktomi, this deal shows how the major players are trying to compete with each other by incorporating proven search technologies to maintain a balance of power and profits.

The business end of search engines has never been so intense. Pressure has been mounting on Google's competitors as their shareholders expect them to emulate Google and capture a generous slice of the market. Obviously the acquisition of AltaVista is a play for the best of both search engine markets; pay-per-performance and unpaid search engine listings. Overture has said that it plans to enhance the Paid Inclusion system that AltaVista currently offers while continuing to provide the traditional "free" listings. We expect this deal to trigger additional power plays within the search engine industry.

Like advertisers bidding their way to the top, dominance can present a fairly hefty price tag in the search engine market. Overture has again stunned the search engine world by announcing the $100Million purchase of FAST, maker of the second largest search engine, AllTheWeb. Two weeks ago, Overture paid an estimated, $140Million to purchase AltaVista. Overture is about to assume possession of what is arguably the largest combined search database on the planet.

Search engine users will need to accept the number of top-rate search tools is going to shrink over the next year. There is a major financial shake-up happening in the industry as the largest three, Overture, Yahoo and Google all vie for position against each other. The big three have looked to each other for ideas on how to model themselves for sustained profits in a difficult economic environment and have supported each other in past years, in some cases are still engaged in cooperative competition. For example, Yahoo still uses Google results to one degree or another, and still accepts paid listings from Overture through the Sponsored Matches listings.

One of the most obvious conclusions of Overture's purchase of two well known and respected search tools is designed to limit direct competition from these firms. Another is the notion that Overture is positioning itself to prevent the popular British bid-per-click search tool E-Spotting from increasing its share of the growing European search market. This leaves questions about other large players in the search engine marketplace such as Ask.Com and MSN. Rumors have MSN looking to make a major acquisition in the future and Ask Jeeve's search tool, TEOMA is a rather attractive option for them.

In the long-run, the acquisition of the small but highly inventive firms such as INKTOMI and FAST by the larger entities will likely limit both innovation and the number of choices available for searchers. Perhaps these moves will open the doors for new products to emerge to fill vacuums left by the old. However, given the state of the Internet economy, the moves of the past months are more likely to produce even more instability as the market struggles to define and redefine itself. Much like the wait for top placements to appear on search engines, only time will tell how it will all shake out in the end.