Lead Yahoo! buys Overture amid Google rivalry

Search engine expands its online ad power

Yahoo! ramped up its growing rivalry with Google over Internet search business on Monday, announcing the $1.63 billion acquisition of Overture Services.

Acquisition bolsters Yahoo! efforts to broaden its revenue sources while giving it access to Overture’s array of commercial and other search services. Overture has an estimated 88,000 advertisers, a large portfolio of patents and many other resources. Yahoo! will need to capture back some of the customers it has been losing to Google, the Web’s busiest search engine.

Under the deal, Overture will swap one share of stock for 0.6108 shares of Yahoo! stock and $4.75 in cash. That values the deal at $1.63 billion, with a net of $1.52 billion when Overture’s cash balances as of its last quarter are included.

Overture will become a wholly owned Yahoo! subsid, still based in Pasadena, with CEO-prexy Ted Meisel reporting to Dan Rosensweig, Yahoo’s chief operating officer. Deal is expected to close in the fourth quarter.

“The combined assets position Yahoo! as the largest global player in the rapidly growing Internet advertising sector,” said Yahoo! chairman and CEO Terry Semel. “Together, the two companies will be able to provide the most compelling and diversified suite of integrated marketing solutions around the globe, including branding, paid placement, graphical ads, text links, multimedia and contextual advertising.”

Search services are not only a source of ad revenues for the company that provides them but also turn that service into a gateway to entertainment and media offerings throughout the Web. Yahoo! also recently beefed up its search capabilities with the acquisition of Inktomi, a pioneer in search technologies.

Google has become such a dominant search operation that many Web sites are now constructed to ensure they’ll get a high search ranking. Though both Yahoo! and observers increasingly consider Google a rival, Google remains a key search provider for Yahoo!

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