Overture’s Achilles heel is not owning a destination site. As CNET reports, Yahoo’s poaching of an exec from Overture is significant. The barrier to entry is too low for Yahoo to not build its own paid search, avoid a 35% commission fee and sever links with Overture.
Yahoo is putting the pieces into place to replace partnerships with Google and Overture and provide their services in house.
For Google this means that Yahoo will compete with them, but Google owns THE destination site for search and provides its own paid listings.
Overture could become the Inktomi of paid search, beholden to those who own the destination sites, the majority of its revenues come from two partners, one of them being Yahoo. It proved the business model for search, its revenues are impressive and its $1.3 billion valuation quite an achievement, but the business model missed one key ingredient, it doesn’t really own the customer. Its growth looks stalled and its future grim.