SquirrelNet: The Irony of Overture's Bidding System

We employed the use of a friend who has an MS in Mathematics to analyze Overture's advertiser bidding system. What he turned up was shocking! Could it be true that advertisers save by spending at Overture?

Often heard in traditional internet circles is that Overture is doinng something sacrilegious by charging advertisers for clickthroughs to their site. These people say that the internet should be free and public and full of "free love" (okay, so I embellished a little). By the way, if you do a background check on these people, you'll note that they are the ones who used the internet as an academic tool back in the mid-90's. This will help you appreciate their lack of interest in e-commerce.

Despite the objection of some people, there are people in this world who look to search engines to deliver traffic to their sites. We now compare advertising costs on Overture vs. Yahoo!

Background
Overture uses a real-time bidding system where sites that want to show up under various listings bid per search phrase or term. Contrasting with Overture is Yahoo! which depends on banner ad impressions for the majority of its income.

Analysis of Overture
Publicly-stated data says that the average clickthrough cost to an advertiser on Overture is 14 cents.

Analysis of Yahoo!
We now calculate the average clickthrough on Yahoo! With banner ads running at around $5 per 1000 impressions and clickthroughs averaging 0.5% (although we think the true number is about 0.2% or 0.3%), we get that $5 gets you roughly 5 clickthroughs (5 = 1000 * 0.5%). This means that you pay about $1.00 per clickthrough on Yahoo!

Conclusion
Clickthroughs are much more expensive on Yahoo! ($1.00) than Overture ($0.14).

Implication
Overture will continue to grow because it represents a cost-effective way for websites to gain much needed traffic.

(Editor's note: This article was originally published in January 2000. We were right about the above implication. Overture has been the only pure search engine to turn a profit. It is also one of the rare internet properties that does continue to grow to this day.)

Overture (formerly known as Overture) is search engine that consitently provides relevant search results. There are several reasons for this including:

Overture has an advantage over other search engines in that it is the search engine least likely to lead you to a website that doesn't exist anymore. You'll see fewer pages that say "Error 404 - we're sorry but this page does not exist anymore".

Overture is a market leader. They now provide supplemental search results for Yahoo, AOL, MSN, Netscape, Lycos, InfoSpace, Ask Jeeves, CNET, the Go Network and HotBot. While Overture has always been a favorite here at SquirrelNet, we're glad to see our early praise of Overture has been echoed by several highly credible companies.

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