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Johannes Larcher

General Manager | 30 Jun 2003

Search is permission-based marketing which is more valuable than traditional online marketing. It offers a higher conversion rate and better return rate on investment for the advertiser.

Johannes Larcher started his career in theatre but moved on to search engine marketing for mega bucks. Currently, he is the General Manager of Overture International, the global leader in Internet commercial search company based in US. He looks after Overture's international activities and led the company's market entry into the U.K. Prior to joining Overture, Larcher was Director of International at Korn Ferry's Futurestep, Inc., where he planned and implemented the rollout of its Web-based executive search business in Europe and Australia. Larcher was a management consultant at McKinsey & Company as well for four years.

Armed with a BA in Drama from the University of Vienna in Austria, he went on to do his MBA from the Wharton School of the University of Pennsylvania.

Recently on his maiden trip to India, he spoke to Akshay Bhatnagar of exchange4media at length about the latest trends in search engine marketing, advertiser reactions, recent developments at Overture and his understanding of the Indian Internet scenario.

Q. What do you think about Internet search engines?

We think that Internet search is really a great platform for effective marketing. Search is a tremendously popular activity on the Internet. It is second only to email which people conduct on Internet. In US alone, we estimate that roughly 70-80 million searches per day happen that are somewhat commercial in nature so.

By commercial searches, we mean the searches that are conducted for products and services that are commercial in potential. Obviously, there are lots of searches that are not commercial also. Most of the consumers in US and Europe report that the majority of their online purchases are actually a result of searches on Internet.

One big advantage of search is, unlike other forms of marketing on Internet, in a search the user conducting the search expresses an interest. Traditional advertising is, hey you should buy this. So search is permission-based marketing which is more valuable than traditional online marketing. So it offers a higher conversion rate and better return rate on investment for the advertiser. And that's what Overture is founded on.

Q. Tell us something about Overture's background and how is it doing?

We started the business in 1998. Since then we have grown from a proof of concept to become a company with a $1billion revenue this year. So it is a very sizable enterprise. About 10-15% of the revenues comes from overseas. We have operations in UK, Germany, France, Italy, Japan and Korea.

The size of the industry is also quite impressive. This is a new industry. Five years ago it didn't even exist. But today the industry in US is about $2 billion. For the first time, we have seen that Internet advertising is working very effectively and creating a real value. In 2008, we expect this industry to be a lot bigger roughly $7-8 billion worldwide. So there is tremendous growth in this industry.

Q. How does the whole process of search engine marketing works from the advertiser perspective?

It all starts with the business that comes to us and sets up an account and submits us the listings. Our editorial team with the help of editorial tools screen it for relevancy. We want to make sure that advertisers that comes to us are relevant for that moment for that search. Otherwise we won't get them listed. It is very important for us. The next step is the user does the search and we return a set of results ordered by us dynamically by price level.

Q. What does that mean?

Well, it is important for the advertisers to be higher up in the order because the more higher you are in the search, the more likely are the chances of getting the clicks. Once you are relevant, your position depends upon price. How much you are willing to pay per click and not per impression. The revenues collected are shared with our partners (depending upon the search types and ad options).

Q. Which are your partners?

See, we are not a portal. We are not a destination site. We are not Yahoo, Google, Amazon… we are Overture. And our brand strength is very well known. We work with the biggest portals and ISPs in Internet to distribute our search results. We work with Amazon and Yahoo, the two biggest players on the Internet. We work with Lycos also. Besides the other big players, we work with hundreds and thousands of small players as well. These partners use our search results on their site to display relevant search content to their users. So the user will not know these are Overture results as there are no logo or some text to show that.

We have got a very strong distribution network across the world. We have recently launched in Korea this April. When we go overseas we work with number of big US partners for example with amazon, we work in almost every country. But we also work with big local players also. That's very important for us. So we try to localize our business model too to the reality of the market.

Q. How the advertisers are reacting to Overture?

We have lots of advertisers who are business to business(B2B) advertisers. See, the B2B searches may be far less than business to consumer(B2C) searches but the value of B2B introduction is a lot higher. So the searches like on disaster recovery or on web hosting are much more valuable, price much higher than B2C. But we have a mix of both. So we believe that Overture offers great value to the advertisers.

Our advertisers really love us. We deliver high returns on investment to our advertisers. The advertisers are also in control which is different from traditional online advertising where you put up your logo, banner… and it is done. While here, the advertiser is the person who actually picks up the search from the web. He also decide how much to pay per click. It is risk free as he pays only when the consumer clicks on the link (pay for performance). So it is like you put up a billboard on a highway and the consumer comes to you to shop and say that I've come here because I saw your billboard. Then you pay for the billboard advertising. We also provide high reach as we reach 80% of the active Internet users in a month in US.

We have 80,000 advertisers worldwide. The names include big businesses like amazon, ebay, expedia… to small businesses like special stores selling Indian curry also! There are certain product and services categories which are regular advertisers on Overture like travel, etailing, financial services like insurance to mortgage to credit cards, entertainment like gambling.

Overture has a big advantage of network effect. The advertisers can come to us and our content will be distributed on number of Internet destinations. So the advertiser doesn't need to go to each of them individually.

Q. What is your opinion about the criticism of the search engines for becoming too commercial?

When we started the business, there had been a lot of criticism of commercial content being mixed with the search. The search is objective. Well, we actually think that the commercial nature benefits the quality of search. We have a very comprehensive editorial process that assures that the quality of our search result is high. The advertiser's product and services comes only in the search when it is relevant.

Q. Why have you acquired Alta Vista and FAST recently?

We recently purchased Alta Vista and FAST, both of them are traditional search engines. We purchased Alta Vista mainly for its technology. As we grow our business, it is really important that we bring to our partners not only the commercial search but also what I would call basic search or algorithmic search. Alta Vista has a long history of search and owns lot of intellectual property and patents in search field that appealed to us.

FAST is a European company based in Norway. We bought the assets of FAST in the search area. They have a strong distribution for their search products across Europe. We believe that by combining these two technologies, we will create a very powerful superior search experience on the Internet.

Q. What about competition… Google?

Google is our biggest competitor and that's no secret. We are intending to definitely offer a product on basic search that's competitive with the Google product. Our commercial search product today is the world leader, undisputed and well ahead of Google. And certainly we are going to take them on in all other areas of searches as well.

Yahoo today is regretting their decision to use Google as their search engine. They have created their worst nightmare and biggest competitor. See Google competes with partners but we don't compete with our partners and that's not going to change. The acquisition of Alta Vista has given us an opportunity to test our products and features before giving them to our partners as Alta Vista is a destination site which we didn't have earlier.

Q. Inspite of such impressive performance, why Overture's shares have noise dived by more than 50% in the stock market in the last one year especially when other net stocks are making a strong come back?

I can't really comment officially on the stock market as I'm not authorized to talk about it.

Q. What's your initial impression of the Indian Internet market? And what are your plans for it?

Well, this country has a small user base which is growing fast. I believe the users range from 10-15 million. The online advertising is also just $10-20 million but picking up. So it is early days. I think search is a relatively immature category which is not well developed here. There is lot of opportunity in the market to really shake the perception of search and develop search. We will need to think through. We obviously have a presence through Alta Vista and we will continue with that. We need to think at what point we bring our flagship product to India. It cost lot of money to customize the technology and hire the people and so forth. We have to compare it with our options like we are looking at countries like China, Brazil, Australia etc.

I'm pleasantly surprised that people here know the business and have a good understanding of the challenges.

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