Read more about search companies
With the new growth spurt, Google is on a collision course in Europe with Pasadena, Calif.-based Overture, which is the top commercial search provider in the United Kingdom and has been escalating sales efforts in other foreign markets in the past year. Sales in Japan will rival Overture's expected launch in that market in the first quarter of 2003 in partnership with NTT-X, which operates the Goo portal and Lycos Japan.
Google has already proved a serious threat to Overture's U.S. business, which is licensing advertiser-paid results to customers such as MSN, Yahoo and Lycos. Google's ad-listing service has snagged high-profile customers away from Overture, including America Online and EarthLink.
Foreign expansion for both companies also highlights advertisers' growing appetite for search-engine marketing, a booming segment of an otherwise ailing online ad industry.
Google's business has two key components. The company has developed a search engine that returns results based on site popularity, plus other other factors. That engine powers results on Yahoo, Netscape, Sony and others.
In addition, Google's AdWords Select allows Web sites to pay for top ranking in search results, set off to the top and right-hand side of the page. Earlier this year, the company redesigned the service by allowing advertisers to bid for placement in the results and pay only when visitors click on a link, a method that takes a page from rival Overture, which has filed a patent infringement suit against Google.
Upping its potential for revenue, Google syndicated the program so that search partners including AOL and EarthLink could license the paid listings, as well as unpaid ones, and make money from the alliance. This venture through Google is in direct competition with Overture's licensing business.
At the same time, Overture has become the No. 1 paid search provider in the United States and one of the few profitable public companies whose business is largely tied to the Internet. It also commands a huge audience in Europe, with 80 percent reach in the United Kingdom and 73 percent in Germany, said company spokesman Jim Olson.
Its popularity in these two countries, and profitability in the United Kingdom for two straight quarters, is largely due to deals with T-Online, Germany's largest destination site, British ISP Freeserve and AOL Europe, with which it has a deal until February 2005. In September, the company plans to enter France in agreement with Tiscali, a major European ISP based in Italy.
But while it has a solid foothold in Europe, the company does not dismiss the competition.
"We're aware of all of our competitors regardless if they are overseas, and we take these competitors seriously," Olson said. "We've been doing this longer and are bigger than anyone else doing paid search--we offer superior economics, service and product quality than anyone else."
For its part, Google is revving up ad sales overseas. It has sites translated into 82 different languages. Google quietly opened offices in London and Tokyo last year. In recent months, it opened annexes in Germany and France. In addition, according to its site, it is hiring eight advertising sales executives in France, Germany and England.
Last month, the company introduced AdWords Select in those six markets, publicizing the cost-per-click program to visitors of those foreign language homepages. With the release, the company is now allowing overseas marketers to participate in cost-per-click advertising with support for local currency.
The release of the technology was a "soft launch," said Google spokesman David Krane. "AdWords Select brings one of our recently introduced advertising products to our customers in their own language and currency."
"We're ramping up that technology and we're adding staff in these markets to better serve advertisers and partners," Krane said. He added that the basic AdWords program, a pay-by-credit-card service, was already available in Germany during the past year. German marketers can now use the pay-for-performance system.
Efforts paying off
Some sales efforts are already paying off.
Earlier this month, Google inked an advertising deal worth an estimated $1.55 million with Lloyds TSB Insurance, a top London banking and insurance company. Lloyds is paying for placement in search results related to more than 1,000 insurance-related keywords over the coming year.
The deal highlights advertisers' embrace of search marketing, widely noted as one of the most important publicity tools on the Net because of its direct connection with consumers seeking out products and services.
"From the perspective of the advertiser, search engines are becoming increasingly important to target consumers because the general public filters advertising deliberately," said Damian Burns, digital account director with London-based Zenith Interactive Solutions, who brokered the deal between Lloyds and Google. "With people in research mode, you can target (them) in a relevant listing and their propensity to listen will be far higher."
Burns said all of his company's ad clients have relationships with Overture and Espotting.com, a U.K.-based paid search provider. Google has only recently caught on, in part because of the company's U.K. audience of about 7.5 million, according to measurement company Nielsen/NetRatings.
"The learning from Google and performance has led us to sign up with them and now it's snowballing," Burns said.
So far, Google has signed on BT, British Airways, Ford Motor and Virgin as U.K advertisers. Overture's U.K. advertisers include many of the same, such as British Airways, Thomas Cook, Virgin and Lloyds TSB Insurance.
Still, Google has yet to publicly announce any licensing customers in the European market. Its first international licensee for syndicated advertising was Sympatico, a Lycos-owned Internet property in Canada. Canadian advertisers can sign up with AdWords to show commercial results only to the country's residents.
For Google, branching into ad sales in foreign markets is relatively simple compared with the efforts needed by other U.S. Net operations such as Yahoo and Overture, industry experts say. Google already has a big audience looking for answers to search queries in countries around the world. With a Google sales staff and automated tools for advertisers to place listings, marketers can reach an already robust audience looking for specific items online.
But for Overture, which does not host its own destination Web site, venturing into new markets requires more legwork. The company must find partners such as Internet service providers, which are interested in commercial search listings, to attract advertisers in a given marketplace. While the company already has multiple top European partners, it must continue to forge those relationships to stay competitive, analysts say.
"If Overture wants to go into Spain, they have to line up the partners and advertisers," said Danny Sullivan, editor of Searchenginewatch.com. "But Google already has plenty of people using the search engine--they don't have to build up a network in countries around the world, they already have people around the world using them."
"If Google gets partners in international countries, it's just the icing on the cake. For Overture, they need to bake the cake from the very beginning," Sullivan said.
For its part, Google intends to keep growing. "The plan is to bring all of Google's products and services to all major markets around the world over time," Krane said.