The rumors started leaking from the Redmond offices of MSN last week. Microsoft was about to announce a major expansion of search services but nobody actually knew exactly what to expect. Yesterday, the MS-hammer fell and with it fell the share prices of Overture, Inktomi and LookSmart.

MSN search announced plans to triple its staff and radically increase the pace of product research and development. Analysts suspect this expansion will close the door on deals with Overture, Inktomi and LookSmart in the near future. Losing distribution rights through MSN does not bode well for Overture as MSN accounts for approximately 1/3 of Overture’s annual revenues. Investors, wary of being caught in any downward tech-stock spin have responded quickly to the announcement, causing a steep drop in Overture’s share-costs. Similar effects are being felt at LookSmart. Inktomi is fairly insulated against MSN as Yahoo recently purchased it.

Last month we predicted MSN would be the next major search tool to make a move in the latest Search Engine Business War. After seeing Google, Yahoo, and Overture go on buying sprees and introduce new forms of service, it was inevitable the other massive player in the industry, Microsoft would begin to position itself in a competitive stance.

Today, Microsoft is taking aim at the dominant search tool, Google. MSN Marketing Director Bob Visse was quoted by Reuters saying, “We do view Google more and more as a competitor. We believe that we can provide consumers with a better product and a better user experience. That's something that we're actively looking at doing.” With the power of the world’s largest corporation behind him and an international network that makes Coke Cola look small, Mr. Visse might not be issuing an idle threat. Only time will tell what will happen in the industry but, when Microsoft tells you they are going to concentrate on dominating your business sector, you either adapt quickly or quickly turn out the lights.

Overture has recently signed up several of the largest Korean Internet service providers and search portals for distributed listings services. This slew of deals gives Overture listings access to over 92% of the Korean market. In the last month, Overture has inked contracts with Daum Communications, owner of the largest search portal in Korea, MSN Korea and the smaller ISP/Portal, Dreamwiz. In explaining why Overture was chosen over other search result firms, Johannes Larcher, Overtures International GM said, “Our partners there understand that Google is a competitor and out to get them."

Overture is gearing up for a major expansion in International search services in a bid to become less dependant on its two biggest partners and payers, Yahoo and MSN. Yahoo and MSN accounted for about two thirds of Overtures revenues in 2002.

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About a year ago, AltaVista claimed that unpaid listings would not be treated differently than paid-inclusion listings, with the exception of less frequent spider updates than paid listings would receive. In the past, if you paid AltaVista for a 6-month inclusion in their database, your placements generally remained in the database after the 6-month period had expired.

One of our clients, Casa de Malahato Cuban Cigars, had paid for a listing at AltaVista and had not renewed or updated his account since. AltaVista had not requested or reminded him of the necessity to renew. Two weeks ago his listing was downgraded to only display the URL of the website without the title of the page or the description that appears underneath the title on search engine results pages. On our advice, he renewed the account and within two days, not only was his listing restored in full, it jumped over 40 points to land in the #3 position under the ideal keyword phrase “Cuban Cigars”.

This could just be a simple case of the Casa de Malahato listing being dropped into a non-paying tier whereby the descriptive text and title were dropped for a short time during transition. This seems a stretch, however, since the response was so immediate and the gains so impressive.

Keep an eye on any current placements you have on AltaVista, especially if you let your paid listing expire. Please let us know if you encounter the same oddity, we would be pleased to bring this to the attention of the AltaVista staff if our suspicions are proven correct.

According to confirmed reports, the states of Massachusetts and Texas are considering bills that would extend the Digital Millennium Copyright Act to make, among other currently legal protections, home-use firewalls illegal. Emails that use encryption technology that hides the originator or recipient would also become illegal under the DMCA.

Industry experts, civil libertarians, political activist and well, just about anyone who understands how the Internet operates have reason to be frightened by the contents of this bill. Most firewalls in home and business operations use technologies that would violate the proposed extended focus of the DMCA. Sending and receiving communications from services such as Ziplip.com and resist.ca would become illegal, as would protecting your computer from outside hackers by masking its IP address.

The new world order is starting to have an old-Soviet style odor and this time the target may be you and other law-abiding netizens. Beware.