• by Masha Geller , June 3, 2003

Today's merger of pay-for-performance players ValueClick and Search123 may seem less than newsworthy at first, but it may be the beginning of a trend in search marketing.

Consider the facts. Founded in June 1999, Search123 operates a pay-for-performance search engine business in which advertisers bid for priority placement on search result pages and pay only when users click on the advertisers' listings. Under the terms of the agreement, ValueClick acquired all outstanding equity interest in Search123 for approximately $5 million, but the transaction was structured as a merger, so Search123 will survive as a wholly-owned subsidiary of ValueClick following the transaction.

Naturally, ValueClick, the Wall Street darling of recent months (shares are up 80% since the beginning of the year and their balance sheet carried $224.1 million in cash and cash equivalents as of the end of March) is happy to add to its arsenal of online advertising solutions, which now include just about everything an advertisers could want.

"We have been interested in adding search marketing to our portfolio of digital marketing solutions, and Search123 is a great fit with our business objectives and a significant step toward completing our digital marketing solutions set," said James Zarley, CEO and chairman of ValueClick. "I believe the addition of Search123 rounds out our array of media offerings and enhances our position as a single-source provider of media services and technologies for online marketers."

On the other end of the deal, as a comparatively small player in the search arena, Search123 has tried to compete with Overture and Google, and is probably happy for the protection ValueClick's financial strength affords it.

No one is worried about Google's position in the marketplace or its survival chances, but does this mean the start of a feeding frenzy on the smaller search companies? Betting's open.