Ask Jeeves Profit Soars on Google Listings

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Ask Jeeves reported a more than 50 percent increase in profits in the first quarter on the strength of its paid search listings partnership with Google.

The Emeryville, CA, search engine earned $13.4 million in the first three months of the year, a 57 percent rise from $8.5 million a year earlier. Sales in the quarter were $39.2 million, up 73 percent from year-earlier $22.7 million in revenue.

Ask Jeeves has Google to thank for much of its success. The company said Google's AdWords listings generated 69 percent of revenue, or $27 million. In the previous quarter, Google accounted for 65 percent of Ask Jeeves' revenue. The companies' U.S. distribution agreement runs through September 2005, though either party can terminate it as early as this September. Industry analysts estimate Ask Jeeves commands as much as 80 percent of the money generated from the listings.

Steve Berkowitz, chief executive of Ask Jeeves, said the company continued to outpace the industry in query growth, reporting a 42 percent year-over-year increase.

Independent researchers tab Ask Jeeves as a distant No. 5 in the search market. ComScore Media Metrix puts its market share at 2 percent. Ask Jeeves disputes these estimates, putting its search share at 3.5 percent.

Ask Jeeves expects its share to double with its planned $343 million acquisition of Interactive Search Holdings, the parent company of search sites like Excite, iWon and MyWay.

Berkowitz declined to discuss specifics of how Ask Jeeves would use the ISH properties until the deal closes next month. He said that the two companies combined handled 1.7 billion queries in the quarter.

On the strength of the acquisition, Ask Jeeves raised its forecast for the year. It expects the combined company will take in $255 million for the year and generate net income of 75 cents per share.

Ask Jeeves is banking on its Teoma search technology differentiating it from search giants Google and Yahoo. The company has ramped up its Smart Search effort, which returns information directly to certain search queries. For example, searches for weather in New York return a forecast. Recently, Ask Jeeves added a celebrity shortcut for searches of famous people that returns a short biography and related information.

"We believe we have the ability to innovate and change the landscape in search," Berkowitz said in a conference call with investors late Tuesday.

He said Ask Jeeves would continue to work with Google and independently to deliver better ad targeting to increase the 15 percent of search queries that result in clicks on advertiser listings.

"Targeting systems today in advertising are nowhere near as good as they need to be," he said.

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