InterActive Buys Ask Jeeves for $1.85 Billion

Ask Jeeves is expected to become a much bigger player in the search marketing space with IAC/InterActive Corp.'s acquisition of the company for $1.85 billion.

InterActive, owned by Barry Diller, adds the search engine to its Expedia and Citysearch Internet businesses. Ask Jeeves will stay an independent brand with its headquarters in Oakland, CA, and Steve Berkowitz will continue as CEO.

Shares of Ask Jeeves soared 24 percent on news of the acquisition before trading yesterday.

InterActive created an “enormous amount of value” by combining the two companies, said Laura Martin, an analyst with Media Metrics, owned by Soleil Securities Group, Los Angeles.

In one of several planned co-marketing efforts, IAC will promote the Ask Jeeves search box on every IAC site, exposing what it says are 44 million unique users to the Ask Jeeves brand monthly.

“It reignites the growth of users by linking InterActive's users to the Ask Jeeves search engine,” Martin said.

Both companies will benefit by sharing information and ad space, industry analysts noted.

Berkowitz said Ask Jeeves will serve as the “connection between IAC's constellation of leading online properties to share users and content.”

InterActive said the two companies will pioneer new search revenue models by vertically integrating IAC's transaction brands and offers into the Ask Jeeves properties.

“Vertical search is all the rage lately,” said Peter Hershberg, managing partner of search marketing firm Reprise Media, New York. “If you apply Jeeves' … technology to all the rich content at Citysearch, Ticketmaster and Expedia, suddenly you could have a series of very powerful, specialized search engines.”

InterActive also has big plans to expand the search engine.

“We believe that in the future, it has the potential to become one of the great brands on the Internet and beyond — and by beyond, we mean in wireless, in the search for anything, on any device,” said Diller, IAC's chairman/CEO.

IAC also will benefit from a reduced reliance on Google, Yahoo and MSN for traffic, Hershberg said, and Ask Jeeves will have a “reduced reliance on Google's AdWords. They can opt to suppress Google ads when they've got the IAC-specific offers that match a user's content.”

Though the acquisition is touted as a way for InterActive to compete with major players Google, Yahoo and MSN in the profitable search engine ad space, Ask Jeeves is a relatively small player in the search market, said Chris Winfield, president/founder of search engine marketing firm 10e20, New York.

“Ask Jeeves accounts for less than 4 percent of actual searches, but people do know the name,” he said.

Instead of competing in the search ad space, the acquisition is a way for InterActive to tie all of its Internet businesses together, and research consumers' buying habits via Ask Jeeves search data, Winfield said.

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