has agreed to a $1.85 billion buyout of Ask Jeeves,
a search engine that has long been overshadowed by Google
The Internet conglomerate,
which is headed by media entrepreneur Barry Diller, said
Monday it is hoping to move aggressively into the Web
search market through the deal and pointed to growth in
the online advertising market as another major incentive
in making the acquisition.
Ask Jeeves differs
from other search engines in that it responds to plain
English questions such as "What is March Madness?"
rather than simple keyword searches. That was one of the
elements of the company that made it most appealing as
an acquisition target, Diller said.
that in the future (Ask Jeeves) has the potential to become
one of the great brands on the Internet and beyond,"
Diller said in a teleconference Monday morning. "And
by 'beyond,' we mean in wireless (and) in the search for
anything on any device."
The buyout comes
during a period of intense activity across the search
market, as the leading players have been aggressively
expanding their efforts around emerging business models
and trends in the sector, including local search, blogs
and sponsored advertising. Blogs, which let people create
their own Web pages on which to share information and
opinions, have been an especially hot topic of late. Yahoo,
for instance, recently made a beta launch of its Yahoo
360 blogging section.
On the advertising
front, MSN is expected to debut a new technology intended
to rival the successful AdWords program operated by Google.
The new MSN AdCenter service, set to debut in Singapore
and France in the coming months, is also likely to diminish
Microsoft's dependence on Overture, a subsidiary of Yahoo,
to help manage its advertising. Using sponsored advertising,
search engines auction off popular search terms to the
highest bidders, whose ads are then featured alongside
search results produced for the terms or phrases.
And in another sign
that companies outside the traditional search space are
increasingly interested in joining the sector, The New
York Times Co. recently agreed to acquire About.com, a
searchlike provider of information, for $410 million.
Under the terms
of Monday's deal, InterActiveCorp will issue 1.26
shares of its common stock for each share of Ask Jeeves
common stock in a tax-free transaction valued at $1.85
billion, discounting any cash involved in the buyout.
InterActiveCorp said that it intends to buy back at least
60 percent of the shares it plans to issue for acquisition
through previously authorized share repurchase programs.
The Ask Jeeves
buyout is the most significant move made by InterActiveCorp
since the company announced in December that it would
divide into two separate companies. At that time, the
company split off its extensive online travel holdings,
including reservation services Expedia.com, Hotels.com
and Hotwire, into a separate venture that does business
under the Expedia moniker.
The search company,
known for the butler figure that serves as its emblem,
will operate as an independent business unit with operations
headquartered in Oakland, Calif., following completion
of the acquisition. If the deal passes regulatory scrutiny
and gains approval of Ask Jeeves' shareholders, InterActiveCorp
said it expects to close the transaction late in the second
quarter or early in the third quarter.
will continue in his role as CEO of Ask Jeeves. He
said that joining InterActiveCorp will give the company
greater ability to compete against its larger rivals,
which include Google, Microsoft's MSN and Yahoo.
"We are excited
about the opportunity to serve as the connection between
InterActiveCorp's constellation of leading online properties
to share users and content," Berkowitz said. "Ask
Jeeves will now be in an even stronger position to aggressively
grow market share."
Among the initial
plans for expanding Ask Jeeves detailed by InterActiveCorp
were making investments in the site's online distribution
and infrastructure, in addition to growing its presence
in international markets. InterActiveCorp said it also
hopes to develop local search capabilities for Ask Jeeves,
mirroring similar strategies recently launched by Google
and Yahoo, and to expand the search engine's online commerce
said that InterActiveCorp will work to integrate all its
travel and ticketing services with Ask Jeeves, and that
all of the company's sites will soon feature a search
function powered by its latest acquisition. The executive
did not rule out the notion of creating a portal-type
site to market all its products through one URL.
"We now have
in one place all the pieces we need however (the market)
develops," Diller said. "Throughout IAC, its
sites and the technology that powers all of them, we have
all the ingredients and resources to pull everything together
if that's what the market demands."
Founded in 1996,
Ask Jeeves said it processes about 42 million unique queries
generated by American Web surfers each month.
At least one
industry expert viewed the deal as a positive for both
IAC and Ask Jeeves. Charlene Li, analyst with Forrester
Research, said the acquisition gives Ask Jeeves deeper
pockets, allowing it to compete more closely against
its larger rivals. She said the deal also offers IAC
a valuable asset for sharing information across its
the idea that IAC will create a portal from its
current holdings and instead recommended that the company
would do better to create online services that draw
from expertise and content available across its online
has needed is better info sharing between its properties,"
Li said. "Once I log into Expedia, I'm not logged
into eVite or CitySearch. A universal log-in across
all these sites would allow them to offer more personalized
searches, and influence the kind of searches that I
do, which could be a good way of putting the properties
to work together."
Li said that
Google, Yahoo, MSN, and even America Online have
such a large head start in the general Web search arena
that it would be hard for Ask Jeeves to catch up. However,
the analyst said that by focusing on personal search,
the Ask Jeeves-IAC combination could make waves.
can incorporate CitySearch with Ask Jeeves and put some
good general search capability next to all the great
editorials in CitySearch, you'd think that could really
work," Li said. "That could help CitySearch
and Ask Jeeves move beyond restaurant listings, or the
other types of information you see today, into other
personalized services. There's going to be a lot of
opportunity in local search."
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