Diller Asks For Search

By Charlene Li

The oft-maligned Ask Jeeves team (“Are they still around?” is what I often hear) should now be having the last laugh. InterActive Corp is rumored to be buying them (from WSJ and NYT) something around $1.9-2 billion.

First, congrats to Ask CEO Steve Berkowitz on his team. Having worked with them for years, I’ve seen innovation after innovation, but lacking the network and traffic, they usually got short-shifted. They have good personalized search, desktop search, their own algorithmic search engine, and of course, their recent purchase of Bloglines. Add in their ownership of properties like Excite, iWon, and My Way, and they make a great acquisition target for IAC.

Here are a couple of ways IAC will leverage the Ask Jeeves acquisition:

-      Search drives much of the traffic for key IAC properties like Expedia, Citysearch, and Match.com. Having direct connections to a search engine, even a smaller one, will give those companies insights into how consumers use search and how to best leverage other search engines. It could give IAC companies a much bigger leg up, especially in the area of organic search optimization.

-      Distribution via RSS of eCommerce promotions. Think about it – all of IAC’s properties are highly dependent on return traffic, not just acquisitions via search. Bloglines represents an untapped opportunity for IAC properties (and other marketers) to reach their customers through personalized feeds (I want all the upcoming concerts for the Indigo Girls in the Bay Area, and if they’re in Boston during an upcoming business trip that I booked on Expedia, also let me know). And even more importantly, because the feeds are delivered online, they can develop rich profiles of those users and target ads, services, and products to them (with strong regard to privacy, of course).

-      Ask Jeeves already has a partnership with Citysearch for local search. Look for Citysearch to beef up its offerings with more Web-crawled information a la Google, supplementing its already deep entertainment listings. Face it, you don’t go to Citysearch to look for your plumber, so both Ask Jeeves and Citysearch

Two big challenges face the combined companies:

1) Gaining user loyalty. As I’ve written in the past (blog, and on Forrester.com), search loyalty is still up for grabs. Jeeves has only a 3% market share (based on which search engine North American online consumers use most often to search the Interent). If any of the above strategies are going to succeed, IAC will have to invest heavily to promote a repositioned Ask Jeeves strongly against formidable competition.

2) Diversifying revenues beyond their current Google revenue share (which represents about 70% of total revenues for ASK). IAC has got to be watching MSN’s new paid search product launch closely and thinking about whether to renew with Google when that contract is up for renewal in 2007 – or to strike out on their own.

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