March 4, 2004

Online search engine Ask Jeeves Inc. is paying $343 million US for a family of popular websites that includes Excite.com and IWon.com, bulking up the company as it vies to wrest market share away from industry leaders Google Inc. and Yahoo! Inc.

Under the deal announced Thursday, Emeryville, Calif.-based Ask Jeeves will double in size with the acquisition of Interactive Search Holdings, a privately held company in Irvington, N.Y., with about 200 employees and more than $100 million in annual revenue.

The Interactive Search operations will remain in New York after the takeover closes in the second quarter, with most of the workers, including company co-founders Bill Daugherty and Jonas Steinman, expected to be retained.

The price consists of $150 million in cash and 9.3 million shares of Ask Jeeves' stock, which closed Wednesday at $20.71. Ask Jeeves announced the deal before the stock market opened Thursday.

Launched in 1999, Interactive Search's best-known properties are the sweepstakes site IWon, which gives away $10,000 a day to attract traffic, and Excite, which was bought for $10 million in 2001 when the site was auctioned in bankruptcy court. The company's other sites include My Way, which waged an anti-Yahoo marketing campaign in late 2002.

Interactive Search - better known as The Excite Network - ran the 12th busiest group of websites in January, attracting a total of 23.8 million unique visitors in January, according to comScore Media Metrix, a research firm. Ask Jeeves ranked as the 26th most popular destination with 15.6 million unique visitors.

Based on the combined audience of 39 million, Ask Jeeves's collection of websites would become the eighth most popular properties on the Internet, ranking just ahead of Amazon.com, according to comScore's latest traffic figures.

Just as importantly to Ask Jeeves, the Interactive Search properties processed 700 million search requests during the fourth quarter, slightly more than the 680 million search queries handled by Ask Jeeves.

Based on those figures, Ask Jeeves's share of the search market should climb to about seven per cent, estimated Steve Berkowitz, the company's chief executive officer. That will still leave the company well behind search engine leaders Google and Yahoo, which own market shares of 35 per cent and 27 per cent, respectively.

The volume of search requests is important because search engines generate much of their revenue from text-based ads that are tied to the words entered in the query box. Businesses pay when their ad links are clicked upon, so search engine profits generally rise along their traffic.

"The foundation of a great business on the web is search," Berkowitz said in an interview. "This deal should really enhance our competitive position."

After losing $699 million during its first six years in business, Ask Jeeves has bounced back from the depths of the dot-com crash on the strength of search-powered advertising. Most of the ads, ironically, are delivered to Ask Jeeves sites by Google, which shares in the revenue.

Ask Jeeves posted a $26-million profit last year on revenue of $107 million and expects its operating profit this year to roughly double, boosted by the acquisition.

The company said Thursday it couldn't accurately estimate its projected net income this year because the Interactive Search deal will likely result in special accounting charges.

Source: Canada.com

        

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