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Ask Jeeves to Buy Web Portals, Search Sites

March 05, 2004|From Associated Press

Online search engine Ask Jeeves Inc. said Thursday that it was buying a family of popular websites that included Excite.com and IWon.com.

The purchase would double the company's market share as it vies to wrest users away from industry leaders Google Inc. and Yahoo Inc.

The value of the cash-and-stock deal climbed to $420 million after Ask Jeeves' shares soared by 40% on the news.

Emeryville, Calif.-based Ask Jeeves is paying $150 million in cash and 9.3 million shares of its stock for privately held Interactive Search Holdings Inc., based in Irvington, N.Y., with about 200 employees and more than $100 million in revenue last year.

Ask Jeeves' shares surged $8.30 to $29.01 on Nasdaq. That reflected investor enthusiasm for a deal that would pull together Web portals and search-engine sites with a combined online audience larger than that of Amazon.com Inc.

"It was a very smart move," said industry analyst Derek Brown of Pacific Growth Equities. "This allows Ask Jeeves to gain significantly more market share than it could have organically."

The acquisition is Ask Jeeves' latest attempt to expand its audience. This week, the company disclosed that its search engine would stop accepting money to crawl through the material on websites -- a service known as "paid inclusion" that has been embraced by Yahoo and rejected by Google.

Ask Jeeves believes that its search engine will deliver more relevant results without paid inclusion, attracting more visitors.

The Interactive Search acquisition, expected to be completed before July, should broaden Ask Jeeves' appeal.

Interactive Search was launched in 1999, and its best-known properties are 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, perhaps better known as Excite Network, ran the 12th-busiest group of websites in January, according to ComScore Media Metrix, a research firm. Ask Jeeves ranked as the 26th-most popular destination. The combined audience would make Ask Jeeves the eighth-most popular overall, ranking just ahead of Amazon.com, according to ComScore's latest traffic figures.

Just as important 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' share of the search market should climb to about 7%, Chief Executive Steve Berkowitz said. That still would leave it well behind Google and Yahoo, which have market shares of 35% and 27%, 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 on, so search engine profits generally rise along with their traffic.

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