Jeeves goes for $1.85 billion asking price

By Steve Malone

Posted on 22 Mar 2005 at 10:49

Ask Jeeves, the world's fifth most popular search engine group, has been bought by IAC/InterActive for $1.85 billion in an all share deal. IAC now has an impressive range of Internet properties including Expedia, Match.com and Ticketmaster.

Under the terms of the deal, InterActiveCorp will swap 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. InterActiveCorp says it will then buy back at least 60 percent of the shares it plans to issue through share repurchase schemes. The company is not short of money for such a strategy as it had a $1.16 billion war chest at the end of last year.

The purchase of Ask Jeeves is further evidence that the financial community sees a big future in search. However, IAC and its CEO Barry Diller will need to put serious amounts of his cash mountain into the Ask Jeeves group if it wants to compete with the big four (Google, Yahoo, MSN and AOL).

According to comScore Media Metrix qSearch which monitors the activities of 1.5 million English speaking searchers world wide, last December the Ask Jeeves group - including Excite and Teoma - garnered just six per cent of the total number of searches. This compares with 35 per cent for Google, 32 per cent for Yahoo!, 16 per cent for MSN Search and nine per cent for AOL.

While having a broad number of online properties, particularly in the hotel and travel sectors, there is not much synergy between a search engine and the existing portfolio. At a time when the big four are rapidly trying to build communities loyal to their own version of search, Ask Jeeves is not even at the starting line.

Ask Jeeves gets much of its revenue from 'sponsored web results' which is several years behind the less intrusive contextual advertising based on keywords offered by Google's AdWords and Overture.

Nevertheless Mr Diller is unperturbed and said that Ask Jeeves 'has the potential to become one of the great brands of the Internet and beyond'.