Sale of Ask Jeeves worth $1.9 billion
By Michael Liedtke
Associated Press
SAN FRANCISCO — Barry Diller's electronic commerce company IAC/InterActiveCorp is buying online search engine Ask Jeeves Inc. for $1.9 billion and taking aim at the Internet's advertising market leaders.
The deal announced yesterday represents Diller's bet that he can transform a second-tier search engine into a more formidable threat to industry leaders Google Inc. and Yahoo Inc., much like he built the Fox television network into a major media player in the late 1980s and early 1990s.
The all-stock acquisition also fills a hole in IAC's diverse lineup of more than 40 Web sites, which include online travel agencies Expedia and Hotels.com, social sites Match.com and Evite.com, and other popular services like Ticketmaster and LendingTree.
"We now have all the clay we need to do whatever we need," Diller told analysts during a conference call.
New York-based IAC is paying 1.2668 of its shares for each of Ask Jeeves' roughly 69.4 million outstanding shares. The exchange ratio valued the takeover at $1.9 billion, or $27.40 per share, based on yesterday's stock prices.
IAC's shares fell 66 cents, or 3 percent, to close at $21.63 in trading yesterday on the Nasdaq Stock Market, where Ask Jeeves' shares surged $4.43, or 18.3 percent, to close at $28.67. Ask Jeeves' shares have ranged between $21.20 and $44.66 during the past 52 weeks.
Snapping up Oakland-based Ask Jeeves gives IAC a foothold in search engine advertising, the Internet's financial hot spot.
Advertisers have been paying increasingly more to have their Web site links displayed alongside search engine results. The search engines and their business partners receive sales commissions when Web site visitors click on the ad links. The activity is expected to generate $4.7 billion this year, up from $3.8 billion in 2004, according to eMarketer, an Internet research firm.
The ad links displayed at Ask Jeeves' sites are delivered by Google. Ask Jeeves' contract with Google runs through 2007 and can't be broken because of the IAC takeover, Diller said.
Even as they share revenue, Ask Jeeves and Google try to lure traffic from each other. Ask Jeeves wants to process more search requests to generate more moneymaking opportunities while Google wants the traffic to itself so it doesn't have to split the advertising commission.
Mountain View-based Google has been winning handily.
Through January, Google's share of the Internet search market was 35.1 percent, followed by Yahoo at 31.8 percent, according to comScore Media Metrix. Ask Jeeves ranked a distant fifth with a market share of 5.1 percent.
