The combination of IAC's consumer sites and Ask Jeeves' search technology creates the potential for market-share gains, but integration of the far-flung services could prove difficult, analysts say.
By buying Ask Jeeves for $1.85 billion, IAC/InterActiveCorp hopes to boost the search engines market share and create a powerful combination of search and structured content for verticals such as local search.
While the acquisition will create the potential for IAC to reach those goals, the companies also will face challenges in attempting to fit Ask Jeeves search and portal properties in with IACs consumer sites ranging from Citysearch and Ticketmaster to Match.com and Expedia, according to financial analysts and market researchers.
Earlier this week, IAC announced an agreement to buy Ask Jeeves Inc.
in a stock deal. During a conference call with analysts, IAC CEO Barry Diller stressed the companys plan to boost Ask Jeeves market share against search heavyweights Google Inc., Yahoo Inc. and Microsoft Corp.s MSN division.
"On paper, it looks pretty powerful," said Allen Weiner, a research director at Gartner Inc. "[Diller] gets himself a portal platform at a reasonable price. He adds to [Ask Jeeves] revenue instantly by giving it more traffic and adds to the power of his sites with the ability to manage his content."
Diller declined to specify a market-share goal for Ask Jeeves but said the acquisition should immediately help drive more traffic to the search engine. IAC plans to promote an Ask Jeeves search box on its network of sites, which reach about 44 million unique users a month. Ask Jeeves by itself draws 42 million unique visitors a month.
"Were convinced that all this hyper growth [in search] is still at the beginning stage," Diller said. "A group of four to five players are going to be able to thrive in this market. ... Because of that, a player like Ask Jeeves has the greatest opportunity for growing share."
Ask Jeeves, based in Oakland, Calif., is the fifth-largest Web search destination in the United States, falling behind Google, Yahoo, MSN and America Online Inc. Ask Jeeves accounted for about 5 percent of U.S. search submissions in January, according to comScore Networks Inc.
Unlike AOL, which uses Googles search results, Ask Jeeves competes using its own technology. It returns search results using the Teoma algorithmic engine it acquired in 2001.
Click here to read about how Ask Jeeves plans to use Teomas clustering technology to refine results.
On the bright side for IAC and Ask Jeeves, their networks of sites largely draw a different set of Internet users. When combined together, their sites reach about 71 million unduplicated visitors every month, comScore Networks reported.
"The combination creates intriguing growth opportunities, given that there is relatively little overlap between the IAC and Ask Jeeves audiences," Dan Hess, senior vice president at comScore Networks, said in a statement.
Targeting expansion in local search.