Ask Jeeves has renewed its contract with Google to supply paid text listings on its results pages.
The deal means Ask Jeeves will continue to rely on its biggest competitor for the infrastructure needed to support paid text advertising on its sites, which include Ask Jeeves and Ask Jeeves U.K. Ask Jeeves said the value of the deal, not accounting for growth, is approximately $1 billion.
Other options available to the company, which also owns portal Excite and ad network MaxOnline, were to acquire a company that provides sponsored ad links, to develop technology of its own, or to sign with Google competitor Overture.
According to AskJeeves spokesperson Derrick Nueman, the company chose to partner again with Google partly because it wants to dedicate its limited resources to improving the search experience, and partly because its status as a smaller player means it can maximize CPCs by allowing its searches to be included in a larger aggregate network.
"It makes more economic sense, if you look at our market share, to partner," he said. "At 7 percent of the market, the pie will be bigger for us working with Google. We make their reach bigger, and more advertisers bid on the keywords."
Ask Jeeves also likely chose to re-sign with Google because the revenues coming in through that deal are a known quantity, as opposed to the uncertain costs that would have been associated with developing an internal keyword bidding and management system, or switching providers. However, the potential gain to the company in owning the keyword management piece of its search business is huge. Jupiter Research Analyst Nate Elliott expressed surprise at the contract renewal.
"On the one hand, this is easy money for AskJeeves -- they just put up the Google tags and cash the checks," said Elliott. "On the other hand, they could probably generate higher revenues and better margins by building their own bidding system. And now that they're a top ten Web property, they've got the scale to attract advertisers on their own."
Google AdWords is also the paid listings provider of choice for the properties that came to Ask Jeeves through its acquisition of Interactive Search Holdings (ISH) earlier this year.
Ask Jeeves said its accumulated Web properties account for 20 percent of Google's network revenues, and 11 percent of the search giant's total advertising revenue. The company has achieved huge traffic increases in the first half of 2004. Last month, it clocked in at the sixth most trafficked online property, according to comScore Media Metrix.
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