Aims to cultivate NASCAR fans and other passionate groups by distributing specialized search results.
If the financial crisis had not come last fall, IAC would be in a bad way right now.
In its earnings report this week, the search and online media firm, whose properties include Ask.com, blamed a combination of factors, both external and "self-inflicted," for a steep decline in its fourth quarter ad revenue. One of those factors was Google's decision to stop serving AdSense for Search ads to some Ask partner sites, decimating its network revenue. Another was the search engine's internal search quality efforts, which reduced ad impressions. "We got less queries because we were making the product more efficient," said CEO and Chairman Barry Diller.
A third whammy was the failure of Ask's costly consumer advertising initiatives. "In spite of the large increases that we got in queries from large marketing efforts, they failed to retain users and they failed to increase frequency of use," Diller added.
As a result, Q4 media and advertising revenues fell 19 percent, a steeper drop than was experienced by any other publicly traded Internet search provider. Additionally, the company said search ad prices dropped 8 to 12 percent during the period, and it expects media and ad revenue to decline by more than 20 percent this quarter. Only Time Warner's AOL ad unit came close to matching the abysmal performance, reporting an 18 percent drop of its own Q4 ad revenue.
Having learned from its failed ad campaigns, Diller said IAC is rejiggering its growth strategy to focus more on vertical audiences. One example of that priority is a recent partnership with NASCAR. Under that deal Ask will power the search experience on NASCAR.com, provide a NASCAR toolbar, and sponsor the stock car racing body's No. 96 car driven by Bobby Labonte.
The goal is replace consumer advertising with specialized deals in a variety of verticals. "The strategy for Ask is...to not go frontally against the larger competitor, Google," said Diller. "We're going after vertical sites that give us traffic and give users a taste of a better experience so they'll come back."
IAC plans to roll out from 8 to 10 similar relationships this year. On these search experiences, Ask will provide structured results that will be "manifestly better" than Google, Yahoo or Microsoft can deliver. As a result, IAC believes query growth in vertical properties will increase substantially by the middle of the year.
Can IAC pull it off? Chris Costello, senior manager of digital research at search agency Performics, notes vertical search has been tried before. "The extent that this is similar or different to those efforts will drive whether or not this might be the time it works," Costello said. "Ask is trying to innovate their way into market share, and they kind of always have. What I think they may be banking on is the stickiness of those individual sites."
Should the effort succeed, Costello says IAC will have aggregated "more engaged, more qualified searchers," which in turn will generate advertiser interest, but not necessarily immediate spending. "Whether or not they have that budget to spend will depend on whether they've got advertising dollars to begin with," he said.
Other categories of Ask's business held up a little better. Local ad services retained some strength, with ServiceMagic revenues up 15 percent year over year. Meanwhile Citysearch revenues were essentially flat.
Chief Financial Officer Thomas McInerney observed the impact of the recession on local advertisers may be delayed somewhat, because smaller businesses don't alter their campaigns as frequently as do larger ones. "Compare search marketing where people are adjusting pricing four times a day to a local business operator who [does so] maybe once a month," he said.
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Until March 2012, Zach Rodgers was managing editor of ClickZ's award-winning coverage of news and trends in digital marketing. He reported on the rise of web companies, data markets, ad technologies, and government Internet policy, among other subjects.
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