Ask Jeeves: Why Buy Interactive Search Holdings?

Ask Jeeves’ recent acquisition of Interactive Search Holdings (ISH) went largely unremarked amid the recent sparring between industry titans Yahoo and Google. But the acquisition is significant, broadening Jeeves’ reach and providing new resources to beef up its core Teoma search technology.

Ask Jeeves announced its intent to purchase ISH on March 4, in a combination cash and stock deal expected to close by Q3 of this year.

ISH isn’t a household name, despite its ownership of some of the Web’s most popular properties. According to an Ask Jeeves press release, ISH was the ninth most-visited property in December 2003, with popular but under-the-radar destinations such as My Way, My Search, My Web Search, iWon, and former high-flyer Excite. Online ad rep group, MaxOnline, is also part of the deal.

Both Ask Jeeves and ISH are dot-bomb shakeout survivors. “Both companies took the ride of the Internet in 1999, and both went down to the depths of despair in 2000-2001,” said Ask Jeeves CEO Steve Berkowitz. “We have a very similar history. And both companies came out of the downturn focused on search.”

Combined, the two companies will have about 7 percent market share of the online search space. The acquisition doubles Ask Jeeves’ market share, and the deal is accretive to the company’s earnings.

“One of our strategies since the company has turned profitable is to grow market share organically and through acquisition,” said Berkowitz. In addition to doubling market share, the acquisition puts the combined companies in a stronger competitive position.

“We both are attacking the search box kind of differently, but we’re focusing on search and user behavior on the Web,” said Berkowitz.

The biggest benefit to searchers is company will have more resources to invest in its core crawler-based search engine, Teoma. “The Teoma technology is improving constantly,” said Berkowitz. “This will give Teoma an opportunity over time to get a lot more people using it.”

Most ISH properties are multi-search engines. They offer a choice of results from five major search engines: Google, AlltheWeb.com, AltaVista, Ask Jeeves, and LookSmart. Google is the default results provider for all ISH’ destination sites except Excite, which is powered by metasearch provider InfoSpace.

Over time, the company plans to lessen reliance on Google and push its own Teoma technology to the fore. “Long term, our goal is to have 50 percent of the Web searching with Teoma,” said Berkowitz.

The company will continue to maintain all the properties as separately branded, distinct destinations. “I believe in a multi-brand strategy. Even though the content was quite similar, the entry points are quite different,” notes Berkowitz.

Different Measures of Search Traffic

How much traffic does Ask Jeeves get compared to top destinations such as Google, Yahoo, and MSN? Depends who you ask. Traffic and market share numbers reported by Ask Jeeves differ from those compiled by the two major online audience tracking services, Neilsen//NetRatings and comScore.

The Nielsen//NetRatings search engine ratings put Ask Jeeves in fifth place as a search destination, with an 8.5 percent market share. comScore Media Metrix search engine ratings reports a much lower 3.1 percent. Jeeves says the combined companies will have about a 7 percent market share of the Web search space.

What accounts for the discrepancies?

“There are two things this industry doesn’t do well,” said Berkowitz. “It doesn’t break out searches, and it doesn’t break out monetization.”

Figures reported by Ask Jeeves and ISH are based on internal metrics culled from usage log analysis and information from audits of ads served on SERPs by Google and DoubleClick. The approach differs from methods used by third-party agencies, which rely on sampling and other methods to compile traffic estimates.

“My advertisers have paid me. Google and DoubleClick have verified those numbers,” said Berkowitz. “They accurately reflect the number of searches as tracked by DoubleClick or Google. Google’s not going to pay me for things that aren’t real.”

Berkowitz isn’t happy with how outside sources compile and use traffic stats to compare search property popularity. “I believe we’re much more real about what goes on in our business than anyone else in this industry, almost to the point where it puts us at a competitive disadvantage,” he stated.

Toolbar Spyware Controversy

ISH was an early mover in the toolbar arena, and toolbars from its various properties are widely distributed. Unlike Ask Jeeves’ core search platform strategy, which relies on users visiting Ask Jeeves or Teoma, the ISH search toolbars strengthen the company’s “acquisition point” strategy, capturing traffic from users who otherwise might not visit a search engine home page. Toolbars work independently of the current page viewed.

Rumors that ISH search toolbars contained adware or spyware have dogged the company for years. Berkowitz denies current versions contain spyware, though he acknowledges there were problems with early distribution partners’ policies.

“[ISH] policies are extremely clean,” he said. “They’re working very, very hard to clean this stuff up. These guys don’t even do an automatic update. They’ve spent a lot of time working with the spyware companies to make sure that they’re not considered spyware.”

Berkowitz is optimistic about the future of the combined companies. “What you’re going to see from Jeeves in the future is going to be really exciting,” he said. “We’re trying to be innovators, rather than just followers. We’ve just got to continue to do what we do, and do it better.”

ISH properties acquired by Ask Jeeves:

  • My Way. My Way was originally launched as a “clean” portal. You could get features such as email, news, and a personalized home page without major advertising or pop-ups. Sponsored listings are from Google; Web search results are from Google by default, with alternative results from AltaVista, Ask Jeeves, AlltheWeb, and LookSmart available via a click or by setting preferences.

  • My Search. Essentially the same as My Way, without the build-your-own portal pitch.
  • My Web Search. Also essentially the same as My Way, but designed as the Web interface for My Web Search toolbar users.
  • iWon. Long-standing portal with a gimmick: the chance to win money in various sweepstakes and other giveaways. iWon’s Web and image search functions are powered solely by Google; its shopping search by Shopping.com; and its directory data by the Open Directory Project.
  • Excite. Excite has a long and storied history. It merged with high-speed cable firm AtHome in the late ’90s, only to flame out in a high-profile bankruptcy soon after. ISH acquired Excite’s “portal” assets, InfoSpace bought the directory and search box. Excite search is still powered by InfoSpace. Berkowitz says no current plans exist to change the arrangement in the short term.
  • MaxOnline. MaxOnline is an advertising representative group, selling for over 1,000 content sites.

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