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Ask Jeeves: Why Buy Interactive Search Holdings?

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Ask Jeeves' recent acquisition of Interactive Search Holdings has gone largely unremarked amid the recent sparring between industry titans Yahoo and Google. But the acquisition is significant, broadening Jeeves' reach and providing new resources that will be used to beef up its core Teoma search technology.

Ask Jeeves announced its intent to purchase Interactive Search Holdings on March 4th, in a combination cash and stock deal that's expected to close by the third quarter of 2004.

Interactive Search Holdings isn't a household name, despite its ownership of some of the web's most popular properties. According to a press release issued by Ask Jeeves, Interactive Search Holdings was the 9th 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. An online ad rep group, MaxOnline, is also part of the deal.

Both Ask Jeeves and Interactive Search Holdings are survivors of the dot-bomb shakeout. "Both companies took the ride of the Internet in 1999, and both went down to the depths of despair in 2000-2001," said Steve Berkowitz, Ask Jeeves' Chief Executive Officer. "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% market share of the web 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 that the company will now have additional 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 of Interactive Search Holdings' properties are multi-search engines, offering a choice of results from five major search engines, including Google, AlltheWeb, AltaVista, Ask Jeeves or LookSmart. Google is the default provider of search results for all of Interactive Search Holdings' destination sites other than Excite, which is powered by metasearch provider InfoSpace.

Over time, the company plans to lessen its reliance of Google and push its own Teoma technology to the fore. "Long term, our goal is to have 50% of the web searching with Teoma," said Berkowitz.

The company will continue to maintain all of 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," said Berkowitz.

Different Measures of Search Traffic

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

The Nielsen NetRatings Search Engine Ratings put Ask Jeeves in fifth place as a search destination, with an 8.5% market share. comScore Media Metrix Search Engine Ratings reports a much lower number, at 3.1%. Jeeves says that the combined companies will have about a 7% 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."

The numbers reported by Ask Jeeves and Interactive Search Holdings are based on internal metrics, based on analysis of usage logs, as well as information from audits of ads served on search result pages by Google and DoubleClick. This 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 the way outside sources compile traffic stats and use them to compare the popularity of search properties. "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 said.

Toolbar Spyware Controversy

Interactive Search Holdings 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 AskJeeves.com or Teoma.com, the ISH search toolbars strengthen the company's "acquisition point" strategy, capturing traffic from users that otherwise might not visit a search engine home page, since toolbars work independently of the current page being viewed.

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

"[Interactive Search Holdings” 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. "I think 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."

Interactive Search Holdings Properties Acquired by Ask Jeeves

My Way http://www.myway.com/

My Way was originally launched as a "clean" portal, where you could get features such as email, news, a personalized home page and so on, without major advertising or pop-ups. Sponsored listings from Google; web search results from Google by default, with alternative results from AltaVista, Ask Jeeves, AlltheWeb and LookSmart available via the click of a button, or by setting preferences.

My Search
http://www.mysearch.com/

Essentially the same offering as MyWay, only without the build-your-own fast portal pitch.

My Web Search
http://www.mywebsearch.com/

Also essentially the same as MyWay, but designed as the web interface for those using the MyWebSearch toolbar.

iWon
http://home.iwon.com/

Long-standing portal with a gimmick -- the ability to win money with various types of sweepstakes and other giveaways. iWon's web and image search functions are powered solely by Google, with shopping search powered by Shopping.com, and directory data from the Open Directory Project.

Excite
http://www.excite.com/

Excite has a long and storied history, merging with high-speed cable firm AtHome in the late 90s, only to flame out in a high-profile bankruptcy soon afterward. Internet Search Holdings acquired the "portal" assets of Excite, while Infospace bought directory and search box. Excite search remains powered by Infospace, and Berkowitz says there are no current plans to change this arrangement in the short term.

MaxOnline
http://www.maxonline.com/

MaxOnline is a advertising representative group, selling advertising for 1,000 plus sites on the content side.

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