For years, Barry Diller of IAC/InterActiveCorp has been searching for the right blend of companies that will realize his lofty predictions about the future of Internet commerce.
Now, the latest object of his search is the search itself.
Diller announced on Monday that IAC would buy Ask Jeeves, a distant fifth in the search market dominated by Yahoo and Google, for stock valued at USS$1.95 billion.
IAC shareholders wondered whether the acquisition was a sign of Diller's brilliant deal making or a bad bet on a small player that will never be able to compete with its far bigger rivals.
One sign that the deal may bolster Diller's reputation was the carping that ensued among Ask Jeeves shareholders who said that the price was too low.
As part of the deal, IAC agreed to exchange 1.2668 of its shares for each share of Ask Jeeves. The closing stock prices on Friday valued Ask Jeeves at US$28.24. That is still well below the company's 52-week high of US$44.66.
Analysts praised the effect of the deal on Diller's company. They noted that it gives IAC an entry into the rapidly growing market for advertising on search engines and also provides it with a broad Web site that could tie together its disparate parts, which include the Home Shopping Network, Ticketmaster, LendingTree, Match.com and Citysearch. IAC's travel companies, including Expedia, are about to be spun out to shareholders as a separate entity.
"I think Diller got a perfect deal," said John Battelle, who edits a widely read Weblog on Internet search technology at Battellemedia.com. Ask Jeeves answers the criticism of IAC as "a company without a middle," he said. "Search is the mortar between the bricks."
Yet Diller, who has long resisted the idea of tying his properties together with some sort of portal or overarching site, dismissed the suggestions that Ask Jeeves would push customers to his other companies.
He said in an interview that IAC's companies would receive no preferential advertising treatment from Ask Jeeves.
"We don't think the Ask traffic will particularly help the commerce side of our business," he said.
Whether the deal ultimately pays off may depend on the ability of Ask Jeeves to match the product development and marketing clout of Google and Yahoo. Ask Jeeves' share price fell last year as many investors thought disappointing third and fourth-quarter results were signs that the company was being outgunned.
Steve Berkowitz, chief executive of Ask Jeeves, who will continue to run the company after the acquisition, said that the firm had been able to more than hold its own.
If Ask Jeeves had remained independent, "we would have continued to gain market share but slowly," he said. "Now being part of a bigger company gives me more opportunity."
In particular, he said he can increase his investment in both marketing and product development.
Nielsen/NetRatings calculates Ask Jeeves' share of total Internet searches at 5 percent, compared with 47 percent for Google and 21 percent for Yahoo.
No. 3 is Microsoft's MSN, and No. 4 is Time Warner's America Online.
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