Honor Among Jeeves

• Email
• Share
• Print

The secret is out: Paid search is in. It popped Infospace (Nasdaq: INSP) shares 28% higher yesterday. It is why Yahoo! (Nasdaq: YHOO) swallowed Overture last year. It is one of many reasons everyone is awaiting Google's IPO. And, last night, it helped Ask Jeeves (Nasdaq: ASKJ) glide past its fourth-quarter targets.

The search portal earned a surprise $0.13 a share on a 58% surge in revenues. This came on a 38% uptick in traffic. By growing its top and bottom lines faster than queries can hit its proprietary sites, Jeeves is milking every juicy eyeball. Investors have to love that.

Readers of Stocks 2004 knew that this would be a hot place to be this year. The paid search upstart we recommended is up 39% since we profiled the sector two months ago. Spitting back sponsored Web results is a win-win-win, as advertisers get to target precise audiences, online surfers get relevant ads, and companies such as Ask Jeeves collect the windfall.

And Ask Jeeves is just getting started. The company is expecting to grow even more this year, guiding Wall Street to $0.56 a share in earnings on $142 million in revenues. Of course, this doesn't mean that the entire niche is foolproof. Lycos.com parent Terra Networks (Nasdaq: TRLY) is struggling with myriad problems, and Looksmart (Nasdaq: LOOK) has been in the penny stock cesspool since being dissed by Microsoft (Nasdaq: MSFT).

However, for the standouts, it looks as if 2004 will be a year to remember. Search-hungry folks hitting the Web in record numbers to ferret out tidbits on everything from the election to celebrity trials will keep traffic booming. Eyeballs? My, oh my, they are fashionable again.

Do you think that Web portals and search specialists will continue to move higher in 2004? Can you separate the winners from the losers? All this and more -- in the Yahoo! discussion board. Only on Fool.com.