Several years ago, if you'd told someone that AskJeeves
However, it was able to use acquisitions to engineer an amazing comeback and turn itself into a super-fast-growth company. In 2001, in search of more-sophisticated search capabilities, AskJeeves purchased Teoma for $4.5 million. And last year, the company acquired much more of the search-market share when it bought Interactive Search Holdings for $343 million.
It seems fitting, then, that AskJeeves has agreed to its ultimate deal: selling out to Barry Diller's InterActiveCorp
While technology is certainly important for search, the real fight is over market share, with the leaders being the usual suspects: Google
AskJeeves' big advantage is its brand, which translates into strong customer loyalty. The company gets about 42 million U.S. unique monthly users. But it's still tiny relative to its peers: According to SearchEngineWatch.com, AskJeeves was garnering only 2% of total searches as of December 2004, vs. 35%, 32%, and 16% for Google, Yahoo!, and Microsoft, respectively.
But whereas "synergies" are often elusive (read: nonexistent) in M&A, they may not be with the IAC/AskJeeves combination.
IAC operates more than 40 consumer brands whose combined websites attract 44 million U.S. unique monthly users. In fact, IAC has sourced direct consumer transactions with 140,000 merchants, suppliers, and vendors. Basically, Diller intends on building a "traffic ecosystem." There will be an AskJeeves search box on all IAC properties. There will also be IAC offers on AskJeeves' search results for a myriad of services, such as travel, ticketing, personals, real estate, and so on.
IAC/AskJeeves also appears to be an attempt at vertical integration -- IAC already gets a great number of customers from search advertising. According to Diller, search is the "gateway to everything" in terms of e-commerce, so why not control some of this distribution? Interestingly enough, AskJeeves has close ties with Google. Perhaps IAC will get some competitive intelligence to see how search companies charge clients like IAC.
Furthermore, it looks as if Diller wants to attack the $20 billion-a-year local search market, which traditional yellow-pages directors currently dominate. Here, IAC can leverage its local properties like Ticketmaster, Match.com, and CitySearch.
In light of the intense competition from Google, Yahoo!, and Microsoft, AskJeeves would have an incredibly difficult time in meaningfully increasing its market share from organic growth. The problem is that there are no other major acquisitions to be had. Selling to a company that will bring synergies and access to a significant amount of capital makes a lot of sense.
If a company like AskJeeves has decided to bail out, how much longer can small-time outfits like Interchange
Fool contributor Tom Taulli does not own shares in the companies mentioned in this article.