March 4, 2004 1:47 PM PST

Ask Jeeves to buy Web network for $343 million

Ask Jeeves said Thursday that it is buying Interactive Search Holdings, owner of several destination sites including iWon, Excite and My Way, for about $343 million in cash and stock.

Under the terms of the deal, Ask Jeeves will issue 9.3 million shares of common stock to Interactive Search, and another $150 million in cash. It will also pay an additional $17.5 million in cash based on the company's operating performance.

The deal is expected to close during the third quarter. Interactive Search would become a wholly owned subsidiary of Ask Jeeves.

Search survey

Through the deal, Ask Jeeves is making a play for greater visibility in the search arena after several years in relative obscurity compared with search luminaries Google and Yahoo. Earlier this week, it sought to differentiate itself from Yahoo's new search engine by removing its paid-inclusion service for algorithmic search.

The Emeryville, Calif.-based company also plans to boost its odds of collecting ad revenue from search-related marketing, an industry worth an expected $4 billion in 2004. Search-related ads from Google have already buoyed Ask Jeeves' earnings over the last year. And Interactive Search owns several popular Web sites, including sweepstakes site iWon.com and portal Excite.com, which are destination sites that rely on search-related ads and pop-up advertising.

Interactive Search, headquartered in Irvington, N.Y., also owns another Yahoo rival, My Way, which touts a Web navigation environment free of pop-up and banner ads. My Way supports itself solely from keyword-search ads from Google.

Jupiter Research media analyst Nate Elliot said that the acquisition should provide Ask Jeeves with distribution for its growing ad network outside of search. The company has been building an ad network in which it sells banners, pop-ups and pop-unders. "This looks like a big improvement to the distribution of that network," said Elliot.

In total, Ask Jeeves will buy six properties, including Maxworldwide, whose collective traffic made Interactive Search the ninth most visited property online in December, according to researcher Nielsen/NetRatings. The company expects revenue of between $225 million and $235 million in 2004 as a result of the deal.

Last year, Ask Jeeves reported operating earnings of 40 cents a share, based on revenue of $107.3 million.

"This acquisition will double our market share, enhance our ability to compete in the fast-growing search market, and is expected to increase the financial returns to our shareholders," Ask Jeeves' CEO Steve Berkowitz said in a statement.

Investors seemed to like the sound of the deal. In trading Thursday, Ask Jeeves' shares closed up $8.30, or 40 percent, to $29.01.

6 comments

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I've never heard of this company
Ask Jeeves, sure. But Interactive Search Holdings? MyWay.com is recognizable, sort of, but what else is part of the company that's worth $343 million, even if it's mostly stock??

This public step helps explain why Ask Jeeves was so quick to come out in opposition to Yahoo's move on paid inclusion... more publicity.
Posted by pencoyd (82 comments )
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Smart move
Jeeves needs the traffic if it wants to compete with the big boys. This will double their size and make them a more legit player.
Posted by jfischel (2 comments )
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Aha... Excite and iWon are also part of the deal
I'm sure there is a bit of legacy traffic there.
Posted by pencoyd (82 comments )
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Excite sells again
Excite may be the "most sold company" in the past 10 years. I know of at least 3 flips in the past year.
Posted by jfischel (2 comments )
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Seems like a great buy
What Ask Jeeves is buying is the distribution for its ad network. The more page views its network of sites gets, the better deal it can get from Google, which accounts for 67% of Ask Jeeves' revenue.

Separately, someone commented that Excite has been sold several times in the past year. It hasn't actually been sold, Interactive Search Holdings has just changed its name many times. Originally, it started out as iWon, Inc. then changed its name to Focus Interactive, Inc. after it acquired the assets of Excite.com in a bankruptcy court-ordered auction of Excite@Home in 2001. It originally operated Excite as a joint-venture between Focus Interactive and InfoSpace called The Excite Network, but in the past year and a half, it bought out InfoSpace's interest in The Excite Network.

Apparently, according to date provided by comScore Media Metrix, ISH properties collectively represent the 9th most visited Web destination. Pretty impressive, if you ask me.

By the way, I am by no means an expert, but I have always had Focus Interactive pegged as an acquisition target. I was thinking that Google or even Primedia's About.com division might buy it.

Doug Mehus
British Columbia, Canada
Posted by dmehus (30 comments )
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ask Jeeves and myway
I'm a user of Myway.com. I hope that my favorite homepage and search page aren't changed or affected by this merger or take over. Myway.com has only had me for a user for about 6 months. I stumbbled upon them by accicent will browsing with msn.net. I liked the idea of no pop-up ads and things that I didn't want to see. My pages loaded much faster just like they said. I've been a happy customer so far and I hope to stay one. But this is news to me to find out that ask jeeves wants a piece of myway. i can only hope that myway will not lose any of it's integrety. If anything, I hope that the site will improve and not go the other way. Myway company if you read this, please don't change!!
B.R.James
Posted by WannaBteacher (6 comments )
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