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Why Diller Really Bought Ask
Jeeves
Why did Diller
offer all of $1.85 billion for Ask Jeeves? Hint: it isn't
to blow Google and Yahoo out of the water.
Michael Stroud
03.24.05
A
fair number of analysts and journalists are scoffing at Barry
Diller's $1.85 billion acquisition of Ask Jeeves , noting
that the search engine company is an also-ran to Google and
Yahoo.
That misses the point. We can quibble about whether Diller
overpaid for Ask Jeeves or bet on the wrong horse. But clearly,
the purchase isn't about bragging rights.
It's about being a portal to every one of the products and
services that Diller's IAC/InterActiveCorp provides—including
LendingTree, Hotels.com, Ticketmaster, Home Shopping Network,
Expedia, and Gifts.com—as well as many products and services
that Diller's partners will provide. If he succeeds in driving
traffic to those sites, he'll generate cash from Ask Jeeves,
even before advertising revenue kicks in.
You can easily see how. Plenty of website owners
would be interested in putting an Ask Jeeves button on their
websites if, say, Diller offered to pay them a fee every time
a customer used Diller's search engine to buy one of his services
or those of a partner. Isn't that exactly what
Amazon.com does when someone lists their favorite book
or DVD on their website and then directs visitors to Amazon.com
to buy it?
Similarly, you can see how a partner—whether a retailer or a
mobile phone operator—might be willing to give Diller a little
cut every time a customer buys an IAC product or a IAC partner's
product after discovering it through the IAC portal. That's
exactly how Ticketmaster works, after all: buy a ticket, pay
a premium to IAC.
Yes, the market can only probably only support a few big search
engines, if you're talking about encyclopedic sites that connect
you to everything from the Civil
War to Martha Stewart . But it doesn't follow that niche
search services catering to specific communities—in this case,
buyers of products and services—can't flourish.
Newspaper readers, after all, don't flock only to USA Today
or the New York Times , while ignoring
local papers. Consumers don't choose to watch only CBS, ABC,
NBC, and Fox, rather than cable or local channels.
Diller knows all about that reasoning. He was scoffed at almost
20 years ago, when he challenged the Big Three networks by cobbling
Fox together from a hodge-podge of local stations. With Ask
Jeeves, he's trying a new twist: creating a unifying engine
that works across IAC's disparate products and services.
Yahoo and Google do the reverse: they have a unifying engine,
and they're seeking the products and services to monetize it.
And there's no business on the web like show business, which
seduces millions of online shoppers with CDs, DVDs, and other
Hollywood products.
It's no accident that Yahoo chairman Terry Semel, Warner Bros.'
former chairman and co-CEO, chose to set up his new
media division in Santa Monica . Entertainment news on Yahoo
is just a mouse click away from Yahoo ads for online vendors
of CDs and DVDs, or entertainment products for sale in Yahoo
Stores.
So there's no reason why other media companies or big retailers—even
specialized ISPs and mobile carriers—can't set up their own
search sites, tailored to their own communities. And don't be
surprised if some of them say "Powered by Ask Jeeves."
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