Ask Jeeves Steps out from under Google’s Ad Umbrella - Know the Market, Know the Past
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Some of us still remember when Netizens considered sponsored listings from search engines shocking and maybe even a little sleazy. Who would use that form of advertising, and who would willingly click through those ads? Quite a few people, as it turned out. Pay-per-click advertising, as it is often called, is now an industry worth $5.4 billion, according to some analysts. This total accounts for less than half of the nearly $13 billion that advertisers will spend on the Internet this year, but it is still a sizable fraction. Indeed, other analysts estimate the Internet search market will be worth $8 billion this year. Forrester Research believes the pay-per-click market will be valued at $9 billion by 2008.
But it was a struggle for many sites before this model took off. Indeed, in one sense, Ask Jeeves benefited from the years of the dot-com bust: it let the company purchase Interactive Search Holdings, thus increasing its own online holdings significantly to include My Way, iWon, Excite, My Search, My Web Search and the MaxOnline advertising network. Completed in May 2004, the purchase served to indicate how well Ask Jeeves was doing. But where did the butler get the $144 million it shelled out (in addition to stock options) for the purchase?
Back in mid-2002, Ask Jeeves made a deal with Google to use the Google Sponsored Links Program, a paid listings advertising service. The two companies would share more than $100 million in estimated revenues over the course of three years, which would be generated from Google’s advertisers on Ask Jeeves’ network of sites. In mid-2004, the two companies agreed to extend the advertising relationship through 2007. By this time, though, we are talking about a lot more than $100 million over the course of three years. Indeed, money from Google’s advertising program accounted for about 70 percent of Ask Jeeves’ revenue of $261 million last year. You can do the math.
It may not be too much of an exaggeration to say that Google’s advertising deal with Ask Jeeves is the single most important factor in the smaller search engine’s survival when the dot-com bubble burst. Though it is no longer an independent entity, its survival is no longer in doubt. This may help explain why it is willing to consider putting its relationship with Google at risk. Barry Diller’s plans for Ask Jeeves also factor into the move to create Ask Jeeves Sponsored Listings. Before we take a closer look at these points, however, let’s take a look at the service itself.
Next: Ask Jeeves Sponsored Listings >>
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