Ask Jeeves Steps out from under Google’s Ad Umbrella

Ask Jeeves has been a faithful butler; the ads it has served up as an affiliate of Google’s sponsored listing program provided it with more than half of its revenue last year. So why is this arguably second-tier search engine striking out with its own sponsored listing program? What will Google think? And should you consider using it?

It can be hard to tell, because so many people who use and advertise with search engines focus on the wildly popular Google and Yahoo!, but Ask Jeeves is a dot-com success story. The search engine that encouraged people to ask natural language questions lived independently for nine years before Barry Diller and his InterActiveCorp purchased the company in a deal valued at nearly $2 billion, completed in mid-July. Diller has a reputation for shaking things up. While the first big announcement from Ask Jeeves after the purchase is more of a baby step – and was underway before Diller bought the company – it may have a large effect.

On August 1, Ask Jeeves announced that it was creating an automated advertising product. Dubbed Ask Jeeves Sponsored Listings, it gives users the opportunity to advertise directly with the search engine, without going through an account rep. Indeed, the program replaces the company’s Premier Listings service, which was mostly available only to high-end advertisers planning to spend a significant amount of money anyway.

The new program operates on a basis that will be familiar to many purchasers of ads with other search engines. Advertisers will bid for placement of ads that Ask Jeeves will serve to its users when they type keywords into the search engine. With some justification, Ask Jeeves Sponsored Listings has been described as a copycat of Google’s and Yahoo!’s programs. Presumably, one can expect the Ask Jeeves program to have the same advantages and drawbacks as those programs – but with a smaller market reach. In June, comScore Networks, a global company that offers insight into consumer behavior, reported on Ask Jeeves’ standing in the U.S. search engine market. It was enough to make even an unflappable butler show a shadow of a frown: a fifth-place finish, with only six percent of the market share.

So why is this move worth talking about? To understand that, it is worth backing up a little for the sake of examining the context.

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.

The general manager responsible for handling Ask Jeeves Sponsored Listings answers to InterActiveCorp; the program falls under the heading of IAC Advertising Solutions. Some the largest benefits touted by Ask Jeeves of its advertising program include a lower minimum amount of money required to get into the program, and a greater ability for advertisers to manage their campaigns. James Speer, vice president of marketing and products for IAC Advertising Solutions, observed that “Ask Jeeves’ customers wanted greater control over their advertising campaigns, and our new product empowers advertisers without sacrificing the high level of customer service for which Ask Jeeves is known.”

The program boasts proprietary Ask Jeeves and third-party licensed technologies. Some of its features include:

  • An automated system that provides control over purchasing, management and campaign optimization.

  • Instant campaign activation and a 24 hour cancellation policy.

  • Spend management options that include daily or monthly budget limits.

  • Bidding system.

  • Real time campaign reporting and account alerts.

  • Automated click fraud protection.

  • Bulk-loading support for large keyword lists.

  • Standard creative format.

Among these features, the one that I am most curious about is the automated click fraud protection. Google, Overture, and presumably other major search engines have teams working to identify click fraud, and also try to catch it with algorithms that measure as many as 50 (or more) aspects of ad clicks. There was no further information available at the time of writing, however; Ask Jeeves scheduled its sponsored listings program to go live August 15.

As more businesses that advertise online learn about click fraud, how well Ask Jeeves can filter that out will become a factor in the success of its program. This is especially true considering that Ask Jeeves intends the automated sponsored listings service to appeal to those with less money to spend than their Premiere Listings customers – so they are presumably less able to absorb the costs of click fraud.

Google might be most curious about the “standard creative format” feature. It seems likely that Ask Jeeves will be following Google’s lead as far as the style of its sponsored listings. If Google becomes annoyed at losing the Ask Jeeves network of sites as an ad affiliate, it might try to make trouble in the courts by claiming the form of the ads infringes on its own format.

Of course, it’s not just the creative format of the ads that is standard about the Ask Jeeves program. Practically all of these services seem to be identical to what Google offers with its AdWords program. While some observers have mocked the smaller search engine for its copycat approach, it does make a certain amount of sense. After all, it works well for Google. Additionally, giving potential advertisers something they are familiar with is likely to reassure them, and make them more likely to use the service.

Ask Jeeves does not intend to stop running Google ads, at least not at first. Its advertising relationship with Google will indeed run through 2007 as originally scheduled. Paul Gardi, executive vice president and general manager of IAC Advertising Solutions, emphasized that point when the company announced the new program. “The relationship with Google is a strong one, and the intention here is not to replace it. The intention is to help advertisers who want a direct relationship with Ask Jeeves.”

Danny Sullivan of Search Engine Watch believed that advertisers might buy direct if they wanted to pay a premium to rank well on Ask Jeeves. He reasoned that the company would only show its own ads when it believes it would earn more money from those than from displaying Google ads for the same searches. Given that Ask Jeeves splits the revenue for Google ads with the larger search engine, however – a split that would not exist with ads purchased directly – it seems likely that an advertiser might end up paying less to rank well with Ask Jeeves than with Google.

This makes sense because Ask Jeeves has a smaller reach than Google, but it could still be large enough for many advertisers. Nielson/NetRatings stated in May that the Ask Jeeves network reaches nearly a quarter of the total online population. And while Ask Jeeves users tend to avail themselves of the site only half as often as Yahoo! or Google users (according to analysis by Compete Inc.), Ask Jeeves claims that its audience does not overlap the major search engines nearly as much as, say, Google’s audience overlaps Yahoo!’s. This might be attractive to some advertisers.

The potential success of the program remains questionable. Ask Jeeves is a perennial also-ran in the search engine market, which may make people hesitant to advertise directly – or, indeed, to take Ask Jeeves seriously. But Barry Diller hopes to make the company into a serious threat to Google, as well as use it to bind his disparate internet properties together.

Diller envisions someone looking for a date at Match.com, then searching Ask Jeeves to plan a date, and eventually winding up at Hotels.com – all three of these being properties owned by IAC. If he can make this type of “networking” work, it could potentially increase the value of advertising with Ask Jeeves by offering the possibility of continuity of ads within the network – and, as any advertiser knows, repetition helps to make the sale. For now, though, we will have to see whether Diller can repeat the success of his Fox television network with Ask Jeeves as the mortar holding together his web properties network.

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