Backed by a new owner known for shaking up the status quo, Ask Jeeves Inc. is launching an upstart advertising network powered by its own search engine — a move likely to rankle its longtime business partner, Google Inc.
Ask Jeeves' marketing system, scheduled to debut Monday, follows the same model that has been generating tremendous profit growth for Google and another Internet powerhouse, Yahoo Inc., during the past three years.
The expansion heralds a new era for Ask Jeeves, a 9-year-old company that survived the dot-com bust to be acquired for $2.3 billion by InterActiveCorp in a deal completed less than two weeks ago.
New York-based IAC is controlled by iconoclastic media mogul Barry Diller, who defied skeptics nearly 20 years ago when he orchestrated the successful launch of a fourth broadcast television network at Fox.
Now Ask Jeeves is invading territory that so far has been dominated by the makers of the Web's two most popular search engines — Mountain View-based Google and Sunnyvale-based Yahoo. Microsoft Corp. also hopes to grab a piece of the action with a similar advertising network revolving around its MSN.com site.
Both Google and Yahoo allow advertisers to bid for the right to have their text-based ad links displayed online when specific requests are entered into a search engine or other relevant content is posted on a Web page. Advertisers pay a fee each time their links are clicked on. The bidding frequently changes, meaning the ad placement shifts throughout the day.
The paid search concept has mushroomed into an estimated $5.4 billion industry, accounting for about 42 percent of the $12.9 billion that advertisers are expected to spend on the Internet this year, according to eMarketer Inc., a research firm.
Like scores of other Web sites, Ask Jeeves has shared in the boom by participating in Google's network.
Under a contract that runs through 2007, Ask Jeeves shares in the commissions from the clicks on the Google ads displayed on one of its Web sites — a family that includes Ask.com, Excite.com, iWon.com and MyWay.com. The Google relationship turned out to be Ask Jeeves' salvation as it struggled to survive shortly after the dot-com meltdown.
Google accounted for roughly 70 percent of Ask Jeeves' revenue of $261 million last year.
With its survival no longer in doubt and its Web sites growing in popularity, Ask Jeeves believes it's well positioned to develop its own advertising network.
"We are definitely very optimistic about the prospects for this product," said James Speer, vice president of marketing for IAC advertising solutions. "We think there is going to be significant demand. We have definitely heard from advertisers that they would like another choice."
Ask Jeeves plans to continue to display ads from Google's network but will feature them below the listings generated from its own auction-based ads. Since users generally click on the links displayed higher on the page, that hierarchy could mean less revenue for Google — a dynamic that figures to cause tensions.
Speer said Ask Jeeves is hoping Google will regard the new approach as "an evolution of an existing product.
A Google spokesman declined to comment on Ask Jeeves' advertising network, as did a Yahoo spokeswoman.
"Google probably isn't going to be happy about this, but they are still going to take the revenue they get from Ask Jeeves," predicted Charlie Sardou, director of media for icrossing, a search engine marketing firm that works with online advertisers.
Chris Bowler, media director of online advertising firm Agency.com, doubts Google will feel too threatened, based on his preview of Ask Jeeves' system. "Ask Jeeves isn't presenting anything new: it's a copycat service," he said.
Ask Jeeves believes its network will appeal to advertisers because its audience isn't as inclined to use the search engines at Google and Yahoo. Ask Jeeves says 16 percent of its audience overlaps with Yahoo and 14 percent overlaps with Google. That compared with a 22 percent overlap between the audiences of Yahoo and Google, according to Ask Jeeves.
But Ask Jeeves' audience tends to be less active than users of the Google, Yahoo and MSN search engines, according to a recent analysis by Compete Inc. The average Ask.com user returns to the site two times per month compared with four times per month for Yahoo and six times per month for Google, Compete said.
In June, Google held a 36.9 percent share of the U.S. search engine network followed by Yahoo 30.4 percent, according to comScore Networks. Ask Jeeves stood in fifth place with a 6 percent market share.
"The key for Ask Jeeves will be to increase the number of searches that it gets," Sardou said. "Advertisers will go anywhere there is inventory. As the network grows, advertisers will follow."
Enticed by the rapidly growing advertising network, Ask Jeeves began working on its own ad network about a well year ago — long before Diller reached an agreement in March to buy the Oakland-based company, Speer said.
Diller views Ask Jeeves as the glue that will help bind together IAC's eclectic mix of Web sites, including Ticketmaster.com, Match.com and LendingTree.com. IAC recently spun off online travel agency Expedia.com and several related Web sites into a separate company, but Ask Jeeves is widely expected to be integrated into those properties, too, since Diller retained a major stake in those operations.