Ask Jeeves Inc is forking over $343m in cash and stock to acquire Interactive Search Holdings Inc, a private company that owns half a dozen also-ran web portals that, collectively, receive more search traffic than Jeeves’ own sites.
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, said CEO Steve Berkowitz In a conference call.
Interactive Search owns the search-oriented web portals Excite, iWon, MyWay, MySearch, and MyWebSearch, as well as MaxOnline, a business that provides web-based advertising and email direct marketing services.
According to Berkowitz, these portals process 700 million web searches a quarter, about 20 million more than Ask Jeeves. Interactive Search says it is the ninth most trafficked network of sites in the US, according to comScore Media Metrix.
Interactive Search Holdings, as a company, seems to be a little over a month old. It’s the new name of Focus Interactive Inc, which launched iWon.com in 1999 with backing from CBS and has quietly been adding sites ever since.
Nobody at Interactive Search Holdings could be reached for comment yesterday, but an Ask Jeeves spokesperson said the name of the company had been changed for legal reasons related to the acquisition deal.
iWon is a typical portal site, its differentiator that it gives cash prizes to users. MyWay and MySearch are relatively young meta-search sites, which aggregate search results from other search engine providers.
The main source of revenue across these sites is the share of the clickthrough revenue on sponsored search results, which are provided by Google Inc. Jeeves itself already gets about two-thirds of its revenue this way.
Berkowitz said the deal is a merger of growth, not of consolidation. The companies have similar business models and the impetus to merge is not about cutting costs but increasing traffic and thus revenue.
Jeeves updated its revenue and pro forma net income expectations to reflect the deal and the fact that its own traffic has been increasing faster than expected. It now expects first-quarter revenue and income of $37m and $0.18, up from $35m and $0.16.
On a standalone basis, Jeeves raised its revenue forecast for the full year 2004 from $142m to $148m, and pro forma net income from $0.60 to $0.68 per share. If the deal closes, it expects revenue of $220m to $240m and income between $0.85 and $0.90.
To buy ISH, Jeeves will issue 9.3 million shares pay $150 million in cash, and expects the deal to close before the end of the second quarter. The company’s share price rose 40% yesterday during Nasdaq trading.
This article is based on material originally published by ComputerWire