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Media conglomerate IAC/InterActiveCorp agreed today to buy search and portal Web site operator Ask Jeeves in a stock-swap deal the companies valued at around $1.85 billion.

IAC chairman and chief executive officer Barry Diller says he sees Ask Jeeves as a company with "the potential to become one of the great brands on the Internet." Currently, it significantly trails search leaders Google and Yahoo--Forrester Research estimates Ask Jeeves's North American search engine market share at 3 percent.

IAC plans to integrate its portfolio of Web properties with Ask Jeeves, potentially increasing traffic both ways. IAC, citing ComScore's Media Metrix, estimates that Ask Jeeves draws 42 million unique monthly U.S. users, while its own Web sites collectively attract 44 million.

IAC's network, built through acquisition, includes Match.com, Evite, Ticketmaster, Hotels.com, CitySearch, and Expedia (which IAC is in the process of spinning off). The company also owns a number of tele-shopping cable channels including the U.S. Home Shopping Network, Australia's TVSN, Germany's 9Live, and Japan's Shop Channel. Ask Jeeves brings to the company its Ask.com search engine, Excite, search/marketing site IWon.com, and recently acquired content aggregation service Bloglines.

Make It Local

New York-based IAC says it will seek to differentiate Ask Jeeves from other players in the crowded search pack by emphasizing its local search, content, and merchant information. The company will also continue Ask Jeeves's in-development plans to launch wireless search services.

Ask Jeeves will remain an independent brand based in Oakland, California, and led by current CEO Steve Berkowitz, IAC says. Pending regulatory and shareholder approval, the deal is expected to close late in the second quarter or early in the third quarter of 2005. IAC will issue 1.2668 shares of its stock for each share of Ask Jeeves stock.

Forrester analyst Charlene Li says that while Ask Jeeves struggles for recognition against its more famous and heavily trafficked rivals, having a search company in-house will benefit IAC.

"Search drives much of the traffic for key IAC properties like Expedia, CitySearch, and Match.com. Having direct connections to a search engine, even a smaller one, will give those companies insights into how consumers use search and how to best leverage other search engines," Li wrote in a post on her commentary Web site. "It could give IAC companies a much bigger leg up, especially in the area of organic search optimization."