May 26, 2005

InterActive Corp. CEO Barry Diller appreciates his latest online acquisition, but he's just not fond of its name.

Two days ago, Diller told an audience of media and executives that the more he learns about the search capabilities of Ask Jeeves, which IAC is buying for $1.85 billion in stock, the more convinced he is that the search company can gain market share against rivals Google, Yahoo and Microsoft's MSN.

But while Ask Jeeves will get a needed infusion of cash for marketing and development, its brand name is unlikely to survive in its current form.

"We're thinking about renaming it," Diller said during a question and answer session at the D3 -- All Things Digital conference. "It probably won't be called Ask Jeeves."

"What will it be called?" asked conference host and Wall Street Journal columnist Kara Swisher.

"Might be one of those words without the other," Diller answered, adding that the final decision on Ask Jeeves' new name isn't "finalized."

Diller said that, at first, his firm wanted to acquire a search business because he and his executive team were afraid that the powerful trend toward paid search advertising could "disintermediate" IAC's many Internet properties.

Translation: Google's method of placing ads on other companies' Web sites in response to keyword searches threatens to take brand power and advertising dollars away from IAC sites such as Expedia and Hotwire, the dating service Match.com, Ticketmaster, CitySearch and others.

Diller said he concluded that IAC's brands "would survive if we kept investing in them," yet the firm still wanted to own a search property.

After evaluating Ask Jeeves' technology and deciding they "liked it," IAC's executives then asked themselves a question.

"Could we gain market share" with it against Google and Yahoo, which each have about 30% of the search market, and against MSN, which as about 16%?

The answer, according to Diller, is yes. "We think these are media businesses, which are not winner-take-all," he said. "There will be more than one winner, and Google and Yahoo won't keep 30% market share over the long term."

When asked whether it mattered to him that IAC had to buy search technology, rather than using that of one of his existing properties, Diller was blunt.

"We invent nothing. We exploit. We recognize opportunity," he declared. Diller told the audience that his firm's CitySearch service "broke even last month, after seven years of our involvement in it," and that IAC briefly considered buying Time Warner's America Online service, but the asking price was too high.

"What was the thinking?" Swisher asked. "At $20 billion, the thinking was 'no,'" Diller said, drawing a laugh from the crowd.

Source: MarketWatch

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