The Fox of search engines
Barry Diller turned Fox into a legitimate fourth major TV network. Can he do the same thing with Ask.com in search?
NEW YORK (CNNMoney.com) – Google. Yahoo! MSN. They are the 21st century equivalent of the Big Three.
Ask.com, formerly known as Ask Jeeves, was re-launched in February without the jovial butler character. IAC/InterActive bought Ask Jeeves last year.
New Ask.com gaining market share
Getting Ask to be mentioned in the same breath as the Internet big boys may seem to be a daunting task. But analysts aren't ruling out Barry Diller. After all, he helped build the Fox TV network in the 1980s, a time when many media experts said that there was no room for a fourth major broadcast channel.
"Google, Yahoo! and MSN are so focused on rolling out new features and competing aggressively with one another that it's going to be very challenging for Ask.com," said Greg Sterling, principal of Sterling Market Intelligence, an independent research firm focusing on search. "But at the same time, Ask.com has been creative, scrappy and resourceful."
The new Ask.com has won praise from many techies for innovative features, such as a "binoculars" site preview that shows screen shots of Web sites listed in search results and maps with walking directions in addition to driving directions.
"Ask.com has been as innovative as anyone in search," said Scott Kessler, an Internet stock analyst with Standard & Poor's. "Most people who have gone and tried Ask.com have a pretty favorable impression."
And according to data from Internet research firm comScore Networks, these changes have helped to boost traffic at Ask.com. The search engine's market share increased to 5.9 percent this March from 5.5 percent a year ago.
To be sure, Ask still trails the other search leaders. It's actually in fifth place in the market. But what's notable is that Yahoo! (Research), Microsoft's MSN and the Time Warner network of sites, which includes AOL, all lost share. (Time Warner (Research) also owns CNNMoney.com.)
"With the exception of Google, Ask.com is the only search company to consistently increase market share lately. There's something to be said for that," Kessler said.
James Lamberti, vice president of comScore Marketing Solutions, a research division of comScore Networks, added that IAC has stepped up the advertising for Ask.com since it bought the company. He thinks that will also help Ask.com continue to gain search market share.
"The recent bump in market share is interesting. We'll have to see if they sustain it going forward but there's no reason to believe they won't," Lamberti said. "This is a viable player right now."
Worries about leader jumping to MSN
But last week, news that the head of Ask.com, Steve Berkowitz, was leaving the company to join Microsoft (Research) rattled the stock. IAC reacted quickly, promoting Ask.com general manager Jim Lanzone to chief executive officer of the unit. Nonetheless, shares tumbled about 4 percent last week.
"This as a strategic loss for IAC/Interactive as Mr. Berkowitz has been credited with the turnaround at Ask.com," wrote Stifel Nicolaus analyst Scott Devitt in a report following the news of Berkowitz's departure.
Kessler adds that Berkowitz's move is a double blow to IAC because he is going to Microsoft's MSN unit. "The company is losing an important leader who is going to a pretty threatening competitor. That's important," he said.
Sterling, however, thinks that the market overreacted to the Berkowitz defection. "I don't think Ask.com's momentum is going to get derailed. Lanzone is a very smart guy," he said, pointing out that Lanzone, who has been with Ask.com since 2001, also deserves credit for the site's turnaround.
It's worth noting that when Diller unveiled the new Ask.com at a search engine conference in New York in February, it was Lanzone, not Berkowitz, who made the presentation with Diller.
IAC will report its first quarter results on Tuesday May 2 and it will be interesting to see just how strong growth was in the Ask.com unit. Google and Yahoo! both reported robust first quarter results so the pressure will be on Ask.com to post strong revenue gains as well.
Ask.com is a small, but growing, part of IAC, which also owns real estate site LendingTree, dating site Match.com, Ticketmaster.com and the Home Shopping Network.
IAC's media and advertising division, which includes Ask.com and local online guide CitySearch, accounted for just 6 percent of total sales and about 7 percent of operating income before amortization.
Sterling added that Ask is important for the overall company because it is a high-traffic site that can steer people to other areas of IAC.
"For the entire network, Ask is an important doorway to a lot of other IAC content. It's a critical piece of the whole IAC pie now," he said.
Analysts are predicting that IAC will report overall sales of $1.54 billion, a 33 percent increase from a year ago, and earnings per share of 27 cents, 23 percent higher than the same period last year.
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Analysts quoted in this story do not own shares of the companies mentioned and their firms have no investment banking ties with the companies.