SAN FRANCISCO (CBS.MW) — As the rivalry between Google and Yahoo heats up, Ask Jeeves is shaping up as a coveted pawn in the chess match between the two leading search and portal companies.
Ask Jeeves ASKJ saw its stock rise 8 percent to $39 Monday after another round of Wall Street kudos spoke of the company’s growing attractiveness to paid-search advertising networks. Ask Jeeves, based in Emeryville, Calif. is scheduled to report first-quarter results immediately after Tuesday’s closing bell.
Under its revenue-sharing deal, Ask Jeeves receives an estimated 80 percent of the cash paid by Google advertising clients whose text ads appear on its site. Ask Jeeves dropped Overture, the paid-search specialist owned by Yahoo YHOO, -1.87% in favor of Google in July 2002.
In addition to reiterating praises of Ask Jeeves’ online search advertising, one analyst raised a larger question: Will Overture try to woo Ask Jeeves back from Google?
Overture is likely to be very keen to win back Ask Jeeves from Google, possibly enough to bid up the price higher than current revenue share, Safa Rashtchy, an analyst with U.S. Bancorp Piper Jaffray, wrote in a note that included an upgrade for Ask Jeeves shares.
Analyst Krista Sober at Thomas Weisel Partners also upgraded Ask Jeeves. But the analyst cited the value of Ask Jeeves’ algorithmic search technology, known as Teoma, as her main reason for the upgrade.
It’s no secret that privately-held Google has been driving Ask Jeeves’ revenue and profit. Some observers have long regarded the company, with 7 percent of the online-search market, as being vulnerable because of that dependency.
The last reported quarter showed that Google accounted for at least 60 percent of sales. It was just one of the many pieces Google could play with and easily discard due to the search engine’s growing advertising network and popularity as the No. 1 search destination online.
Recently, however, Ask Jeeves acquired ISH, which owns Excite.com and number of other Web properties, doubling its market share of search traffic. By doing so, Ask Jeeves, though still very dependent on Google, becomes increasingly attractive to Google and Yahoo, some analysts say.
Ask Jeeves may be able to raise its cut of the revenue sharing with Google to 90 percent under the agreement that it is expected to negotiate later this year, according to analyst Jordan Rohan at Schwab SoundView.
Yahoo officials declined to say whether they’re trying to win back Ask Jeeves. We’re always evaluating opportunities and what makes the most sense for us, our users and our partners, said Diana Lee, spokeswoman for Yahoo.
Ask Jeeves may grow even more valuable if Google pursues plans to go public, a move that would pressure it to ramp up revenue.
Of course, Google may only do so if its rival Yahoo wanted Ask Jeeves as a distributor. The question here isn’t so much, does Yahoo want Ask Jeeves, but how much would Yahoo pay to have it?
It would have to at least be a superior revenue-sharing deal currently offered by Google, Rashtchy said. Our most recent interviews with industry contacts show that there is an escalated competitive environment between Google and Yahoo in winning new syndication partners, wrote Rashtchy. In this context, Jeeves will be a fine prize to win even without ISH properties.
Earnings look ahead
Ask Jeeves is expected to earn 18 cents on $37 million in the first quarter. In the second quarter, Jeeves is estimated to earn 19 cents on sales of $43 million. For the full year, Jeeves is expected to earn 92 cents on sales of $240 million.
Also coming up this week will be earnings from eBay EBAY, -0.33% and Amazon.com AMZN, -2.60%
EBay is expected to earn 26 cents on sales of $716 million. Amazon is expected to earn 19 cents on sales of $1.4 billion.
Meanwhile, following last week’s earnings releases, Netflix NFLX, -3.79% shares fell another 8 percent. The stock plunged 24 percent Friday after the operator of DVD rentals said the cost to acquire customers rose.
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