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Microsoft Corp (MSFT.O) is viewed as the most likely buyer or partner for IAC/InterActiveCorp's (IACI.O) Ask.com if CEO Barry Diller decides to throw in the towel on the struggling search engine.Diller effectively hung a "for sale" sign on Ask.com on Tuesday, when he said on a conference call with Wall Street analysts that the search business is "challenging" and its future is "speculative.
Answering questions about whether he would consolidate a business that has been unable to expand beyond its 4 percent market share in search queries, Diller said, "The answer is 'yes.' And it is unlikely that we would be the consolidator."
Every time I've used ask.com I'm surprised on how far forward they have not gone since the last time I tried it! It claims to answer most common questions, but it seems like a poor search engine with a little tiny bit of extra intelligence.
A message for ask.com - stop your rebranding/marketing ideas and get some really smart developers to work on the background engine.
There is so much they could do with this. Such a big future if they just look ahead to what people are looking for in a search/ask engine.
A good option would be a deal with Wolfram alpha. Take Wolfram's engine and bring it to a more social level. Mix that up with some web results and they would be on to a real winner.
The concept of ask.com is good, but they really need to deliver a website that meets user expectations.
Combine that with the Yahoo search deal, and suddenly you have a potential all-or-nothing play for a contender at unseating Google's dominance, or at a minimum making a nice dent in their bottom line.
Without Google, ASK is like a ball with the air let out of it.
More like a leaky tire that only stays inflated as long as the owner is willing to keep pumping air into it.
How many here remember Teoma? That one had some early potential until they dressed it up in a butler's outfit.
...currently it costs more to run than it generates.
I have not seen that reported anywhere. Have a link?
It's been estimated [google.com] that Ask generates $450 million dollars in revenue per year.
Personally I think Barry Diller is swimming in the wrong direction. He's throwing away $125 million at an entertainment site, Electus, and sees sites like Hulu as the future of the Internet. Which is a concept that an old media fossil like Diller would understand. Is the past really the future? Is that where companies will flock to spend their money? Or will companies continue the trend for advertising opportunities that resemble Google where the ROI is measurable and vastly more profitable?
While Diller is cultivating entertainment sites, he's ruining CitySearch, a local search company that should be in a prime position to sell local based advertising. It was reported that their redesigned site and ad serving technology has backfired and is causing massive losses. Local Search is one of the hottest revenue areas of the Internet and Diller is so lost he turned what should be a red hot business into the drooling kid with the pointy head while competitors like Yelp run away with CitySearch's lunch money.
Diller has gutted Ask.com's talent and replaced it with IAC employees who've spent most of their careers shuttling between the different websites IAC owns. It was Diller who turned Ask.com away from the business of search and treated it like a destination site, instead of a starting point. Take a look at their press releases for 2009 [ask.mediaroom.com], there is not a single announcement related to improving or refining their search technology, and only one announcement of a partnership that extends their search audience (they became Nascar's official search engine), and one announcement of a development of a database of question and answer pairs. Everything else ASK.COM did in 2009 did not contribute to growing their technology or their search audience.
Knock, knock... Anyone home at ASK.COM?
It's the smaller players that Microsoft can simply swallow up that will win them market placement.
Mack.
They could then replace Google ads with adverts from Yahoo!
Only if Yahoo acquires the ability to grow advertisers on trees, about $450 million dollars worth. ;)
Of course, only one of those two helps Microsoft's bottom line DIRECTLY, and only one hurts Google DIRECTLY but looked at from a certain perspective, Google gets damaged by the combined total of both revenue amounts.
That's the real question... if you are Google, and Microsoft buys Ask (one of your top partners) do you allow the contract to be assumed?
...the revenue that Microsoft gains from operating Ask and serving ads...
The situation is worse for Microsoft than it is for Yahoo. Microsoft does not have the advertiser inventory to supply ASK with buyers for PPC ads. Microsoft cannot even supply itself with advertisers in order to monetize Bing. How would they supply advertisers to ASK if Microsoft doesn't have enough advertisers to monetize Bing? Microsoft's search revenue is actually declining. Microsoft cannot derive any meaningful amount of revenue from ASK because they do not have the supply of advertisers to feed the demand.
Here is what CNN Money reported [money.cnn.com] about Microsoft's poor position:
The company still failed to turn a profit in its online services business though. That division, which includes MSN, lost $480 million in the quarter. Sales in the division were down 6% from the same quarter a year earlier. The company said search advertising revenue continued to decline, but the industry is showing signs of stabilization.
If that doesn't make sense, then here is an analogy. Imagine that advertisers are lemons and the search engines are lemonade stands. The more lemons you have, the more lemonade you can sell.
Now imagine Microsoft has enough lemons to make one pitcher of lemonade, Yahoo has enough lemonade to make two pitchers of lemonade, and Google has enough lemonade to make one hundred pitchers of lemonade.
Now here comes ASK.com. ASK.com has zero lemons, no advertiser base at all. ASK.com's lemons were being supplied by Google.com. Google has an oversupply of lemons, enough capacity to supply ASK.com with $450 million dollars of lemonade per year. Until the agreement with IAC expires in three years.
Microsoft has enough lemons to make one pitcher of lemonade. If Microsoft buys Ask.com's lemonade stand, how many more pitchers of lemonade can Microsoft sell at ASK.com's lemonade stand?
This is what I mean when I say that Microsoft/Yahoo will have to magically cultivate thousands of new advertisers overnight before they will be able to monetize ASK.com with ads. If there are no advertisers bidding for PPC then there is no revenue.
That's the real question... if you are Google, and Microsoft buys Ask (one of your top partners) do you allow the contract to be assumed?
I would be flabbergasted if the contract between Ask and Google does not have a get-out clause based on change of ownership.
As pointed out by MB, Google has plenty of advertisers (that they would probably not share with Microsoft), so they would probbaly walk away - the consequence of that would be to increase CPC on Google properties due to the number of searches reducing overnight (which could actually cause more people to seriously consider AdCenter).
The sooner we see the Yahoo/Bing tie up passed and integrated the better, 2 weak competitors is no problem to Google; a well-managed combination of Yahoo/Bing would make things interesting (especially if they keep BOSS...)
As a few including myself have mentioned, its a case of 2 birds with one stone, what ever revenue they generate and what ever Google looses.
Another way to look at this, we agree that currently Yahoo couldn't support Ask, but they (m$ and Y!) would be taking in 100% of the ad revenue, not a cut from a third party, so the drop on cpc by using Yahoo ads might not be as damming as we think.
Also by powering Ask using Bing, the operational costs will be a lot lower. In its current state Ask search will be far from cheap to run, kill it and use Bing. If they can stop bleeding money concentrate on gaining new advertisers due to new properties to advertise on and retain 100% of the cpc then I still think this is a wise move.
Mack.
If they can stop bleeding money...
Do you have a link to a report that says ASK is bleeding money? I have not seen that reported anywhere.
Mack, advertisers are spending less on Yahoo PPC this quarter, by about 20% less. Yahoo has excess PPC inventory that they cannot sell. If they cannot sell their own ad inventory, what makes you think that adding more ad inventory is going to help?
That's like a toy shop owner looking at their full shelves of transformers toys and deciding that the way to sell them is by increasing their inventory of transformers toys, toys no one is buying. Increasing inventory is not a logical way to increase demand, is it?
Regarding bleeding money, bad choice of words, but throwing funds into a search engine that simply can't compete is as good as throwing money at the wind.
Personal I see this as buying market share, what price would M$ be prepared to acquire 4-6% of the search market? Powering Yahoo! then Ask. It sends a pretty clear message.
Mack.
You have a double whammy of lower search numbers AND lower matching quality (although there is the argument that Yahoo, and especially Bing, convert better when you do get clicks).
Where would you put your PPC management resources? I guess Yahoo is finding out the hard way that Google is retaining advertisers and any reduction in PPC management time is coming straight out of the hours that people spend on anything that isn't Google.
Additionally, every day in which the alternatives to Google are not consolidated is another day in which Google is collecting massively more user data on paid search that allows them to stretch their lead. If Google has 5 times as many clicks as a competitor then it has 5 times the money (or more) to spend on improving their system and the benefit of 5 times as much data to analyse - and let's not forget how good Google is at crunching numbers (and the fact that Hadoop has lost its creator, not good news for Yahoo there).
Looks like an uphill battle for Bing, but Microsoft know that - they want to be a strong second place, that will at least allow them to be in with a chance. If they stay below 10% then they will never catch up (and, whether it's Yahoo or Bing, I certainly do want one to catch up).
Bring on Ask powered by Bing.
If Ask folds, there is a void, of course. If Ask sells whoever buys gets that smidge of the net.
What we can see is some of the "elder" engines of old are chucking out and now is the time to "remainder shop" to collect the antiques.
why buy when you can let them fail and get market share for free :)
That's the same logic Coke used when they had the opportunity to buy Pepsi... Oops!
