Ask Jeeves is to pay $150m (£82.4m) in cash and the remainder in a stock and options issue for Interactive Search Holdings, the owner of Excite. Ask Jeeves said that the deal will double its market share and improve its ability to compete in the search market.
Google has dominated internet search engines for several years but as revenues from paid-for search terms become more lucrative, the friendly relationships between ISPs and Google are disappearing. Yahoo! has already launched its own search technology and MSN is in the process of developing its own.
Ask Jeeves and Excite were both at the forefront of search technology in the early days of the internet, but now lag behind Google and Yahoo!. Ask Jeeves had 650m searches in the last quarter of the year and Excite had 700m.
Steve Berkowitz, chief executive officer of Ask Jeeves, said: "This acquisition will enable us to combine Ask Jeeves' proven strengths in user experience, search technology and brand development with Interactive Search Holdings' strengths in distribution and direct marketing. By leveraging these two complementary approaches to search, we expect to accelerate Ask Jeeves' market share gains in 2004 and beyond."
Ask Jeeves said that it was raising its outlook for the first quarter and now anticipates revenues of $37m instead of $35m because of stronger than anticipated traffic.
Shares in the company leapt by 40% on the day the deal was announced, to close at $29.08 on Nasdaq.
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