Search engine Ask.com balanced a decline in profits with growth in revenue and search queries in the first-quarter financial report issued by parent InterActiveCorp yesterday.
Revenue at Ask.com, formerly Ask Jeeves, was up 9% over the first quarter of last year, largely due to an increase in search queries, the company said. But that gain was offset by a reduction in the average amount of revenue per query, mostly due to continued reductions at Ask.com in the number of pay-for-performance ads shown on its results pages.
That effort to clean up the search function for users, along with a re-branding and an ongoing mass-media campaign, gave Ask a 7% year-over-year increase in search market share.
“We introduced the new Ask.com about two months ago, and the truth is, I haven’t heard a bad word since,” IAC chairman and CEO Barry Diller said in a conference call. “We began advertising Ask about six weeks ago and are going to step up the campaign over the next months. While it’s too early to tell much, so far so good: Share is growing.” He forecast that the company’s extensive investment in Ask.com would begin to pay off in Q1 2007.
Diller said daily traffic at Ask.com just prior to Easter was up 25% to 35% over the same period last year, and he attributed much of that increase to the mass-media campaign. “Will we be able to retain [those visitors]? That will take a while and much more marketing before we know that,” he said. “But right now every single metric that we look at is good.”
Revenue for the company’s media and advertising segment, contributed largely by Ask but also by Citysearch, Excite and Web portals iWon and MyWay, reached $117.6 million in the first three months of 2006. Revenue for the same segment was only $9 million last year, but results were not comparable with Q1 2005 because IAC purchased Ask Jeeves in April 2005. The division posted an operating loss of $6.4 million, larger than the $1 million loss for the same period last year.
First-quarter profit at IAC as a whole was $47.2 million, off 32% from $68.9 million in Q1 2005. The company attributed most of that decline primarily to the spin-off of online travel agency Expedia last August, and to lower earnings in its HSN home shopping and Lending Tree financial properties.
IAC’s retailing division, which includes HSN, saw an increase in U.S. revenue due largely to the purchase of catalog marketer Cornerstone Brands in April 2005. But overall income for U.S. retailing fell by 1% to $42.6 million, compared to $43.3 million in Q1 2005. The decline was largely due to merchandising mistakes at HSN during the period, including a higher-than-average rate of product returns and an anticipated increase in fitness-equipment sales that did not materialize.
That quarterly decline at HSN was offset by double-digit growth in online sales at the HSN.com Web site, the company said.
Asked if he thought Ask.com had been hurt by the departure of its long-time former CEO Steve Berkowitz for a leadership post at Microsoft’s MSN and Windows Live unit, Diller said Berkowitz’s departure would not derail Ask.com’s plans to grow its market share and its search ad revenue.
“Steve was an asset to the company, and we’re sorry he decided to leave,” he said. “But we do not believe it will have an effect on what we do.” He added that Berkowitz had not had “day-to-day” oversight of Ask.com, which had fallen to the company’s U.S. general manager Jim Lanzone. Lanzone was named CEO of Ask.com within days of Berkowitz’s departure.
Diller also said he was concerned that Microsoft’s impending launch of a new Internet Explorer browser with an automated search button might give that company an “imbedded advantage” in winning users if the software ships with MSN as a default search engine. But he expressed confidence that Ask’s feature innovations, relevance and ease of use would be enough to win fans and attract users on its own. However, he said the company is currently in talks to get Ask plug-ins added to an array of toolbars in order to stake a claim on browser screens.
While Diller said Ask.com had no plans to offer e-mail service along the lines of Yahoo! Mail or Google’s Gmail, he said the company would probably launch an Ask-branded news reader within three to six months.
