Soon after Barry Diller bought Ask Jeeves, he noted what would happen if the company could just increase its then 6% share of the search market by a few percentage points. This was an enticing concept. Alas, despite two years of rebranding, renaming, redesign, and a couple of gigantic (and mystifying) advertising campaigns, the Ask division has lost a point of market share. Ask.com, moreover, the most important and profitable engine of the division, is barely clinging to 2%.
What gives? First, search is not like television: just because one engine provides “better search” doesn’t mean users will switch. Many critics agree that Ask has the best search on the web, and the reaction to this is a big “so what?” Contrary to the belief of dozens of companies busy developing next-generation search (Hakia, Mahalo, et al), most web users think current search is just fine. Google finds them what they’re looking for. Why would they switch?
Second, mass-media advertising, especially mass-media advertising with bizarre catch-phrases like “The Algorithm killed Jeeves,” does nothing more than drive some curious folks to the site for a quick look-see (if they even understand what’s being advertised). Google has never run a mass-media advertising campaign, and it’s share grows by about 1% a month. So IAC’s marketing muscle has not been–and likely will never be–of much use to Ask.
So that brings us to Q2. How did Ask do? Not well.
Growth in IAC’s “media and advertising” division grew 33% to $174 million. That’s not bad, but it’s still a small business ($750 million a year versus, say, Google’s $16 billion). The growth was also driven by non-Ask properties such as Fun Web Products and an increase in queries in syndicated search. What is “syndicated” search? Search queries on third-party web sites powered by Ask’s technology. The reason this distinction is important is that the profit-per-search is far lower on a syndicated query than an Ask.com query (just as Google’s “network” profit margins are less than 1/5th the margins on its own Google.com). [After jump: More from the conference call…]
Meanwhile, about the flagship Ask.com itself, IAC President Doug Lebda had this to say:
Query growth over at Ask.com was slower than we would like due in part to less effective marking spend in the period, comping against the successful March 2006 rebrand and relaunch of Ask.com. Queries did grow but revenue per query declined slightly because the new Ask 3-D, launched in June, is a much better experience and most users click on the paid links fewer times than before.
That’s a nice spin on bad news, but it’s still bad news. It might be OK that “most users click on the paid links fewer times than before” if the new experience was so compelling that user and query growth were going through the roof. But they’re not.
Lebda added that “user retention and search frequency are up 8% and 5% respectively since the launch, which in the long run will more than offset RPQ decline.” These are minor positives, but they’re barely material.
Later, when asked about Ask.com’s market share in the Q&A, CFO Tom McInerney added the following:
As you know, the business is related to driving new users. Obviously we have seen good improvements in frequency and retention, but it’s offset by not having the growth in new users on the Ask.com business. The driver there will be the new marketing, but I think the frequency and retention gains should start to kick in more Q4 later in the year, albeit they are small as I laid out, small but certainly encouraging.
As noted, we agree that the frequency and retention gains are “small,” and we disagree about “marketing” being a future driver. Tom goes on to suggest that this campaign isn’t working as well as prior campaigns, and that the company is trying to fix it.
In terms of the marketing, we can very scientifically look at the marketing spend in the US and relate that to new user growth and so the way to measure it is by new users showing up at the side and we’re not seeing it with this marketing campaign, the way we have seen it with prior marketing campaigns. What we’re doing on that front is retooling the marketing campaign, making it a much stronger call to action and much more product demo spots for later in the year and we hope that will have some effect.
The “algorithm” campaign is awful, so we would indeed expect to see some modest improvement from future campaigns. But we don’t think any campaign will save the day.
So what should Ask do?
We don’t want to write the company off, be we think trying to compete as a generalist search engine with a distant No. 4 position and such low market share is futile. The company has made no headway in the past two years, despite vastly improving the product and spending a ton on marketing. We see no reason why this will ever change.
We think, therefore, that Ask should refocus and concentrate on a tight vertical niche or niches, ones that it can dominate (travel would have made sense, at least before IAC spun off Expedia). The size of the total opportunities here are smaller, but niches are very defensible. And in contrast to the general “search” market, marketing campaigns focused on specific markets might actually have an effect.
NOW WATCH: Tech Insider videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.