Tuesday, June 01, 2004
Ask Jeeves' stock valuation has risen more than tenfold over the past two years. Froth? Bubble? How does a company that was unprofitable and struggling two short years ago make it to a $2 billion market valuation?
It's obviously a bit more than hype at work here. Jeeves' market strength has been sustained enough to suggest that where there's smoke, there must be fire. Investors are accumulating the stock, possibly because someone else might be interested in acquiring Ask Jeeves. But why? Here are some conjectures:
- It didn't die. There's no arguing with consumers actually using a search engine. For whatever reason, unlike many other declining search engine properties, Jeeves has maintained considerable customer loyalty even though its underlying search technology (Teoma's) has little to do with answering questions. The butler, and the idea of typing a question, is still memorable enough to a lot of users that Jeeves remains one of the few search engines other than Google that the average person might consider using.
- Pay-per-click. The ads are making the company profitable. While the current P/E ratio of 80 is high, it's not so outlandish for a solidly profitable web property that might command a premium to be acquired. There is some question as to how the current profitability can be sustained given that Google AdWords gives away too-large a percentage to Jeeves in their current distribution partnership, but the underlying principle is now clear: if you own lots of user search traffic, it is now possible to monetize it effectively. This wasn't always the case.
- Search for dummies? Is it possible that many of Ask Jeeves' users are unsophisticated, and that's the reason for the continued profitability of the company, built on search engine results pages that sometimes display up to ten sponsored links at the top of the page, dominating the entire real estate of a user's screen?
- A great concept could be reinvigorated. Natural-language search caught our attention when Ask Jeeves first launched, but they never delivered on it. That's a cool concept that could still resonate with consumers with no need for any change in the Jeeves brand.
Which major media company will rekindle its interest in search and portal activity enough to grab control of this $2 billion property? Will it be AOL, Interactive Corp., or (wouldn't it just be logical) Disney? Isn't it obvious that a cuddly, smart butler that could answer questions in your hotel room or car is still something that could give the Yahoo and Google brands a run for their money? And don't major media conglomerates like Disney, IAC, etc. have a pretty good "in" in negotiations with other corps. that might help them weave search deeper into the fabric of how we work and play?
If none of that is going to happen, what does Jeeves plan to do with itself? The cuddly butler may still have some life left, but eventually, even the dum-dums are going to catch on that this thing doesn't really answer questions. In addition to a known brand, Jeeves needs a compelling natural-language search product that sets it apart, something it's never really had in spite of acquiring some fairly pleasing me-too search technology. When will this be developed? Doesn't the public demand better than it's now getting... pages of SERP's often prefaced by up to ten sponsored AdWords results?
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