Through The Fly's Eyes: IAC/InterActiveCorp

from Laurie Pasternack of Theflyonthewall.com

Ask.com-Google Partnership Sunk?

According to Investor's Business Daily, IAC/InterActiveCorp (IACI) CEO Barry Diller was, at one time, confident that his Ask.com would renew its partnership with Internet giant Google (GOOG). The question of renewal was posed to Diller back in February, and he said he believed the renewal could take around two months, at most, for a deal. Now that it's October, with no renewal in sight, a deal may be looking less likely. Diller has remained "relatively quiet" on the subject. Not good for InterActive, as the contract expires at the end of the year.

Why is the Google deal so important for Ask.com? The search engine is currently dependent on Google for text ads that provide a large part of its revenues. Being the giant it is, Google, ValleyWag.com, isn't nearly as dependent on Ask.com or on InterActiveCorp. Analysts believe Google isn't as dependent because as time goes on, the company continues to widen its lead in the search market. According to research firm Hitwise, Google accounted for nearly 64% of all searches in the U.S. in August, while Ask.com trailed far behind with just over 3%.

There is an upside -- sort of. Even if Google doesn't decide to renew its partnership with Ask.com, many believe there are others that would be interested in partnering. Of those, Yahoo! (YHOO) and Microsoft (MSFT), who are both looking to delve deeper into the search-advertising market, may be the biggest contenders for a relationship. Despite the fact that neither of these companies make as much as Google does -- per search -- they would still be willing to split profits with Ask. Additionally, ValleyWag points out another issue for Ask.com, which, should Google bail out, would leave Ask.com dependent on another search engine. Either way, if Ask.com isn't with Google, it may as well anticipate a net loss.

As the partnership with Google remains up in the air, Ask.com is aggressively promoting its upgraded search engine by advertising it on television. InterActiveCorp beefed up the site in June in attempt to catch up to the likes of Microsoft and Yahoo!. The new site integrates content from various media types, including Web content, news, blogs, images and video, onto one page. The shiny new Ask3D is reportedly more user friendly, but users have questioned whether Ask.com provides the "instant getification," it claims, as opposed to Google's Universal Search. The new ad spots have aired during shows like "Saturday Night Live," and aims to show the common user why their search engine is better than others.

Despite all the "cool" new functions of Ask.com, it is unlikely it would be able to catch up with Google in terms of advertisers and market share. Google has the resources, particularly through acquisitions, and the innovation to continue its drastic lead against not only Ask, but Microsoft and Yahoo!. If it wants to get ahead, Ask's remaining hope appears to be renewing its Google partnership. Otherwise, it looks like Ask.com is out of its league.

Shares of IAC/InteractiveCorp were down 0.17% to $29.69 this morning.