NEW YORK (AP) _ Barry Diller's electronic-commerce company IAC/InterActiveCorp is buying Ask Jeeves Inc., the Web-search service, for $1.85 billion, the companies announced Monday. AskJeeves shares climbed 14 percent in early trading.
The deal would put Diller's company into the highly competitive and rapidly growing business of Internet search, which is dominated by big players like Google Inc., Yahoo Inc. and Microsoft Corp.'s MSN service.
IAC holds a collection of electronic transaction businesses, including the travel site Expedia, the Home Shopping Network, Citysearch, Ticketmaster and the online dating service Match.com. IAC/InteractiveCorp is planning to spin off its travel business into a separate entity.
Unlike search engines that look up keywords and phrases, Ask Jeeves is designed to find answers to questions written in natural language. Diller said in a statement that Ask Jeeves caught on because ``consumers want answers to questions.''
``We believe that in the future (Ask Jeeves) has the potential to become one of the great brands on the Internet and beyond, and by beyond we mean in wireless, in the search for anything on any device,'' Diller said.
Under terms of the deal, IAC would issue 1.2668 shares of stock for each Ask Jeeves share, valuing Ask Jeeves at about $28.24 per share based on Friday's closing prices, or a 16.5 percent premium.
Ask Jeeves shares jumped $3.39 to $27.63 in early trading Monday on the Nasdaq Stock Market. The shares had been trading toward the low end of their 52-week range of $21.20 to $44.66 since last fall.
IAC's shares fell 74 cents, or 3.3 percent, to $21.55, also on the Nasdaq.
The companies said they would integrate IAC's brands into the Ask Jeeves service; enhance Ask Jeeves' local search capabilities _ a hotly competitive area among online companies _ and promote the Ask Jeeves service on IAC sites.
Ask Jeeves says it has 42 million unique monthly users in the United States, while IAC has 44 million, according to comScore Media Metrix.
Several major media companies have bought online companies in recent months in a bid to get a piece of the rapidly growing Internet advertising business.
The New York Times Co. paid $410 million for About.com; Dow Jones & Co., publisher of The Wall Street Journal, bought MarketWatch Inc. for about $500 million in cash, and The Washington Post Co. bought the online magazine Slate from Microsoft.
Citing research from Merrill Lynch, IAC and Ask Jeeves said advertising from online search is expected to grow 24 percent per year over the next five years, and currently makes up 36 percent of online advertising, which amounted to less than $10 billion last year.
Ask Jeeves would continue to operate as a stand-alone business based in Oakland, Calif., after the acquisition, and Steve Berkowitz would remain as CEO. The companies said they expect the deal to close late in the second quarter or early in the third quarter, before IAC spins off its travel business.
On Monday, IAC also launched Gifts.com, an online gift shopping resource that allows consumers to purchase gifts tailored to their interests, hobbies and personalities.