Will Google end its relationship with Ask Jeeves? (GOOG, ASKJ, IACI, INSP)

by: David Jackson

Adware/Spyware expert Ben Edelman thinks that could happen. First, he outlines Google's (ticker: GOOG) role in providing ads that are used by toolbars:

Through syndication relationships, Google provides ads to multiple web toolbar operators, including to toolbars installed on users' PCs without notice or consent. Google pays these toolbar companies for the ads they show -- thereby supporting and funding their operations.

Next, he shows that Ask Jeeves (ticker: ASKJ, being acquired by IACI) illigitimately disseminates toolbars, summarizing:

So even if a user has an AJ toolbar, the user may not want it, may not know how it arrived, and may not have granted meaningful consent (if any consent at all).

And then he argues that the appearance of AdSense ads on these toolbars violates Google's own policies:

These various behaviors seem to constitute multiple violations of Google's Software Principles -- among others, installation without any consent at all, as well as failure to provide appropriate "upfront disclosure."

Notwithstanding the tricky installation methods used by these Ask Jeeves toolbars, AJ's revenues ultimately largely come from Google: Enter a search term into an AJ toolbar, and most of the resulting ads are Google AdWords ads.

Would this problem lead Google to terminate its relationship with Ask Jeeves? Ben thinks "maybe". He says:

I wouldn't be totally shocked if Google ultimately elects to drop its relationship with AJ.  I don't have any specific reason to think they will, but I know that's what I'd be thinking of if I were them -- especially if the contract made me sure I could do so without risk of litigation.

Quick comments:

  • Ask Jeeves monetizes its search properties with Google ads. Ad revenue from Ask Jeeves website Ask.com is entirely legitimate, and probably accounts for a reasonable percentage of ASKJ's revenues. Is it plausible that Google would forego over $300 million per year in revenue as a pre-emptive move to avoid litigation before ASKJ itself was sued, even when much of that revenue comes from legitimate sources? Ben thinks that's possible.
  • If Google did terminate its relationship with AskJeeves, that would cause signficant short term damage to ASKJ's revenues until a transition to Overture (ticker: YHOO) as the new provider of PPC search ads was completed. Would that be valid cause for IAC (ticker: IACI) to terminate its merger agreement with ASKJ? Perhaps.
  • Ben Edelman's (as usual excellent) full article is here.
  • Ben also thinks that Infospace (ticker: INSP) has exposure:
It's also interesting to see how InfoSpace gets involved here -- as an
intermediary between Google (source of ads and money) and IBIS WebSearch (sleazy toolbar with very poor installation practices, per my prior articles).  An odd business for a $1.1B company!