Ask.com Strategy Shift Starts to Pay Off

October 26, 2012

With its traffic soaring more than 35 percent in the last 18 months and advertising revenue up by tens of millions of dollars, Ask.com expects to boost hiring in its expanded Oakland headquarters.

Fresh off last month’s $300 million purchase of the New York-based online reference site About.com, Ask.com intends to add another 45 people over the next year in Oakland. It is taking additional space to house them, and many more.

CEO Doug Leeds said the growth reflects the success of his decision two years ago to stop trying to compete with Google Inc. in general search and instead go back to the company’s roots — answering questions — which was what most users were coming to Ask.com for anyway.

The trend has made Ask.com a bright spot in the constellation of properties owned by its parent corporation, New York City-based IAC/InterActiveCorp. On Oct. 24 it beat analysts’ estimates with third-quarter profits attributed in significant part to attracting more users to Ask.com, which now gets most of its revenue from advertising sold by Google.

Revenue for IAC’s destination websites, which is almost all coming from Ask.com, grew 49 percent in the third quarter from $123 million to $183 million, year over year, on top of 44 percent growth in the second quarter from $119 million to $171 million over the same period in 2011.

Ask.com’s mobile phone application has been downloaded more than three million times in two years and mobile traffic is way up, Leeds said. Ask.com in June had nearly 266 million unique monthly users globally, according to comScore, a web traffic measurement service.

“If you put all that together, we’ve got a great story we are able to tell of growing revenue, growing profits and a growing user base,” said Leeds.

Ask.com has been telling that story loudly, with a recent national television advertising campaign and regional outdoor campaigns including the recent wrapping of San Francisco Muni buses.

It’s a welcome turn of events for Ask.com, which has 220 employees in Oakland. The company laid off 110 people in 2010 as it discontinued search- related activities in Edison, N.J., and in China.

Now Ask.com, together with a couple of affiliated properties owned by IAC, has signed a lease for another 25,000 square feet at 555 12th St. in Oakland. Ask.com currently occupies about 83,000 square feet, along with Dictionary.com and Ask Partner Network, which have nearly 100 employees combined.

The new space will be enough for 150 people, said Ben Knight, director of real estate and facilities at Ask.com, adding that he expects the space to fill up by 2015.

Leeds, who was promoted to CEO in 2010 after a year as president of Ask.com U.S., is ebullient about his company’s acquisition of the About Group from The New York Times last month. The 173-person operation runs About.com, which publishes content from 950 subject experts.

About.com’s content will increase the authority of Ask.com’s answers to queries, and Ask.com’s search expertise will make better use of About.com’s three million editorial pieces, and earn more money, Leeds said. This summer, Ask.com also bought an 11-person New York company called nRelate that makes content discovery technology for bloggers and publishers, including CBS Interactive.

This month Leeds reorganized Ask.com’s structure to more closely coordinate product, marketing and revenue operations.

In addition, Leeds promoted Shane McGilloway, an Ask.com veteran of 12 years, from chief revenue officer to chief operating officer.

McGilloway said he constantly pushes to use data analysis to closely align company moves with user desires.

“We’re always asking ourselves ‘Why does Ask.com matter to users?’ We want to think of new visionary ways to grow,” McGilloway said.

It’s the latest upswing in the roller coaster ride since its founding as “AskJeeves” in 1996. The company grew during the dot-com boom, but suffered afterward. IAC Chairman Barry Diller spent several years publicly shopping for a buyer, an effort probably not helped by his proclamation at a 2010 conference that it lacked “any meaningful value,” a comment company officials quickly tried to soften.

Total IAC revenue for the first nine months of this year was $2.03 billion, with profit of nearly $118.5 million, compared with $2.05 billion revenue and a profit of $174 million for all of 2011.

Kerry Rice, an analyst with Wedbush Securities who follows IAC, recently upgraded his opinion of IAC’s stock, partly because Ask.com’s move away from trying to battle Google head-on saved money on development, infrastructure and marketing costs.

Rice said IAC has been posting even faster growth outside of Ask.com, particularly through the distribution of toolbars that users download — some critics say at times unwittingly and with undesirable effects — as browser add-ons.

“The growth there has just been tremendous,” Rice said.

One of IAC’s makers of toolbars is the Ask Partner Network, which has 71 people in Oakland.

IAC owns more than 150 brands and products, including Match.com, CollegeHumor.com and CityGrid Media.