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Ask Jeeves Sees Growing Profits

Search company Ask Jeeves reported solid first-quarter earnings Tuesday, easily exceeding revenue and net income forecasts.

For the first three months of the year, the Emeryville, Calif.-based company said revenues grew 57 percent from a year earlier, to $25.2 million. Net income surged to $7.7 million, compared to a $10.4 million loss a year ago. Both numbers exceeded the company's forecast.

Ask Jeeves' Web properties unit, which includes its Ask.com search site, was the driver of its growth, more than doubling revenues from a year earlier to $21.6 million. Jeeves Solutions, its enterprise search unit, saw revenues decline from $5.3 million to $3.6 million.

Ask Jeeves's executives said the positive results came in large part because of the booming market for paid listings. Paid placement, which includes its Google partnership, paid inclusion, and other search-advertising options, grew 71 percent from a year earlier. The company does not break out Google's contribution.

Ask Jeeves cast its lot with paid listings by jettisoning both banner and pop-up ads in January. Ask.com still serves graphic "branded response" ads targeted to user queries.

"We have more than made up for the lost banner and pop-up revenue," said Skip Battle, Ask Jeeves' chief executive, on a conference call with analysts.

While Ask Jeeves reported a 24 percent increase in queries, average paid-placement pricing declined slightly in the quarter. The company attributed the decline to the increase in the percentage of traffic the company is turning into revenues.

With Google now reporting over 100,000 advertisers, more searches on Ask Jeeves generate paid listings, although some of those terms garner a lower going rate than the more popular ones.

On the strength of its robust quarter, Ask Jeeves upped its full-year guidance. The company now expects revenues of $102 million, up from $100 million, and pro forma net income of 25 cents a share, up from 20 cents a share.

"Search is the front door of the Internet," Battle said. "The advertising that's been developed to complement search is much more effective than other advertising."

While Yahoo!, MSN and Google have snatched the lion's share of the search market, Ask Jeeves has settled into a comfortable spot in the second tier. Its acquisition of search technology Teoma in September 2001 buffed up its site capabilities to the point where the company plans to begin advertising again. After running smallish outdoor campaigns in the fall and winter, Ask Jeeves announced on Monday it would roll out its first substantial ad push in two years.

Battle said Ask Jeeves could continue to grow its user base as well as the 14 percent of traffic that currently generates revenues.

"We believe our differentiated product and the brand we have will allow us to compete with the major players," he said.