• by Wendy Davis  @wendyndavis, August 2, 2005

Positioning itself as a competitor to Google and Yahoo!, search engine Ask Jeeves Monday launched its own keyword bidding platform. The move comes just weeks after Barry Diller's IAC/InterActiveCorp completed its purchase of Ask Jeeves for around $2 billion.

As expected, the new service will be based on an auction model, similar to Google's.

The program replaces Ask Jeeves' "premium listings" service, which placed text ads for up to three advertisers at the top of the search results page. Starting Monday, advertisers that participated in the premium listings program were offered the chance to buy ads using the new model; the platform will open to all advertisers Aug. 15.

Advertisers will bid for the price per click they're willing to pay to appear as a sponsored listing on the results pages for specific keywords. The minimum cost per click will be 5 cents, confirmed James Speer, vice president for advertising products for IAC Advertising Solutions, a newly formed division that will sell sponsored search listings.

Ask Jeeves will determine placement within the sponsored results based on a combination of cost per click and relevance, as determined by click-through rates.

Paid listings served by Google will continue to appear on the results pages, but below the Ask Jeeves listings. The top three sponsored listings on the results pages are reserved for marketers who bid through Ask Jeeves. Google's contract to power the Ask Jeeves listings doesn't expire until 2007.

The Ask Jeeves listings will be distributed in the company's syndication network, which encompasses sites like MyWebSearch as well as portal properties such as iwon.

Analyst Gary Stein of Jupiter Research saw the move as having a limited impact for now, largely because Ask Jeeves had already offered its own paid ads on the results pages, via the premium listings program. "In many ways, this is sort of a symbolic move for Jeeves, a declaration of their independence--or a declaration of their intended independence," Stein said. "Economically, I don't think it's going to move that needle that much."

Stein adds that Ask Jeeves will have to make sure its system doesn't require too much work by marketers. "It's really up to Jeeves in general to make it as easy as possible," Stein said. "If it's not easy, it's not like it's Google and the whole word is going there."

Still, some representatives of search engine marketing companies said that Ask Jeeves' entry into the market could only help search advertisers.

"Overall, I think it's good for marketers in general. The more choices marketers have, the better they're going to be," said Peter Hershberg, a managing partner at Reprise Media. "This market has largely been dominated by Yahoo! and Google--and obviously MSN is entering soon, so if nothing else, it's going to create more options."

Bryan Wiener, president of 360i, agreed: "Never in the history of media has a monopoly or oligopoly been good for the marketer," he said.

The impact that Ask Jeeves' move will have on keyword prices was unclear, said many SEM execs, although it's possible that active markets like Google's won't be affected much at all. "I'm not sure that it'll have much of an effect on the Google pricing," said Fathom Online's Gregg Stewart. "In the short term, there'll probably be some bargains for advertisers out there, even for those highly populated categories, but I expect those to fill up pretty quick, and reach price parity."

Wiener speculated that keyword prices for Ask Jeeves will likely start out low, but climb in popular niche categories like finance and real estate. "Initially, I'd guess that prices on Ask Jeeves would be lower, but if Ask Jeeves performs well, it's possible that prices will go up in niche inventory."

Hershberg added that the introduction of Ask Jeeves into the already-competitive search engine market could force the big names in search to focus some of their innovation on their advertising models. "In the past year, we've seen innovations on the consumer side in local search and desktop search--but really, search marketing has remained relatively stagnant," he said. "The big players have to do something to differentiate themselves."

Ask Jeeves is believed to have about a 6 percent share of the search market, far behind search leaders Google, Yahoo!, and MSN.

Reporter Shankar Gupta contributed to this article.