Search The Internet. Askjeeves Incorporated Essay Example

five years, recent surveys show that only 3.5% of users view AskJeeves as their primary search engine. Furthermore, 21% of respondents reported using AskJeeves just once annually. These findings suggest that AskJeeves has a restricted user base within its intended audience, particularly in the United States. As a result, AskJeeves has primarily focused on serving a specialized search engine niche.

AskJeeves stands out with its unique advantage in utilizing specific search technology instead of solely relying on keyword metrics. This approach results in searches conducted on AskJeeves being more user-friendly and leading to accurate answers. Impressively, 21% of users have rated AskJeeves as the most user-friendly search engine among twenty competitors. These statistics unequivocally showcase the exceptional technological capabilities of AskJeeves, catapulting it to market dominance.

AskJeeves, like other niche players, relies on a specific target demographic of users, with the majority coming from AltaVista, Netscape, and Infonautics search engines. This suggests that AskJeeves has the potential to expand its market. However, it must reassess its market position and determine where its future target demographic is and how to gain an advantage against competitors such as Google and Yahoo.

Revenue Generation

AskJeeves primarily generates revenue through its Consumer Question Answering feature. This feature brings in advertising revenues and knowledge base licensing fees. Advertising revenues are obtained through short-term contracts that require delivering a specific number of impressions to users within a specified time frame.

AskJeeves determines its advertising rates using the CPM metric, with DoubleClick, Inc. acting as a third-party affiliate responsible for delivering and measuring all of AskJeeves' impressions. Additionally, AskJeeves generates income by licensing its knowledge base to three companies: AltaVista, Netscape, and Infonautics. These companies offer internet-wide

navigation services and pay a fixed rate during specific contract intervals. The successful combination of these primary revenue streams has consistently positioned AskJeeves as one of the most profitable search engine companies on the internet.

AskJeeves had a remarkable 30% growth in revenue during the third quarter of 2006, amounting to a total of $58 billion. This consistent growth has been evident for the past five years and is supported by the company's search metrics and revenue projections. However, along with this increase in revenue, there has also been a proportional rise in costs associated with marketing and operations. As a result, AskJeeves' pro forma income figures have remained steady at $10 million for the past two years. These increased costs can be attributed to AskJeeves' implementation of multi-channel marketing in the previous year.

In order to attract a new class of users, they have implemented a strategy that involves both online and offline marketing methods. As a result, their total marketing expenses have nearly tripled since 2004. Despite the increased spending, their revenue numbers have supported a significant increase in spending aimed at fueling user growth. Over the past two years, there has been no significant fluctuation in their per-user cost metrics.

The financial outlook for AskJeeves remains positive, with accurate and high revenue projections for the next three quarters.

Future Outlook

Despite improvements in technology, usability, marketing, operations, and service, AskJeeves has struggled to compete with other leading search companies. As a result, their next expansion plan involves targeting international markets where they can gain market share without fierce competition. Given AskJeeves' superior technology and usability, they can easily rebrand and focus

on global distribution. In 2006, InterActiveCorp Inc. acquired a significant portion of AskJeeves stock to enter the internet search industry.

With the financial and management support provided, AskJeeves has the potential to expand its primary focus from the US market to a global scale.

The Industry's Outlook

In the last decade, there has been significant growth in the internet search field. ComScore Metrics reports an impressive annual growth rate of nearly fifty percent. Moreover, studies indicate a substantial increase in the market share of search engines, with over two hundred million unique visitors per month. The internet search industry possesses distinct characteristics that set it apart from other industries.

The growth of internet search engines such as Yahoo, Lycos, Excite, etc. has been rapid and unpredictable, with over 150 rival search technologies emerging. The number of users interacting with these search engines has increased from two million unique visitors per month to well over 100 times that amount. Additionally, the industry has witnessed centralization, where currently only five search engines are accountable for conducting 95% of all searches despite Yahoo's initial dominance.

The industry centralizes as users with similar search metrics converge, and there is no significant advantage for first-movers or early adopters in the internet search market. Among the initial five search engines, only one currently holds more than five percent of the total market share. The rapid growth of search engine technology becomes apparent through the emergence of new players and their swift adoption of technology.

Google and Yahoo are the leading forces in the internet search sector, jointly commanding more than 80% of global searches. They both have a significant presence in the top fifty search markets worldwide.

However, their business strategies and approaches to searching diverge significantly. Google's approach centers around rapidly connecting websites to enhance user efficiency and generate higher advertising CPM for clients. Conversely, Yahoo focuses on captivating users through its range of capable tools.

Both Yahoo and Google have implemented strategies to increase user retention on their platforms in order to maximize their internal CPM. Despite employing different tactics, both companies have achieved considerable success and are thriving. Approximately 20% of the market share is occupied by other search engines, with AskJeeves properties making up 3.5%. Many of these alternative search engines are designed for specific niche searches, such as AltaVista.

The internet search industry is seeing substantial growth and profitability mainly because of advertising revenue. It is projected that by 2010, internet search revenue will reach $10 billion, with affiliated search advertising hitting $6 billion in the next three years. Businesses are acknowledging the advantages of targeted online search ads compared to traditional mediums such as radio, TV, and newspapers. As a result, they are dedicating a significant portion of their marketing budgets to online search advertisement.

According to a recent survey by Forrester, there is an expected increase of approximately 40% in internet search marketing in the upcoming year. American Fortune 500 companies are embracing this shift towards online advertising as they transfer their marketing campaigns to the virtual world. The future of the internet search industry appears promising for several reasons. Firstly, global internet access is rapidly growing at an annual rate of nearly 6%, thanks to the implementation of fiber optic technology in telecommunications. Over the next five years, countries such as China, India, and Russia are predicted

to experience yearly growth rates of up to 15% in terms of internet capability. As a result, both current market players and new entrants will have numerous opportunities to capitalize on the expanding global search market share.

Furthermore, the increase in consumer and internet user sophistication has resulted in more focused searches and the need to reevaluate assumptions about search technology. This indicates that advancements or new technologies in search can greatly influence the search landscape. Regarding market positioning, the next phase of growth for internet search is to enter untapped global markets with growing demand and user sophistication.

Target Country for Expansion: China

The expansion of China's internet market has made it crucial for the industry's future to adopt and improve search engine technology.

China is projected to surpass the United States and Japan as the largest internet consumer base in the world. Currently, China has about 200 million internet users, many of whom are new to internet access and have less than two years of experience. This suggests that customer loyalty towards search technology is not yet fully established. According to Analysys International, approximately 100 million Chinese internet users - half of the total population - use search engines weekly. The industry's revenue is also rapidly growing, with a 79 percent increase in overall revenue in 2006, resulting in nearly 950 RMB of generated revenue.

Around 32.2% of the total online advertising market is represented by revenue sharing with established search portals, making it the ideal foreign market for AskJeeve's investment and global expansion. To assess if China is compatible and viable for market penetration, a PEST market analysis will be conducted.

Political

Factors

The inconsistency and hostility of the national government pose significant barriers to entry for AskJeeves or any internet search player.

In China, the government tightly controls the internet through monitoring and censoring online content. To operate in China, search engines must agree to take full responsibility for filtering displayed content according to government policies. These policies, along with revenue sharing arrangements, greatly affect the search industry. For example, Google had to negotiate with the Chinese government to continue its search portal while implementing filters and censorship measures. Moreover, the government grants exclusive privileges and access based on their agenda, using policy and legislation to redirect users from established search engines.

From an economic standpoint, the government aims to monitor and regulate the growth of the Chinese internet market in order to establish a stable infrastructure for E-commerce that is domestically self-sufficient. Therefore, it strongly supports Chinese internet search companies so as to reduce reliance on multinational corporations like Google and Yahoo. For AskJeeves to successfully enter this market, a significant shift in their mindset and approach is required. It is crucial to have a deep comprehension of Chinese social, political, and economic advancements and requirements to earn the government's trust and gain permission to tap into the Chinese marketplace. To access this demographic, major concessions in the areas of search filtering, privacy, and government access to back-end data will be necessary.

However, AskJeeves can now benefit from several recent government decisions and commitments that will greatly expand their market reach in China. One significant development is China's membership in the WTO and the preferred nation status bestowed between the United States and China, which has implications

for the internet sector. To compete against domestic internet search companies, concessions have already been made to Google, Yahoo, and Microsoft to expand their search engine components into the Chinese market. Additionally, the recent ratification of the Internet Information Access Resolution forces China to lift many of its internet censorship requirements. This combination of open trade and reduced censorship provides a more favorable market penetration strategy for AskJeeves.

Economic Factors

The growth of China's internet economy since 1998 has been remarkable, reaching 25 million users and increasing almost twentyfold.

In terms of online advertising revenue, the company has achieved a total of 4 billion RMB, with a consistent annual growth rate of almost 18%. The projected future growth suggests that the online advertising revenue share could reach an impressive 12 billion RMB by 2010. Notably, a significant portion of this revenue goes towards search engine marketing, indicating a lucrative opportunity for market players. Despite this positive outlook, it is important to consider the volatile nature of the Chinese economic situation from a broader macroeconomic perspective.

Many concerns over the overheating of the Chinese economy are evident in several factors, such as the recent severe drop within the Chinese stock market. The current confusion overvaluation of the RMB, as well as concerns over foreign investment and liquidity, has shaken the Chinese economy internally and externally. Although as an economic force it is still growing at a near frenetic pace of 12% per year, this growth sustained over the next five years could mean a severe economic backlash as the Chinese economic infrastructure may not be able to support such massive growth. Since the internet is not only the

newest of its powerful industries but also one of the most expendable, many fear that a severe economic backlash from an overheating economy would have severe consequences for the Chinese internet market in general.

Sociocultural Factors

The broad liberalization of the Chinese population has become a dramatic model of change and identity crisis.

Although traditionally China's communist roots have produced a hardworking and diligent population driven by strong moral and social motives, the combination of rapid economic growth and reform has led to a nation that is ambitious and hungry for financial wealth. This has resulted in a divide within the nation, with a significant wealth gap between the majority of the population living in extreme poverty and a few individuals attaining ultra-rich status. The majority of Chinese internet users are relatively wealthy and reside in urban areas, comprising almost 90% of the user base. Rather than being loyal to Chinese products, most Chinese internet users choose to use established Chinese internet companies over foreign competition. This preference can be attributed to Chinese companies having a better understanding of the desires and needs of the Chinese internet user base.

However, Microsoft dominates the Chinese platform software industry with a market share of 68%, indicating the strong presence of international players in China. The majority of Chinese internet users fall within the age group of 15 to 30 years, making them highly interested and knowledgeable about new technology. They do not display strong loyalty to established market players.

Technological Factors

The Chinese internet search industry faces significant weaknesses from a technological standpoint. Baidu, the most popular and highly visited search engine, is often criticized for its slow and inefficient search capabilities. Despite

its current dominant position, it is predicted that the overall search engine market in China will experience a significant decline within the next 18 months.

Analysis International states that search engines have not met people's high expectations in terms of performance. The poor user experience, unstable advertising effects, and irregular channel operations have created suspicion among internet users regarding new search engine technology. It is believed that technological flaws within search engines have limited their effectiveness and eroded consumer trust. However, the entry of international market players in the demographic is expected to alter the technology's overall perception. As an example, Google and Yahoo China have already repositioned themselves as providers of quality search technology.

The transition from Baidu and other Chinese search engines to well-known internet players has already started. A survey conducted in 2006 revealed that 46% of users opt for search engines and portals outside of domestic providers when they are unsatisfied with the results. This data indicates a favorable market for AskJeeves to establish its presence and gain market share.

Strategy for Capturing the Market

To enter the Chinese internet search market, a comprehensive marketing and distribution strategy is necessary. This entails distribution at the local, regional, and national levels.

According to recent statistics from a survey, viral marketing at the local level is the most effective method for entering the market. In China, about 68% of internet users learn about websites and portals through their friends. For AskJeeves to succeed, it is essential to focus on local viral marketing due to the high urbanization rate of the Chinese internet population. Since the majority of internet users are concentrated in

urban areas, a strong local viral marketing campaign can quickly spread awareness of AskJeeves. This approach aligns well with the current internet generation's reliance on word-of-mouth recommendations. Additionally, AskJeeves' confidence in its performance metrics, compared to other competitors in the market, makes a local campaign an effective implementation strategy.

Distribution and marketing on a regional level should take place through popular Chinese internet portals. These portals, such as Sina and Baidu, attract a large number of Chinese internet users. This gives AskJeeves the advantage of targeting a specific segment of the Chinese internet community without using too many resources. To enter the market effectively, AskJeeves should also focus on user forums, online communication mediums, and news portals. Moreover, it is important for AskJeeves to establish a national level presence by filtering users through government affiliation.

The Chinese government holds significant power over users, as the websites that are highly rated and approved by the government tend to be the most successful. Thus, it will be vital for AskJeeves to negotiate with the Chinese government in order to promote its website and ensure overall growth.

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