Ask Jeeves To Acquire Net Effect For $288M

Internet search engine Ask Jeeves, Inc. announced yesterday that it has agreed to acquire closely-held online customer-support software maker Net Effect Systems, Inc. for about $288 million (US$) in stock.

Ask Jeeves will exchange 1.835 million shares for the North Hollywood, California-based Net Effect. When the transaction is completed in the fourth quarter, Net Effect investors will have a 5.5 percent stake in Ask Jeeves.

Stockholders in Ask Jeeves reacted favorably to the announcement, as shares of the stock soared $10.75, or 7 percent, to close at $167.75.

Many industry observers feel that this acquisition underscores the growing importance of online customer service firms such as Net Effect in the growing e-commerce arena, especially in light of the upcoming holiday season.

Linked To Live Help

Currently, Ask Jeeves’ service allows users to search for information on the Web by phrasing queries in conversational English. However, the Emeryville, California-based company feels that its acquisition of Net Effect will enable it to link customers to live experts who can answer their questions via e-mail or telephone.

“The ability to offer live interaction with a human being at the point when its most important to e-commerce and overall customer satisfaction presents a compelling proposition for e-businesses,” said Rob Wrubel, Ask Jeeves’ president and CEO.

Keep Them Coming Back

By integrating Net Effect’s service into Ask Jeeves, the company hopes to capture more users and keep them coming back.

“We are extending Ask Jeeves’ strategy to make it easier for the customer to get answers either through self-service or live help,” said Julie Schoenfeld, president and CEO of Net Effect. “We really want to work with Ask Jeeves because they understand the importance of human touch on the Web.”

Additionally, Ask Jeeves said that Net Effect’s services will be added to its Corporate Question Answering Service. The service’s customers include BellSouth Corp., Dell Computer Corp., Iomega Corp., Martha Stewart Living Omnimedia, Inc., Microsoft Corp. and Williams-Sonoma, Inc.

These companies use the service to reduce their offline support costs and improve customer loyalty by answering online questions ranging from general questions about their companies to specific pre-sales and support questions about their products or services.

About Ask Jeeves

Founded in 1996 by David Warthen and Garrett Gruener, Ask Jeeves (Nasdaq: ASKJ) went online in 1997 and receives about 4 million visits a month. Named after the unruffled English valet in P.G. Wodehouse novels, Ask Jeeves offers a question-and-answer search format that allows users to pose questions in plain English.

Ask Jeeves’ Chairman Roger Strauch owns about 13 percent of the company, partly through Roda Group. CPQ Holdings, a subsidiary of Compaq Computer Corp., owns about 12 percent.

About Net Effect

Founded in 1997, Net Effect delivers live help services to the e-commerce marketplace. The company is backed by Greylock, Trinity Ventures, TL Ventures and Stanford University.