Ask Jeeves' Corporate Clients Renewing, Extending Their Contracts

The corporate end of Ask Jeeves' business accounted for roughly 34% of its third-quarter revenue.
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SAN FRANCISCO -- Do corporate customers like

Ask Jeeves'

(ASKJ)

question-answering service?

So far, the answer is yes.

Compaq

(CPQ)

,

Martha Stewart Living Omnimedia

(MSO)

,

Toshiba

and

Microsoft's

(MSFT) - Get Report

WebTV

all have renewed or extended their contracts to use Ask Jeeves' service, the company says. In all, Jeeves' executives say about half of the company's two dozen corporate customers have either renewed or extended their contracts.

Specific terms weren't disclosed, but the deals all indicate that Ask Jeeves is having success with its corporate offerings, which made up 34% of the company's $6.4 million third-quarter revenue. Investors have been salivating over the growth prospects of this service, which Ask Jeeves hopes will become an essential feature of e-commerce Web sites. Ask Jeeves' stock is up about 925% since going public on July 1, but is off its Nov. 19 all-time high of 173 3/4. Friday, Ask Jeeves closed down 2 7/8 to 129 5/8.

The contracts are "the best confirmation in the marketplace you can ask for," says Frank Vaculin, Ask Jeeves' general manager of the corporate question-answering service.

Ask Jeeves has had success landing new accounts for its corporate service, with 25 customers signed up so far. The corporate service acts like a virtual customer service representative, answering questions that consumers have about various products or services. On top of an up-front fee to build a database of questions, Ask Jeeves receives a monthly maintenance fee and a small commission for each answered question.

Most customers of Jeeves' corporate service initially took baby steps with its technology. Take Compaq for instance. Compaq first licensed Jeeves' corporate service to help customers find answers to questions about their desktop computers such as, "Where can I find warranty information for Presario desktops?" That contract was in the five-figure range, says Steve Young, Compaq's director of global customer support.

But after test-driving the technology, Young became convinced of its value. He's particularly enamored of its ability to track the type and frequency of questions, which gives him a clear picture of customers' needs.

When Compaq rolled out the service it was getting several hundred questions a week; now Young says the service receives tens of thousands of questions a week, and he expects that number to climb into the hundreds of thousands in the near future.

While Compaq signed a limited one-year contract five months ago, Young says it decided to expand and renew the contract ahead of schedule. Under the new contract, Compaq will deploy the service across all of its product lines, including computer servers, portable computers, mainframes and storage products. By January, Young says the service will be available for all of these products. The new multiyear contract is in the low six figures on an annualized basis, he says.

The experience of WebTV tells a similar story. WebTV signed its first contract in October 1998 for one year. Now, WebTV has extended that contract to two years in order to incorporate more questions and answers into its database.

"Customers want to find the information themselves," says Jim Whitright, WebTV's business operations manager. "There's less of a chance that customers will pick up a phone or send an email so it will reduce our costs."

And Ask Jeeves has other tricks up its sleeve.

New corporate customers will be announced next week, says Ask Jeeves' Vaculin. What's more, the company just closed its acquisition of

Net Effect Systems

, a private firm that has developed software that enables text-based online conversations in real time between businesses and their customers. Jeeves is hoping that the new service will further help convert online shoppers into buyers, a task proving harder than expected. One study by

Jupiter Communications

(JPTR)

found that 41% of consumers would be more likely to make purchases online if human interaction were available. In the next few weeks, the company will announce the first customer of a new product that marries its natural language search service with Net Effect's live agent functionality.

"What people really want on the Web is real-time personal service," says Ask Jeeves' Vaculin. "Net Effect allows us to interject a live agent into certain circumstances."