March 21 (Bloomberg) -- Barry Diller's IAC/InterActiveCorp, owner of the HSN home shopping-network, may buy Ask Jeeves Inc. for about $2 billion to add a Web-search engine to its Expedia and Citysearch Internet businesses, the Wall Street Journal reported, citing people familiar with the situation.

The acquisition, which may be announced today, would put New York-based IAC in competition with Yahoo! Inc., Google Inc. and Microsoft Corp.'s MSN in the market for advertisements linked to Web-search results.

Diller, 63, may be able to boost visitors to Ask Jeeves by linking it with IAC sites including Match.com and Evite. Purchasing Emeryville, California-based Ask Jeeves would supplement IAC's Internet-commerce revenue with Web-advertising sales. The U.S. market for ads linked to search results will more than triple to $12.6 billion by 2010, according to Minneapolis- based Piper Jaffray Cos.

``Search advertising revenue is the fastest-growing portion of Internet advertising revenue, which is the fastest growing segment of total advertising,'' said Laura Martin, an analyst with Soleil Securities in Pasadena, California. ``Barry Diller's background in media and advertising would create opportunities in Ask Jeeves that it wouldn't have on a stand-alone basis.''

Ask Jeeves Vice President Heather Staples declined to comment. IAC spokeswoman Andrea Riggs didn't return a voicemail to her office last night.

IAC would pay for the transaction in stock, the Wall Street Journal said. IAC shares have fallen 18 percent since Diller announced the split Dec. 21. The company's shares on March 19 fell 8 cents to $22.29 in Nasdaq Stock Market composite trading and have declined 26 percent in the last 12 months.

Ask Jeeves

Ask Jeeves shares have fallen 21 percent in the last 12 months. They fell 41 cents to $24.24 on March 19.

IAC will exchange its shares for Ask Jeeves stock, then buy back 60 percent of the just-issued IAC shares for about $1.2 billion, the New York Times reported. The bankers in the transaction are J.P. Morgan, Allen & Company and Citibank, the New York Times said.

Diller in December said he'd split his travel-related units, including Hotels.com and Hotwire, away from IAC, which will retain retail assets including Home Shopping Network and Ticketmaster. IAC has said it expects to complete the spinoff of the travel unit during the second quarter.

IAC posted a fourth-quarter loss of $42.6 million after writing down the value of its call center business and the TV Travel Shop unit by $218 million.

Search Competition

IAC's travel businesses had sales of $496.5 million, missing the $539 million-average estimate of five analysts surveyed by Bloomberg News. Hotel chains and airlines are taking a bigger share of online travel sales by offering rooms and tickets on their own Web sites.

Ask Jeeves accounted for 5.3 percent of U.S. Internet searches in December, more than doubling its 1.9 percent market share from a year earlier, according to ComScore Networks, which monitors Web use.

Ask Jeeves is trying to keep pace with Google and Yahoo by introducing new products such as a program to search for keywords in a user's personal computer files.

Net income at Ask Jeeves last quarter rose to $17.5 million, or 25 cents a share, from $7.64 million, or 13 cents, a year earlier. Revenue jumped to $86.1 million from $31.8 million.

Ask Jeeves Chief Executive Steve Berkowitz last month said 70 percent of the company's revenue comes from advertising on its sites that's sold by Google. Ask Jeeves's contract with Google runs through 2007.

The IAC purchase may strengthen Ask Jeeves's ties to the Citysearch Web site, which provides reviews of local businesses, the Wall Street Journal said.

To contact the reporter on this story: Danny King in San Francisco at dking19@bloomberg.net.

Last Updated: March 21, 2005 01:03 EST