IAC stops developing search, to outsource

BOSTON (Reuters) - Internet mogul Barry Diller has ended his IAC/InterActiveCorp’s quest to develop Internet search technology to rival that of Google Inc and Microsoft Corp.

IAC’s unit said on Tuesday it has decided to buy its Web search results from one of its rivals, but it declined to say which one, citing a clause in the contract.

Ask will lay off 130 engineers who had been dedicated to building the search engine, and also get rid of thousands of computer servers that stored billions of pages of data.

“The development of search as a technology has become commoditized. To continue to invest our own resources to do web search doesn’t make sense because that development is expensive and doesn’t give you a differentiated product,” Ask President Doug Leeds said by telephone.

The move by Ask, a unit of IAC whose revenue has helped IAC post stronger-than-expected profit in its two most recent quarters -- leaves only two key providers of search results: Google and Microsoft. Yahoo withdrew from the business last year when it signed a deal to get its results from Microsoft’s Bing engine. Leeds would not say if Ask was getting its results from either of those companies.

Leeds said Ask would re-deploy some of the resources it has spent building its own search engine into expanding a popular service that provides answers to specific questions that users key into their browsers.

That’s an area where the No. 4 search provider can differentiate itself from its three bigger competitors, Leeds said.

Shares in New York-based IAC were down 1.5 percent to 28.24 in late afternoon trading on Nasdaq.

Reporting by Jim Finkle; Editing by Tim Dobbyn