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United States
Securities and Exchange Commission
Washington, D.C.20549

/x/ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2001 or

/  / Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                              to                             

Commission File No. 000-26521

FORM 10-K

Ask Jeeves, Inc.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)
5858 Horton Street, Suite 350,
Emeryville, CA 94608
(Address of principal executive offices and zip code)

94-3334199
(I.R.S. Employer Identification No.)

Registrant's telephone number, including area code (510) 985-7400

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 par value
Preferred Stock Purchase Rights

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /x/    No / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form  10-K or any amendment to this Form 10-K. / /

The approximate aggregate market value of voting stock held by non-affiliates of the Registrant, based upon the average of the high and low prices of the Common Stock on January 16, 2002 as reported by NASDAQ National Market was approximately $127,513,641.20. Shares of Common Stock held by each officer and director and by each person who owns 5% or more outstanding Common Stock of the Registrant have been excluded from this computation in that such persons may be deemed to be affiliates. Determination of affiliate status for this purpose is not a determination of affiliate status for any other purpose.

        As of February 26, 2002, the Registrant had 39,963,630 shares of Common Stock outstanding.

DOCUMENTS TO BE INCORPORATED BY REFERENCE

Portions of Ask Jeeves' Definitive Proxy Statement to be filed with the Securities and Exchange Commission (the "Commission") pursuant to Regulation 14A in connection with the 2002 Annual Meeting of Stockholders ("Annual Meeting") are incorporated hereby by reference into Part III of this report.

Certain exhibits filed with Ask Jeeves' Registration Statement on Form S-1, No. 333-77539; Current Report on Form 8-K, filed with the Commission on November 18, 1999; Current Report on Form 8-K, filed with the Commission on February 14, 2000; Registration Statement on Form S-1, No. 333-95691; Registration Statement on Form S-1, No. 333-30494; Quarterly Report filed with the Commission on November 14, 2000; Form 10-K filed with the Commission on April 2, 2001; Current Report on Form 8-K, filed with the Commission on May 10, 2001; Registration Statement on Form S-8, No. 333-73400; Quarterly Report filed with the Commission on August 14, 2001; Current Report on Form 8-K, filed with the Commission on September 17, 2001, are incorporated by reference into Part IV of this report.

ASK JEEVES, INC.
2001 ANNUAL REPORT ON FORM 10-K

CONTENTS

PART I

ITEM 1. BUSINESS

This Annual Report on Form 10-K and the documents incorporated herein by reference contain forward-looking statements based on expectations, estimates and projections as of the date of this filing. Actual results may differ materially from those expressed in forward-looking statements. See Item 7 below, "Management's Discussion and Analysis of Financial Condition and Results of Operations-Forward-Looking Statements."

Overview

Headquartered in Emeryville, California, Ask Jeeves is a provider of natural language question answering technologies and services. Our proprietary technology creates an interaction centered on understanding users' specific needs and interests and connecting them to the most relevant information, products and services. Specifically, our natural language technology allows users to ask a question in plain English (or another language) and receive a response pointing to relevant answers. We believe that by providing an intuitive way to access information on the World Wide Web ("Web"), we make online navigation a more satisfying experience for consumers. We also believe that our natural language approach enables companies to better establish connected self-service solutions. The Company serves its customers through its two divisions, Web Properties and Jeeves Solutions.

Through patented search technology and natural-language capabilities, Ask Jeeves Web Properties provide consumers with a simple and fast way to find relevant answers to their everyday questions. The Ask Jeeves Keyword Network, the Company's advertising services network, provides companies with targeted and effective tools for reaching a broad base of highly valuable customers.

We deliver our search technologies and services through our own Web sites at Ask.com, AJKids.com and Teoma.com. We also syndicate our technologies to portals, infomediaries, and content and destination sites to help companies increase e-commerce and advertising revenue through powerful search.

The first natural language search service on the Web, Ask Jeeves has maintained its position as a consistent top twenty Web property in terms of traffic and advertising. As of December 2001, our combined Web Properties attracted an audience of 15.7 million unique monthly users per Nielsen Netratings who viewed an average of approximately 15.8 million Web pages per day on Ask Jeeves' online properties. Because of our broad reach and comprehensive suite of keyword targeted advertising products, we believe Ask Jeeves Web Properties provide a relevant medium for companies seeking to reach online audiences.

Jeeves Solutions software and service offerings allow corporations to establish connected self-service solutions that supplement the activities of call center, contact centers and marketing departments. Jeeves Solutions core software application, JeevesOne, allows customers to get answers to their questions, and with the use of additional modules, take action through a variety of connected enterprise transaction systems. In turn, through Jeeves Analytics, companies learn about user behavior, interests and trends, allowing them to better serve customer needs. We believe our technology and services increase user satisfaction while enabling corporations to profit from the interactions and retain customers.

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Jeeves Solutions software products are designed around the JeevesOne engine, which serves as the hub for question answering and analytics. The JeevesOne engine is connected to various information sources in the customer's organization, including web pages, flat documents, relational databases, content management systems, core business transaction systems, ERP (Enterprise Resource Planning) systems, and numerous others. Connectivity to the breadth of an organization's systems allows JeevesOne to respond automatically, drawing from the information in these systems, to the entire spectrum of inquiries customers ask of a business throughout the lifecycle of customer involvement. By connecting to the systems a company uses to operate its business. We believe that JeevesOne is unique in that it can satisfy the entire spectrum of customer questions, spanning product research, purchase, customer service, and reengagement. Consequently, we believe Jeeves Solutions products can yield significant return on investment for the customer.

Fiscal year 2001 saw the continuation of the challenging business environment begun in 2000. We responded by implementing changes across our organization that we believe make Ask Jeeves a stronger company and increase long-term shareholder value. During 2001, we completed our restructuring that realigned our company into two business units and eliminated significant amounts of cost from our operations. Our sales force for both Web Properties and Jeeves Solutions was reorganized and management teams streamlined. We launched innovative products in both the Web Properties and Jeeves Solutions businesses. We also made a number of strategic technology acquisitions during the year that we believe will enable us to continue to develop cutting edge products and offer innovative services.

Ask Jeeves ended fiscal year 2001 with revenues of approximately $66.5 million, a 30.5 percent decline from fiscal 2000. While the economic environment stalled the Company's growth, we believe the steps we have taken during the year leave us better positioned to serve customers and target new market opportunities in the future.

Ask Jeeves Web Properties

Industry Background

Search continues to be an essential online activity for the Web's millions of users. Second only to email usage, nearly 80 percent of the Internet population navigates the Web via search engines. In addition to email and search, Internet users research products and services, browse local content and send electronic greeting cards.

Already a dynamic and accepted medium, the number of active Internet users is expected to grow 11 percent to 129.4 million consumers in 2002. As such, the $7.5 billion online advertising industry is forecast to experience a 15 percent growth in 2002 to $8.6 billion. By 2006, online advertising is expected to become a $20.7 billion industry.

Ask Jeeves Web Properties include Ask.com, Ask Jeeves for Kids at AJKids.com, Teoma.com, the Ask Jeeves Keyword Network and Ask Jeeves Syndicated Search.

Ask.com

Ask.com is the flagship Web property for our search network. Ask.com provides consumers with an easy-to-use Web interface to assist them in finding the most relevant answers to their questions. When a user enters a question or multiple keywords, Ask.com parses the query for word meaning and grammar and displays a selection of relevant search results. The results include dialogue questions from the Ask Jeeves' Knowledge Base, automated search results generated from our proprietary popularity and subject-

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specific popularity technologies, metasearch results from other search engines and paid placement listing from our partners.

Jeeves, the Web's most famous face (according to NPD Wave 4 Study, March 2001), serves as a trusted guide for our users, providing them with help and direction throughout their search experience. In December 2001, Ask.com processed approximately 3.2 million queries a day compared to approximately 3 million questions in December 2000. The number of unique users increased from 11.8 million users in December of 2000 to more than 15.7 million in December 2001 per Nielsen/Netratings. In September 2001, we acquired Teoma Technologies and integrated their highly advanced subject-specific popularity results into Ask.com to deliver more authoritative and relevant results to Ask Jeeves users. Within a few weeks of integrating this technology, we believe user satisfaction on Ask.com increased by more than 25 percent.

Ask Jeeves for Kids

Modeled on Ask.com, Ask Jeeves for Kids at AJKids.com is a child-friendly version of the Ask.com site that enables children to find answers to frequently asked questions about a variety of topics, from soccer to homework help. Examples of question templates are "Who was the 15^th president?" and "What is it like on the moon?"

Teoma

Ask Jeeves acquired Teoma Technologies, Inc. in September 2001. Teoma's Subject-Specific Popularity^SM technology processes and organizes the most relevant and authoritative Web sites in real time. Teoma.com, which is currently operating in a beta, or test phase, is maintained as a stand-alone search engine. We expect Teoma.com will be formally launched as a standalone site in the first half of 2002.

Teoma's technology provides users of Teoma.com with three types of search results:

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RESULTS are relevant search results that match a user's query.



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REFINE organizes results into specific sub-topic categories, so users can refine their search to find the results most closely related to their query. For example, a search on "video games" would let a user choose from folders containing results in the categories of "Video Games Reviews," "Home PC Games," "Classic Video Games" and more. We believe no other technology can dynamically cluster search results into these topic-specific Web communities.



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RESOURCES are Web sites created by individual enthusiasts or experts. These sites feature lists of other authoritative sites and links relating to the search topic. For example, an amateur golfer may have created a page devoted to his personal collection of favorite golfing sites. This site would appear under the heading "Resources" in response to a golf-related query.

Ask Jeeves Keyword Network

Through the Ask Jeeves Keyword Network, we provide marketing solutions designed to help companies build brand awareness, drive qualified prospects and increase transactions. We accomplish this through a combination of advertising, premier listings and paid inclusion available through Ask.com, AJKids.com, Teoma.com and our network partners. The benefits to companies that use our targeting services include the following:

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Broad Reach. We provide access to a large number of Web users. This access offers companies the ability to target a broad set of potential customers.

Ask Jeeves, Inc.  5

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Keyword Targeting. Through our natural language technology, we are able to deliver an advertiser's message at the moment a user is most interested—when they are asking a question. For example, a flower company can reach potential customers by delivering a targeted message on the Ask.com results page in response to the query "Where can I find gift ideas for Mother's Day?"



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Comprehensive Suite of Products. Companies can use multiple products to reach targeted prospects, including branded response, branded animation, interstitials, sponsorship, premier listings, paid inclusion and banner advertising.

Ask Jeeves Syndicated Search

Teoma's search technology, along with Ask Jeeves' patented popularity-technology, is syndicated to Web publishers, portals and infomediaries interested in maximizing revenue through superior search results. Customers pay a licensing fee or share advertising revenue from search results pages with the Company. Partners include MSN, Lycos, InfoSpace, About.com and iWon, among others.

•

Teoma Search Technology. In addition to using traditional page ranking methods, Teoma uses Subject-Specific Popularity^SM to generate the most relevant and authoritative results. Subject-Specific Popularity ranks a site based on the number of same-subject pages that reference it, not just general popularity, to determine a site's level of authority. For example, a site devoted to fencing would be ranked based on how many links it received from other sites geared toward fencing aficionados, with less emphasis placed on links from general sports or portal sites.



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Ask Jeeves Popularity Technology. Ask Jeeves' Popularity technology aggregates and organizes online content by tracking the products, services and information people seek, the amount of time they spend at various Web sites, and how frequently they return. A search algorithm is then applied and results are ranked by popularity.



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Ask Jeeves Related Search. Related Search is a tool used in connection with a user's primary search. Related Search increases user satisfaction by offering suggestions to broaden or narrow a search.

Web Properties Products and Services

Ask Jeeves Keyword Network

Ask Jeeves Keyword Network offer a comprehensive suite of integrated advertising and marketing products designed to give our clients powerful tools to drive traffic to their Web sites, increase sales and build brands. These products are as follows:

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Branded Response. Branded Response provides Ask.com users with content about an advertiser's brand at the moment they are most interested—when they are asking a related question. The advertiser's branded content can appear in a question and answer format featuring relevant content, as a helpful fact or hint, presented in paragraph format, or as an interactive toolbar offering real-time content. Branded Response also features related links to promotions or incentives. This feature allows advertisers to occupy highly visible Web real estate in the middle of the Ask.com reply page.



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Branded Animation. Branded Animation offers an animated presence on the Ask.com homepage that is sponsored by an advertising partner. Using multimedia animation, Ask.com users are exposed to the sponsor's brand and message in a compelling and dynamic way. This product is only available on Ask.com.



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Interstitials. An interstitial launches an advertisement or page in a window behind the browser. After the advertisement is triggered by a keyword, a new browser window opens that consists of an advertiser's page or a customized Web area. The user then has the opportunity to explore the advertiser's page or Web site or minimize the new browser window for later exploration. In an effort to maintain and increase the

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impact of the advertisers' message, frequency caps have been implemented for interstitials appearing on Ask.com. This product is available on sites throughout the Ask Jeeves Keyword Network.

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Premium Listings. Currently scheduled to be introduced in 2002, Premium Listings will permit advertisers to obtain valuable leads with targeted, text-based sponsored placements designed to feel more like an answer than an advertisement. The keyword-triggered paid placements will appear as sponsored search results above the automated search results. This product will be available on sites throughout the Ask Jeeves Keyword Network.



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Site Submit and Index Express. Currently scheduled to be introduced in 2002, Site Submit and Index Express are tools that allow companies to frequently insert and update their Web pages for inclusion within Ask Jeeves' search index. Fees are based on the number of URLs submitted for inclusion. This product will be available on sites throughout the Ask Jeeves Keyword Network.

Web Properties Sales and Marketing

By investing in the brand early in the history of the Company, Ask Jeeves was able to establish a strong brand that attracted a loyal and growing user base. This strategic investment positioned us to increase our user base in 2001 despite a significant decrease in marketing expenditures compared to 1999 and 2000. Unique users grew from 11 million in December 2000 to over 15 million in December 2001. Moving forward, we anticipate marketing efforts will focus on increasing traffic and frequency by creating a superior search experience rather than pure brand building efforts. We believe that the improvements in experience on our sites will generate interest through word of mouth marketing and public relations resulting in an increase in user frequency to a point that will have a positive impact on revenue.

In general, the Company makes its Web properties available without charge to users, and generates revenue primarily through the sale of advertisements, premier listings and paid inclusion. We believe our advanced search technologies and services provide a relevant and contextual way for companies to target and acquire customers. Companies can target Ask.com, AJKids.com, Teoma.com and syndication partners' users through branded advertising, text links, sponsorships and paid placement referrals.

The majority of advertising on Ask Jeeves Web properties is sold through the Company's internal advertising sales force. As of January 31, 2002 Web Properties direct sales force consisted of 38 individuals with offices in California, New York and Chicago.

We also syndicate our proprietary Popularity technology and Subject-Specific Popularity technology to companies seeking to provide consumers with relevant search results across the Internet. Companies that syndicate our search services pay us a licensing fee or share advertising revenue with us from each of the search pages served on their sites.

Customers

Our Web Properties Group had 690 customers for our advertising, paid placement and syndication services for the year ended December 31, 2001. Representative customers include AT&T, Expedia, McDonald's, General Motors, Amazon, Barnes and Noble, MSN and Lycos.

Jeeves Solutions

Industry Background

Customer Relationship Management (CRM) software has emerged as an important investment for today's Global 2000 corporation. The promise of CRM is to help automate the relationship with the customer and increase satisfaction while reducing costs. With the emergence of the Internet, customer interaction

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processes are being redesigned and automation is beginning to reach customers in the form of self-service applications. The potential to increase usability and satisfaction while reducing operating costs is re-defining the way companies sell and support their products and services. CRM and electronic Customer Relationship Management offerings include specialized solutions and wide ranging suites. While the more established players are expanding their suites to cover web self-service, many specialized point solutions continue to emerge as contenders that offer superior performance due to technological innovation, significant prior experience, or recognition of a more fundamental problem.

Providing information to customers through access to disparate sources of information has gained ground over the past few years due to the emergence of Internet-based technologies. However, no solution has yet integrated the information into an easy to use and cohesive interface with which customers can interact. While technologies are evolving, business processes are being redesigned to address the requirement for greater flexibility, faster response and more comprehensive access. There are numerous challenges associated with interacting with customers in this dynamic business environment. Customers expect to have the right answer to their question, to be able to order a product with the same ease of communication that they can get when talking with a salesperson, and to have easy access to the status of their orders, or banking accounts, or favorite stocks.

Ask Jeeves has developed and deployed natural language question answering and enterprise connectivity technologies for corporate web-based self-service. This provides real-time information and actions related to the company's products and services. By connecting users to answers and actions through a suite of self-service technologies that includes knowledge-based routing, automated search, natural language question answering and intelligent advisor technology, we believe our solutions allow our corporate customers to create an intuitive interaction with their customers throughout the customer lifecycle. Moreover, we believe that by providing a comprehensive, intuitive, and flexible way to access online information, companies will be able to maximize conversion and retention rates, lower support costs, improve customer access to information and actions. In addition, through our analysis and reporting tool that captures user questions, we believe that we can provide critical insight into the specific needs, interests and preferences of users to help companies make customer-driven business decisions.

The return on investment of the Jeeves Solutions product derives entirely from the ability of the JeevesOne product to automate the customer interaction role of the customer service representative (CSR) and to understand and make recommendations to the organization on the customer interactions that occur. At the most basic level, by automating the question answering and resolution activity of the CSR in response to natural language requests, the organization can better manage its Call Center/Customer Service/Contact Center/Customer Care workforce, while increasing customer satisfaction. Since standard and straightforward questions and inquiries can be answered automatically, less staff is required to handle this level of response and more experienced staff can be made available for complex customer inquiries or urgent sales situations.

The system aggregates, measures, and identifies to the organization those inquiries that can't be answered automatically. Responses to frequently occurring unanswered questions can be automated quickly, yielding instant savings for the organization. Furthermore the system identifies and alerts the organization to situations (i) where customers are asking for products and services the organization doesn't have, (ii) situations where customers are not interested in products and services the organization does have, and (iii) situations where customers are not interested in products and services the organization doesn't have. This provides organizations with information needed to determine, where to invest, where to stop investing, and where not to invest.

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Finally, when customer support is responsive, high quality, available 24x7, and ubiquitous, customer satisfaction and loyalty increases, yielding a more dependable revenue stream and lower costs of customer acquisition.

Bringing the Web to the Enterprise

When users arrive at a corporate Web site, companies often face difficulties in providing a level of self-service that effectively answers questions, provides education about relevant products and services and provides support for business transactions at the level customers expect using other channels. Thus, to maintain or increase market share, many businesses are focusing on the quality of Web-based service as a key competitive differentiator. Whether asking about product features, checking the status of an order or receiving help with a loan application, online customers have traditional service needs, and they want to be assured that these needs will be met before conducting a transaction. We believe that in the increasingly competitive business environment, companies that fail to address these consumer service needs will lose sales to competitors and fail to realize the savings achieved by other companies.

To address these concerns, companies are implementing new methods of conducting business online. They are focusing on increasing online conversion rates by providing timely, personalized service to guide users through the process of finding answers and receiving help. In addition, companies are looking to increase customer satisfaction with their products and services by establishing cost-effective customer support alternatives.

We believe that to unleash the potential of the Internet, companies must develop Web sites that fulfill a variety of customer self-service needs, including:

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attracting or delivering users;



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providing users with easy access to requested information such as product features, account specific information, order shipment status, or product availability;



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enabling user's business transactions such as bill paying, securities selling, or purchasing;



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facilitating pre-sale and post-sale customer support; and



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improving business decision-making abilities by analyzing consumer data.

The Jeeves Solutions Answer

By enabling intuitive customer self-service, our natural language and enterprise connectivity technologies are designed to help companies improve customer satisfaction, increase understanding of customer demand, and reduce expensive support costs in Call Centers, Customer Support, and Marketing. We believe that our natural language and connectivity technologies make interaction from the Internet with mainstream corporate business more intuitive, of higher quality, more accessible, more satisfying, and significantly more productive than historical approaches to engaging with the customer.

Products and Services

The Jeeves Solutions self-service products are designed for two distinct market segments. The first product, JeevesOne, is designed for companies that have completely web-enabled their customer operations and include on their web site not only information regarding their company, products, and services, but customer business transactions such as purchasing, checking order status, problem resolution, and bill paying. The second product, JeevesOne Enterprise, is designed for companies that have web sites, but still utilize their enterprise computing systems for customer and business operations. Finally, Jeeves

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Solutions provides an add-on module, Purchase Advisor, for assisting prospects research and selecting complex products.

Both JeevesOne products accept free form natural language input from a customer, determine from the request what the most satisfactory action is, either retrieving information or conducting a transaction, and perform that action. In the background, an analytics engine is recording the current and subsequent activity of the customer, which reveals, through productized analytics, how well the company is serving its customers and what it can do better to serve its customers. JeevesOne can detect the importance or criticality of the interaction with the customer, such as an angry interaction or a high likelihood to buy, and determine automatically whether to escalate to a human-assisted communication. JeevesOne precision in understanding a customer's question and determining the appropriate action is derived from information about the customer's business, which is contained in vertically-specific knowledge packs. The knowledge packs were developed and validated across many of Jeeves Solutions customers over a period of years.

JeevesOne

In addition to the functionality described above, JeevesOne can automatically determine what customer questions it can answer from an organization's documents. These documents can be in a myriad of standard formats, such as HTML, PDF, Word, Excel, PowerPoint, and accessible from a wide variety of document systems, including web servers, http-enabled file servers and document repositories, and content management systems. The product contains tools for identifying documents, controlling the processing of documents into answers, editing document descriptions, serving answers, and connecting to customer web-based transaction and escalation systems.

JeevesOne Enterprise

JeevesOne Enterprise contains the functionality of JeevesOne and the additional connectivity, security, access, and adapter architectural components necessary to answer customers' questions or conduct business transactions from an organization's enterprise computing systems. JeevesOne Enterprise contains adapters for connecting to such systems as enterprise resource planning (ERP) systems, core business systems (insurance, banking, trading), relational database management systems, and customer relationship management (CRM) systems. Furthermore, an advanced security architecture is designed to use existing corporate security systems, avoiding duplicative effort and introduction of risk.

Finally, JeevesOne "Enterprise" can answer customer questions from a multitude of systems. The technology provides the capability to interweave and cascade the results from many systems, including systems on other sites. A customer question about the status of an order could result in a response from the company's distribution system tied to the shipping status drawn from a parcel delivery tracking system and displayed with an online map keyed by the shipping address.

Purchase Advisor

Purchase Advisor, our decision support product, leads the customer through a question and answer dialogue to enable real-time purchase decisions. Purchase Advisor asks customers questions to establish their needs and preferences and provides them with a personalized list of recommendations, selected product features and side-by-side comparisons. Companies can implement Purchase Advisor to dynamically tailor the shopping experience to the individual needs of their customers.

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Customer Self-Service Benefits

An open source self-service application. The Jeeves Solutions product is capable of leveraging the information stored within the existing information technology infrastructure. Therefore, the need to develop an independent monolithic knowledgebase is minimized. This leads to improved utilization of existing technology investments and minimizes the ongoing maintenance and management issues introduced with centralized control of customer information.

Escalation to assisted channels. The Jeeves Solutions product supports the seamless and automatic escalation of self-service sessions, to assisted channels, when critical customer service opportunities are identified. Session context is maintained which eliminates the need for the customer service representative to reestablish the customer's service issue. This trend allows existing investments in the customer contact center to be leveraged while minimizing the mundane frequently asked questions that are better suited for automated responses.

Broad support for customer inquiries. The Jeeves Solutions self-service application is not limited to problem resolution activities. Expanded access to core business systems and enhanced support for the customer lifecycle has dramatically expanded the scope of the JeevesOne self-service application to the entire customer lifecycle.

Natural language analytics. Support for customer inquiries across the customer lifecycle can translate into improved organizational visibility into the needs and desires of prospects and customers. Historically, technology solutions have attempted to infer customer intent based upon customer's actions. Unfortunately, these approaches required that the data from numerous business systems be integrated and analyzed. The costs and complexity of these approaches effectively eliminated their viability in most real world business environments. Natural language analytics approaches the issue from a new perspective. We believe that if prospects and customers are empowered to share their needs and desires in an unconstrained manner the issue of evaluating intent is minimized. Historically, market research companies have utilized techniques for gathering this information using focus groups and personal interviews. We believe awareness levels, perceptions, attitudes, needs and desires can all be evaluated from natural language questions submitted to a self-service application. We believe a resulting benefit is that a self-service application can bypass the high costs and set-up time normally required to conduct focus groups or personal interviews. With JeevesOne, a centralized cost effective feedback mechanism may be deployed which enables business units to make decisions based upon a more unified understanding of the customer.

Support for business processes. Business processes continue to dictate the approach that organizations take to achieve objectives. Common business objectives include increased revenue from online channels and increased lead generation for channel partners. Defined processes ensure that consistency is maintained during diverse and distributed customer interactions. In addition, metrics allow the business processes to be evaluated relative to target business objectives. Many packaged software applications force companies to adopt their "best practices" for handling customer interactions. Other software companies provide a static approach for supporting company specific processes. While the systems may be configurable, since they require the intervention of information technology resources even to make simple changes, we believe such systems do not allow business units to take ownership of the response needed to adapt quickly to changing needs. We believe process ownership should reside within the business units and appropriate tools should facilitate changes independent of technical resources. For example, we believe the integration of merchandising cross-sell information should be driven by corporate objectives and

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implemented by the marketing unit. The JeevesOne solution empowers the business units to define and track their own customer interaction processes and implement systems that will ultimately be more flexible and powerful for the organization.

Natural language interface. Natural language provides a powerful mechanism for customers interacting with the self-service application. The approach minimizes the interface barriers that are commonly presented with web-based applications. While the web has opened a new channel for customer interaction the lack of interface standards presents a serious challenge to new users. As the number of core business systems exposed via web interfaces increases, the ability of customers to leverage these options decreases. Therefore, we believe businesses are ultimately not effective in their underlying goal of empowering customers with self-service options. JeevesOne leverages a natural language interface and provides a consistent and natural vehicle for processing customer requests.

Business Strategy

Jeeves Solutions offerings allow companies to fulfill an original promise of CRM: To automate customer interaction while increasing customer satisfaction. To increase market share and become the dominant player in Connected Self-Service, which allows corporations to deploy effective self-service solutions that are focused on the greatest benefit to the company and their customer, Jeeves Solutions intends to:

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Enhance our positioning. We intend to continue to position JeevesOne squarely in the center of CRM, delivering enterprise level software and connectivity primarily through traditional software sales models that corporations embrace. Our customer-resident, business-oriented applications are expected to target the Global 2000 companies that are investing in the web channel as an important means of marketing, selling and supporting products and services.



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Increase our Sales Presence. We intend to continue to increase the number of sales people to bring our solution to more companies. In particular, we currently intend to increase our sales efforts in the Eastern region of the U.S. where many of our potential customers reside, and where we believe we have been under-represented in the past.



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Continue to develop our technology. We intend to integrate new technologies and develop additional features in JeevesOne that will continue to enhance its position as the leader in Connected Self-Service. We intend to continue to support industry standards and expand the platforms on which our software operates.



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Forge Strategic Alliances and Expand Market Reach. As we did in 2001, we intend to continue to work with other technology and system integration companies to enhance the value that our solutions bring to companies, and to find additional sales channels for JeevesOne. We believe that this will continue to increase our market penetration in two ways. First, for companies with multiple vendors, we believe that our productized solutions will easily integrate with other preferred technologies, providing companies with one integrated platform. Second, with an integrated solution, we believe Ask Jeeves will have greater flexibility to form strategic alliances and partnerships that will enable third parties to sell, install and support our solutions. By partnering with system integrators to create an indirect sales channel, we believe that we can greatly expand our market reach.

Jeeves Solutions Sales and Marketing

Sales Strategy

Our Jeeves Solutions division markets its products, including JeevesOne, JeevesOne Enterprise and Advisor to Global 2000 companies. We target companies seeking to increase conversion and retention

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rates through a direct sales force that is complemented by our account management team. Our account management team maintains close relationships with our corporate customers to identify and serve their ongoing needs, enabling our sales professionals to focus on new business opportunities. We believe this approach leads to a higher level of satisfaction for our corporate customers and increased cross-selling and up-selling opportunities. As of January 31, 2002, our direct sales force consisted of 40 people with offices in various locations.

Marketing

Our marketing program is designed to acquire new corporate customers. We engage in a number of marketing programs to build our brand and reach consumers and companies. These programs include online and offline advertising, public relations, direct mail, trade shows and ongoing customer communications programs. Our marketing group assists our sales team by providing them with product collateral materials, customer case studies, market surveys and customer profiles. In addition, our marketing group helps identify and develop strategic relationship opportunities and channel distribution relationships.

Customers

Our Jeeves Solutions division had 43 total customers during the year ended December 31, 2001, including customers in our targeted vertical markets of technology, financial services, telecommunications, e-tailing and healthcare. Representative Jeeves Solutions customers as of December 31, 2001 included Compaq, Dell, First Union, Ford Motor Co., Datek, Nike, the State of Washington and Iomega.

International Properties

We believe there is a significant market opportunity for the international expansion of our natural language question answering technologies and services. We have pursued a strategy of market entry through joint venture structures with local partners, use of local management and employees and the implementation of language and geographic specific deployments of our services.

To date, the Company has entered into joint venture arrangements with local partners to provide our services in the United Kingdom, Japan, and to the worldwide Spanish-speaking market. In January 2001, AJI formed Ask Jeeves Australia, a wholly owned subsidiary of AJI, to provide a localized version of our technologies and services for the Australian market.

Ask Jeeves UK

Ask Jeeves UK is a joint venture with two British media companies, Carlton Communications and Granada Media Group formed to market our search technologies and services to Great Britain and the Republic of Ireland. The Ask Jeeves UK Web site is among the top 10 most popular UK Web properties with 4.7 million unique users. At December 31, 2001, Ask Jeeves owned a 50 percent interest in this joint venture. In February 2002, the Company announced an agreement with Carlton Communications and Granada Media Group to acquire full ownership of Ask Jeeves UK. Upon its expected close in the first quarter of 2002, we currently intend to integrate Ask Jeeves UK into the Ask Jeeves Web Properties division.

Ask Jeeves, Inc.  13

Ask Jeeves En Espanol

Originally a joint venture with the Spanish language media company Univision, Ask Jeeves en Espanol was formed to target Spanish speakers worldwide. In the fourth quarter of 2001, we dissolved the joint venture. We expect to re-launch operations as a Spanish channel on the Ask.com site during 2002.

Ask Jeeves Japan

Ask Jeeves Japan, a joint venture with Trans Cosmos, Inc., a Japanese customer service and information technology support provider, was established to market Jeeves Solutions products and services to the Japanese marketplace and to launch a Japanese language version of Ask.com. Ask Jeeves owns a 50 percent interest in this joint venture.

Ask Jeeves Australia

Ask Jeeves Australia at Ask.com.au. is a localized Australian version of the Ask.com Web site that was launched in January 2001. Ask Jeeves owns 100% of this entity.

Additional information required by this item is incorporated herein by reference to Note 15 "Business Segment and Geographic Information" of the Notes to the Consolidated Financial Statements which appears in Item 8 of this Annual Report on Form 10-K.

Technology and Operations

Ask Jeeves has developed and acquired proprietary technology to create natural language technologies and services aimed at creating a unique user experience that emphasizes ease of use, relevance, precision and ability to learn. The goal of our Company's services is to combine the strengths of automated natural language parsing software, topic-specific Web content analysis tools and popularity-based search technology with advanced search algorithms to give Web users easy access to the information they seek.

Our software and service offerings also allow companies to establish connected self-service solutions that supplement the activities of call center, contact centers and marketing departments. The Jeeves Solutions software combines knowledge-based routing, automated search, natural language question answering and intelligent advisor technology to enable customers to connect to information from disparate sources, providing self-service for question answering, education and business transaction support.

Scalability and Operations

Our question answering technology runs on arrays of Intel-based server systems running Microsoft Windows 2000 and Internet Information Server Software. The Question Processing Engine is written in the C++ computer language and is optimized to handle high traffic volumes. The Ask Jeeves knowledge bases are deployed on these servers as read-only, memory mapped files. To scale our service as traffic increases, we only need to install our QPE and knowledge base on additional servers.

Our Popularity Engine distribution servers are arrays of Intel-based server systems running the FreeBSD operating system and Apache Web Server Software. The software is written as C++ FastCGI modules for highest scalability and real-time performance. The Popularity Engine Processing Servers are also Intel systems as well as Sun Sparc Systems running Solaris, utilizing Oracle back-end software. To scale as user traffic increases, we need only install additional distribution servers. To scale as we add more data sources such as international search or corporate databases, we add more capacity to the Oracle systems or increase the number of systems.

The servers hosting Ask Jeeves and some of our customers' Web sites are located at AboveNet Communications in San Jose, California, and London, England, Worldcom in Billerica, Massachusetts and

14  Ask Jeeves, Inc.

Exodus Communications in Waltham, Massachusetts, Santa Clara, California, and London, England. Additionally, some of our corporate customers Web sites are co-located with our customers' servers at other facilities. The hosting centers provide routing and communication lines with a variety of major Internet backbone providers, as well as continuous monitoring and communications support. They also provide their own power generators and multiple, redundant backup systems. We maintain significant server over-capacity at each site so that if one hosting facility fails, the other site can service our entire user traffic.

Competition

Web Properties Group

We face direct competition from companies that provide Internet-wide search directory, and network services. For example, we compete with search engines, including AltaVista Company, Excite@Home Corporation, Google Inc., Northern Light and Inktomi Corporation for the traffic generated by Internet users seeking links to third-party content to address their online information needs. We also compete with directory services, such as Overture Services, Inc., LookSmart, Ltd. and Yahoo! Inc., because they provide alternative ways for users to obtain the desired information. An increasing number of these search and directory companies are syndicating services to corporations, presenting additional competition for our syndication services.

Jeeves Solutions Group

We compete with a number of companies that provide customer self-service solutions for corporate customers. While various companies are addressing this market through a range of solutions, we believe no company competes directly with our approach of offering a suite of self-service technologies that includes knowledge-based routing, automated search, natural language processing, analytics and intelligent product recommendation technology. We believe that our solutions are unique in that they allow our corporate customers to create an intuitive interaction with their customers throughout the customer lifecycle. Other companies that provide automated online customer products and services against which we compete can be categorized as follows:

1)

companies that provide advanced natural language self-service, such as iPhrase Technologies, Inc., AnswerFriend, Inc., Banter, Inc., Primus Knowledge Systems and Kanisa Inc.;

2)

search technology companies, such as Inktomi Corporation, Google, Inc. and Verity, Inc.;

3)

customer relationship management companies, such as eGain Communications Company and Kana Communications, Inc.

Our ability to compete depends on many factors, many of which are outside of our control. These factors include: the quality of content, the ease of use of online services and the timing and market acceptance of new and enhanced online services. We believe we compete favorably with respect to each of these factors.

Some of our existing competitors, as well as potential new competitors, have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical and marketing resources than we do. This may allow them to devote greater resources than we can to the development and promotion of their services. Many of these competitors offer a wider range of services than we do. These services may attract users to our competitors' sites and, consequently, result in less traffic to our site. These competitors may also engage in more extensive research and development, adopt more aggressive pricing policies and make more attractive offers to existing and potential employees, partners, advertisers and electronic commerce partners. Our competitors may develop products and services that are

Ask Jeeves, Inc.  15

equal or superior to ours or that achieve greater market acceptance. In addition, current and potential competitors have established or may establish cooperative relationships among themselves or with third parties to better address the needs of advertisers and businesses engaged in electronic commerce. As a result, it is possible that new competitors may emerge and rapidly acquire significant market share.

Proprietary Rights

We seek to protect our intellectual property rights, but our actions may be inadequate to protect our patents, trademarks or other proprietary rights. We rely upon trademark, patent and copyright law, trade secret protection and confidentiality or license agreements with our employees, customers, partners and others to protect our proprietary rights. We have one patent and several patent applications on file with the United States Patent and Trademark Office for various aspects of our natural language search and other database search technologies, which technologies power the JeevesOne™ software product, www.ask.com, and www.directhit.com. As a result of our acquisition of Etour, Inc., we received an assignment of one United States patent covering aspects of the technology powering the Jeeves' Tours website at www.jeevestours.com. We have obtained registered trademark status for "Ask Jeeves" in China and Korea. We have obtained registered trademark status for the "Ask!" button design in China and the European Community. We have obtained registered trademark status for the"Jeeves design", a stylized depiction of our butler character, in China, Korea, the United Kingdom, and the European Community. We have obtained registered trademark status for "Direct Hit" in the United Kingdom. We have also applied for registered trademark status for "Jeeves Solutions" in the United States. As a result of our acquisition of Teoma Technologies, Inc., we acquired the United States trademark applications for "Teoma" and the "Teoma" design. We do not know whether we will be able to defend our proprietary rights since the validity, enforceability and scope of protection of proprietary rights in Internet-related industries are uncertain and still evolving. Because we are devoting significant resources to building our brands, primarily "Jeeves Solutions," "Ask Jeeves," "Ask.com," and "Teoma," if we are unable to register the trade and service marks for which we have applied, or if we are unable to defend our intellectual property rights, our business may be seriously harmed.

Third parties may assert infringement claims against us. From time to time in the ordinary course of business we have been, and we expect to continue to be, subject to claims of alleged infringement of the trademarks and other intellectual property rights of third parties. These claims and any resultant litigation, should it occur, could subject us to significant liability for damages. In addition, even if we prevail, litigation could be time-consuming and expensive to defend, and could result in the diversion of our time and attention. Any claims from third parties may also result in limitations on our ability to use the intellectual property subject to these claims unless we are able to enter into agreements with the third parties making these claims.

Strategic Relationships

We have established strategic relationships with Vignette Corporation and Lionbridge Technologies, Inc. These relationships provide us opportunities to extend our reach by marketing and selling our services to their existing network of customers.

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Executive Officers of the Company

A. George (Skip) Battle was appointed Chief Executive Officer in December 2000. Mr. Battle has served as a director of Ask Jeeves since August 1998 and currently serves on the compensation committee. Mr. Battle retired from Andersen Consulting in June 1995. Mr. Battle joined the firm in 1968, became a partner in 1978 and held a series of management positions in the firm including Worldwide Managing Partner Market Development and a member of the firm's Executive Committee, Global Management Council and Partner Income Committee. Mr. Battle is a member of the Boards of Directors of PeopleSoft, Inc., Barra Inc. and Fair, Isaac and Company, Incorporated as well as a director of Masters Select Equity Fund, Masters Select Value and Masters Select International Fund, registered investment companies.

Steven J. Sordello has served as Chief Financial Officer of Ask Jeeves since December 2000. Mr. Sordello joined Ask Jeeves in June of 1999 and served as Director, Financial Planning and Analysis from June of 1999 until April 2000, when he was promoted to Vice-President-Financial Planning Analysis. From April 1994 to June 1999, Mr. Sordello served as Senior Director of Financial Planning for Adobe, Inc., a software company. Prior to Adobe, Mr. Sordello served in various positions at Syntex Corporation, a pharmaceutical company.

Christine M. Davis has served as Controller of Ask Jeeves since January 1999 and was promoted to Vice President and Corporate Controller in November 1999. From January 1999 until April 1999, Ms. Davis also served as Acting Chief Financial Officer of the Company. From December 1997 to January 1999, she served as Corporate Controller of TIBCO Software, Inc., a software company. From April 1987 to December 1997, Ms. Davis served as Corporate Controller, Assistant Secretary and Treasurer of TCSI Corporation, a telecommunications software company.

Cynthia L. Pevehouse has served as General Counsel & Secretary of Ask Jeeves since January 2000. From 1997 to 2000, Ms. Pevehouse served as legal counsel at Compaq Computer Corp. From 1996 to 1997, she was legal counsel to Canon USA, Inc. Prior thereto, Ms. Pevehouse was in private practice in Seattle, Washington; Portland, Oregon; and Osaka, Japan. Ms. Pevehouse holds a J.D. from Willamette University and an LL.M. in Asian Law from the University of Washington.

George S. Lichter has served as President of Ask Jeeves International since May 1999. From December 2000 to October 2001, Mr. Lichter temporarily served as Interim Chief Executive Officer of AJUK. As interim CEO, he was provided limited authority by the Board of Directors of AJUK, all significant transactions of AJUK required Board approval and he had no authority to approve transactions between AJUK and the Company. During such time, there were no transactions between the Company and AJUK other than as comtemplated in previously existing contracts. From January 1997 to May 1999, Mr. Lichter served as Senior Vice President, Business Development of Havas Interactive/Cendant Software. From 1994 to 1997, Mr. Lichter served as Vice President New Business Development of Knowledge Adventure, an

Ask Jeeves, Inc.  17

educational software company. From 1993 to 1994, Mr. Lichter was employed as an attorney at the law firm of Rosenfield, Meyer & Susman. Mr. Lichter resigned in February 2002.

Steven Berkowitz has served as President of Web Properties since May 2001. From 1999 to 2001, Mr. Berkowitz was President and CEO of Intermap Systems, an ASP content provider focused on online consumer healthcare information systems. From 1994 to 2001, Mr. Berkowitz served as President and Chief Operating Officer of IDG Books, a publishing company.

Claudio Pinkus has served as President of Jeeves Solutions since December 2000. From June 1999 to December 2000, Mr. Pinkus served as Chief Operating Officer of Ask Jeeves International. Prior thereto, Mr. Pinkus served as CEO of Bowne Global Solutions, a provider of localization services, from November 1996 through June of 1999. Prior thereto, Mr. Pinkus founded IDOC, Inc., a localization company, where he served as CEO from 1985 until November of 1996 when it was acquired by Bowne. In 1992 Mr. Pinkus also founded Globalware, Inc. to develop and market software solutions for the translation and localization industry.

Employees

Ask Jeeves' future success is substantially dependent on the performance of its senior management and key technical personnel, and its continuing ability to attract and retain highly qualified technical and managerial personnel. As part of our business realignment and reorganization, we conducted additional workforce reductions during 2001. As of December 31, 2001, the Company had 416 employees. No employees are represented under collective bargaining agreements. We consider our relations with our employees to be good.

See the "Risk Factors" section below for a further discussion of certain risks related to our employees.

Regulation of the Internet

There are currently few laws or regulations specifically addressed to the Internet. The application of existing laws and regulations to Ask Jeeves relating to issues such as user privacy, defamation, pricing, advertising, taxation, gambling, sweepstakes, promotions, content regulation, quality of products and services, and intellectual property ownership and infringement can be unclear. In addition, we will also be subject to new laws and regulations directly applicable to our activities. Any existing or new legislation applicable to us could expose us to substantial liability, including significant expenses necessary to comply with such laws and regulations, and dampen the growth in use of the Internet. Several federal laws could have an impact on our business. The Digital Millennium Copyright Act is intended to reduce the liability of online service providers for listing or linking to third-party Web sites that include materials that infringe copyrights or other rights of others. The Children's Online Protection Act and the Children's Online Privacy Protection Act are intended to restrict the distribution of certain materials deemed harmful to children and impose additional restrictions on the ability of online services to collect user information from minors. In addition, the Protection of Children From Sexual Predators Act of 1998 requires online service providers to report evidence of violations of federal child pornography laws under certain circumstances. Such legislation may impose significant additional costs on our business or subject us to additional liabilities. We post our privacy policy and practices concerning the use and disclosure of user data. Any failure by us to comply with our posted privacy policy, FTC requirements or other privacy-related laws and regulations could result in proceedings by the FTC or others which could potentially have an adverse effect on our business, results of operations and financial condition. In this regard, there are a large number of legislative proposals before the United States Congress and various state legislative bodies regarding privacy issues related to our business. It is not possible to predict whether or when such

18  Ask Jeeves, Inc.

legislation may be adopted, and certain proposals, if adopted, could materially and adversely affect our business through a decrease in user registrations and revenues. This could be caused by, among other possible provisions, the required use of disclaimers or other requirements before users can utilize our services.

Due to the global nature of the Web, it is possible that the governments of other states and foreign countries might attempt to regulate its transmissions or prosecute us for violations of their laws. We might unintentionally violate such laws, such laws may be modified and new laws may be enacted in the future. Any such developments could have a material adverse effect on our business, operating results and financial condition. We may be subject to legal liability for our online services. We host a wide variety of services that enable individuals to exchange information, generate content, conduct business and engage in various online activities on an international basis, including public message posting, sweepstakes and services relating to online auctions and homesteading. The law relating to the liability of providers of these online services for activities of their users is currently unsettled both within the United States and abroad. Claims may be threatened against us for defamation, negligence, copyright or trademark infringement, or other theories based on the nature and content of information that we provide links to or that may be posted online.

RISK FACTORS

We Have a History of Net Losses and Expect to Continue to Incur Net Losses

We incurred net losses in each year since inception and, as of December 31, 2001, we had an accumulated deficit of approximately $675.4 million. We expect to have net losses and negative cash flows, as determined under accounting principles generally accepted in the United States, for the next twelve months. The size of these net losses will depend, in part, on the rate of growth of our revenues from our advertisers and corporate customers and on our expenses. It is critical to our success that we continue to expend financial and management resources to develop our brand loyalty through marketing and promotion, enhance our search technologies and services and expand our other services. Beginning in late 2000, we announced steps to narrow our net losses, including business realignment and a reduction in our workforce. Although these steps are intended to reduce our net losses in the future, we cannot guarantee that these steps will achieve the expected reduction in net losses.

As our operating expenses are likely to continue to exceed our revenues in the near term, we will need to generate significant additional revenues to achieve operating profitability. Even if we do achieve operating profitability, we may not be able to maintain or increase our operating profitability on a quarterly or annual basis. If we do not achieve or sustain profitability in the future and are unable to obtain additional financing, then we will eventually be unable to continue our operations.

We Rely on Revenues Derived from Internet Advertising and Licensing of our Products and Services, Which are Subject to Uncertain Demand and are Difficult to Forecast Accurately

Internet Advertising. We expect that revenues from advertising will continue to represent a significant portion of our total revenues for the foreseeable future. We have experienced a decrease in our advertising revenues that may continue for the foreseeable future due to the prevailing conditions in the online advertising market and to downward pressure on advertising rates industry-wide.

We compete with traditional media such as television, radio and print, as well as online advertisers and high-traffic Web sites, for a share of advertisers' total advertising expenditures. We have experienced, and may continue to experience, downward pressure on advertising prices in the industry due to the increasing amount of advertising inventory becoming available on the Internet. Advertisers may find Internet

Ask Jeeves, Inc.  19

advertising to be a less effective means of promoting their products or services relative to traditional advertising media and may reduce or eliminate their expenditures on Internet advertising. Many potential advertisers and advertising agencies have only limited experience advertising on the Internet and have not devoted a significant portion of their advertising expenditures to Internet advertising. Acceptance of the Internet among advertisers will depend, to a large extent, on the perceived effectiveness of Internet advertising and the continued growth of commercial usage of the Internet.

Currently, there are a variety of pricing models for selling advertising on the Internet, including models based on the number of impressions delivered, the number of click-throughs by users, the duration over which the advertisement is displayed or the number of keywords to which the advertisement is linked. It is difficult to predict which pricing model, if any, will emerge as the industry standard. This uncertainty makes it difficult to project our future advertising rates and revenues that we may generate from advertising. A decrease in advertising sold or advertising rates could adversely affect our operating results.

In addition, our advertising revenues will depend on our ability to achieve, measure and demonstrate to advertisers the breadth of the traffic base using our search service and the value of our targeted advertising. Filter software programs that limit or prevent advertising from being displayed on a user's computer are available. It is unclear whether this type of software will become widely accepted, but if it does, it would negatively affect Internet-based advertising. Our business could be seriously harmed if the market for Internet advertising does not continue to grow or if we are unsuccessful in increasing our advertising revenues.

Licensing. For the year ended December 31, 2001, $21.0 million, or approximately 31.6% of our revenues, were generated from licensing our services to corporate customers and to our joint ventures through our Jeeves Solutions Group. Jeeves Solutions revenues for this period included intellectual property licensing revenues of approximately $19.0 million from our joint ventures. In October 2001 and February 2002, we acquired full ownership of Ask Jeeves en Espanol and Ask Jeeves UK, respectively. Consequently, these intellectual property licenses have terminated or will terminate and will result in a decline in future licensing revenues in Jeeves Solutions. If, in the future, we are unable to generate sufficient licensing revenue from our corporate customers and/or our remaining joint venture, our results of operations could be substantially impaired.

JeevesOne. In September 2001, we launched JeevesOne, the Company's first productized software product. While we believe that the product responds to market need for this type of enterprise software, there is no assurance that JeevesOne will achieve market acceptance. If we are unable to generate significant sales of software licenses, our business could be seriously harmed.

We May Not Be Able to Secure Additional Financing to Meet Our Future Capital Needs

We currently anticipate that our cash, cash equivalents and marketable securities will be sufficient to meet our anticipated needs for working capital and capital expenditures for at least twelve months. If, after twelve months, we are unable to generate sufficient cash flows from operations to meet our anticipated needs for working capital and capital expenditures, we will need to raise additional funds to fund brand promotion, develop new or enhanced products and services, respond to competitive pressures or make acquisitions. We may be unable to obtain any required additional financing on terms favorable to us, if at all. If adequate funds are not available on acceptable terms, we may be unable to fund our expansion, successfully promote our brand, develop or enhance products and services, respond to competitive pressures or take advantage of acquisition opportunities, any of which could seriously harm our business.

20  Ask Jeeves, Inc.

If we raise additional funds through the issuance of equity securities, our stockholders may experience dilution of their ownership interest, and the newly issued securities may have rights superior to those of the common stock. If we raise additional funds by issuing debt, we may be subject to limitations on our operations, including limitations on the payment of dividends. If we do not achieve or sustain profitability in the future and are unable to obtain additional financing, then we will eventually be unable to continue our operations.

We Rely on Third-Party Advertising Delivery Which Could Effect Our Ability to Deliver Advertisements On Our Web Sites

We rely on third-party advertising services, provided by DoubleClick, Inc. to deliver advertisements to our users. DoubleClick is currently the only provider available in the market that meets our delivery needs. If DoubleClick fails to deliver the advertisements as contracted for, due to reliability or performance problems, or if advertisements cannot be targeted as promised to advertisers, our revenues may decrease.

Some of Our Web Properties Customers are Emerging Internet Companies that Represent Credit Risks

We expect to continue to derive a significant portion of our revenues from sales to Internet companies. Many of these companies have limited operating histories and are operating at a loss. Moreover, many of these companies have limited cash reserves and limited access to additional capital. We have in some cases experienced difficulties collecting outstanding accounts receivable and we may continue to have these difficulties in the future. These difficulties may increase as a result of a recent downturn in economic activity and reductions in funding for Internet companies from public capital markets and private venture capital and equity sources. If any significant part of our customer base experiences commercial difficulties or is unable or unwilling to pay for any reason, our business will suffer.

Our Search Technologies and Services are Unproven

We will be successful only if Internet users adopt our search technologies and services as a primary method of navigating the Internet. Internet users have a variety of other search techniques, such as directory searches, available to them to navigate the Internet. Users can also rely on methods, such as call centers, chat rooms and e-mail, rather than difficult-to-navigate corporate Web sites, to obtain information on products and services. Our search technologies, including those of our recent acquisition Teoma Technologies, Inc., are novel and unproven. It is difficult to predict the extent and rate of user adoption of our search technologies and services. Users of our services may try our Web sites and then revert to other search techniques to navigate the Internet or choose new search techniques. It is uncertain whether widespread acceptance of our search technologies and services will occur.

We Will Only Be Able to Execute Our Business Plan if Internet Usage Grows

Our business would be adversely affected if Internet usage does not continue to grow or grows at significantly lower rates compared to current trends. The continued growth of the Internet depends on various factors, many of which are outside our control. These factors include:

•

the Internet infrastructure may not be able to support the demands placed on it;


•

performance and reliability of the Internet may decline as usage grows;


•

growth in utility and accessibility to desired information may slow, decreasing the number of new Internet users;


•

security and performance concerns due to hackers and authentication concerns with respect to the transmission over the Internet of confidential information, such as credit card numbers, and

Ask Jeeves, Inc.  21

attempts by unauthorized computer users, so-called hackers, to penetrate online security systems may impact use of the Internet; and

•

privacy concerns, including those related to the ability of Web sites to gather user information without the user's knowledge or consent may limit the Internet's use.

We Depend on Third Party Content to Provide the Answers to Questions Asked on Our Web Sites

Visitors to our Web sites use the sites to obtain direct access to the information, products and services they need through the display of a third-party Web page containing the answer to the user's question. We have little control over the content of these third-party Web sites. If these third-party Web sites do not contain high-quality, up-to-date and useful information to the user, the utility of our service to the user will be reduced, which could seriously harm our business.

Our Web sites are designed to directly link users to a page within a third-party Web site that contains the answer to a question asked. However, when our Web sites attempt to direct the user to a page within the Web site, some companies have automatically redirected users to their home page. If companies prevent us from directly linking our users to a page within a third-party Web site, and if there are no comparable alternative Web sites to which we can direct our users, the utility and attractiveness of our services to consumers may be reduced. If this occurs, traffic on our Web sites could significantly decrease, which would seriously harm our business.

We May Not Be Able to Effectively Compete Against Our Current and Potential Competitors

Web Properties. We face direct competition from companies that provide Internet search and directory services. For example, Web Properties competes with search engines, including AltaVista Company, Google Inc., Northern Light, and Inktomi Corporation, for the traffic generated by Internet users seeking links to third- party content to address their online information needs. Web Properties also competes with directory services, such as Overture Services, Inc., Inc. LookSmart, Ltd., and Yahoo! Inc., because they provide alternative ways for users to obtain the desired information.

Jeeves Solutions. We compete with a number of companies that provide customer self-service solutions for corporate customers. For example, Jeeves Solutions competes with other companies that provide advanced natural language solutions, such as iPhrase Technologies, Inc. and Kanisa Inc.; search technology companies, such as Inktomi Corporation and Verity, Inc.; knowledge management companies such as Primus Knowledge Systems, and eGain Communications Company; and customer relationship management companies, such as Siebel Systems, Inc. and Kana Communications, Inc.

Our ability to compete depends on many factors, many of which are outside of our control. These factors include: the quality of content, the ease of use of online services, the timing and market acceptance of new and enhanced online services and sales and marketing efforts by our competitors and by us.

Many of our existing competitors, as well as potential new competitors, have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical and marketing resources than we do. This may allow them to devote greater resources than we can to the development and promotion of their services. Many of these competitors offer a wider range of services than we do. These services may attract users to our competitors' sites and, consequently, result in a decrease in traffic to our site. These competitors may also engage in more extensive research and development, adopt more aggressive pricing policies and make more attractive offers to existing and potential corporate customers, advertisers and syndicators. Our competitors may develop products and services that are equal to, or superior to, our products and services, or achieve greater market acceptance. In addition, current and potential competitors have established or may establish cooperative relationships among themselves or

22  Ask Jeeves, Inc.

with third parties to better address the needs of advertisers and businesses engaged in electronic commerce. As a result, it is possible that new competitors may emerge and rapidly acquire significant market share.

Our Growth Will Depend on Our Ability to Develop and Maintain Our Brands

We believe that favorable consumer and business community perceptions of the Ask Jeeves brands are essential to our future success. Accordingly, we intend to continue pursuing brand-enhancement strategies, which may include mass market and multimedia advertising, promotional programs and public relations activities. These expenditures may not result in a sufficient increase in revenues to cover such advertising and promotional expenses. In addition, even if brand recognition increases, the number of new users and corporate customers may not increase. Further, even if the number of new users increases, the amount of traffic on our Web sites and the number of corporate customers may not increase sufficiently to justify the expenditures.

If We Are Unable to Rapidly and Successfully Develop New Products, New Product Enhancements and Integrate Acquired Technologies, We May Be Unable to Meet Customer Demand

We operate in a highly competitive, rapidly changing environment and our future success depends on our ability to develop and introduce new products that meet the needs of our customers. In our Web Properties division, we are currently developing new advertising products such as Premier Listings, Site Submit and Index Express in order to meet new demands in the marketplace. If we are unable to develop these and other new and enhanced products, our business and operating results may be adversely affected. Also, many of our products must be available on a variety of operating system platforms. We must ensure that such products are available on the platforms that our customers require. For example, at December 31, 2001, JeevesOne was not yet available on the Solaris Operating Environment. We must successfully launch JeevesOne on this platform in order to meet customer demand.

Additionally, we have acquired technology to accelerate our ability to meet new product requirements and enhancements. For example, in September 2001 the Company acquired Teoma Technologies, Inc. and in January 2002, we announced the acquisition of certain technology from Octopus Software, Inc. We must continue to scale and integrate these technologies into our existing and new products. If we are unable to successfully and rapidly integrate these and other technologies into our products, our business may be harmed.

If We Are Unable to Continue to Improve Operations Efficiencies, We May Be Unable to Meet Customer Demand

Our past and planned growth in traffic may continue to place strain on our current and planned systems. We must continue to develop new technologies to improve our ability to serve and manage the growth on our sites as well as the sites of our syndication partners. Additionally, we may not have adequate capacity to meet demand for new products. If any of this were to occur, it could damage our reputation and limit our future growth.

Failure to Add or Retain Corporate Customers May Have an Adverse Effect On Our Revenues

In the coming year we expect that revenues associated with corporate customers will be comprised primarily of corporations with large, difficult-to-navigate Web sites. If we do not complete sales to a sufficient number of customers, our future revenues will be adversely affected.

Most of our existing corporate customer contracts have a term of one year following the implementation of our services. As a result, if we are unable to offer value to our customers during the term of these contracts, or if our customers choose a competitor's service over our service, or if our customers decide to

Ask Jeeves, Inc.  23

use their own proprietary technology to develop services similar to ours, those customers may not renew their contracts. If we do not obtain a sufficient number of contract renewals or cross sales of other products, or if such renewals are obtained on terms less favorable than the original contract, our business could be adversely affected.

Implementing Our Services for Some of Our Corporate Customers is Labor Intensive

Because the implementation of some of our services is labor intensive, it is difficult to predict the length of the development cycle in Jeeves Solutions. Factors that affect the length of the development cycle include the overall size and complexity of the Web site, the interaction with the customer and the dynamic nature of the content. Launching a customized version of some of our services may take a month or longer. The long development cycle makes it difficult to predict the delivery time to the customer, realize our revenue goals and manage our internal hiring needs to meet new projects. In addition, in order to meet increased demand by corporate customers, we may have to hire additional people and train them in advance of orders. When we outsource development of custom knowledge bases, we will have little control over the speed and quality of the development. Any decline in the speed or quality of the implementation of our services could seriously harm our business.

If Accounting Interpretations Relating to Revenue Recognition Change, our Reported Revenues Could Decline or We Could Be Forced to Make Changes in our Business Practices

Over the last several years, the American Institute of Certified Public Accountants issued Statement of Position or SOP 97-2, "Software Revenue Recognition," and SOP 98-9 "Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions." These standards address software revenue recognition matters primarily from a conceptual level and do not include specific implementation guidance. In addition, in December 1999, the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements", or SAB 101, which explains how the SEC staff believes existing revenue recognition rules should be applied. The Company believes that its revenue recognition policies are currently in compliance with SOP 97-2, SOP 98-9 and SAB 101.

The accounting profession continues to discuss certain provisions of SOP 97-2 and SAB 101 with the objective of providing guidance on potential interpretations. These discussions and the issuance of interpretations, once finalized, could lead to unanticipated changes in our current revenue accounting practices, which could cause us to recognize lower revenues. These changes may extend sales cycles, increase administrative costs and otherwise adversely affect our business.

Events or Changes in Circumstances May Result in Additional Impairment of Our Goodwill and Acquired Intangible Assets

The Company recorded significant amounts of goodwill and other intangible assets on its consolidated financial statements. In the first quarter of 2001, we identified indicators of possible impairment of these assets and recorded an impairment charge of $339.2 million to our results of operations during that quarter. In the third quarter of 2001 we identified additional indicators of possible impairment of these assets and recorded an additional impairment charge of $16.1 million to our results of operations during that quarter. These assets will continue to be subject to evaluation for impairment when events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. If in the future a determination is made that the assets are impaired, it could result in a significant reduction in the carrying value of such assets and which could harm our consolidated financial position or results of operations.

In addition, in July 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141 (SFAS 141), "Business Combinations", and No. 142 (SFAS 142),

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"Goodwill and Other Intangible Assets." SFAS 141 changes the criteria for recognizing intangible assets apart from goodwill in accounting for business combinations under the purchase method. SFAS 142 requires goodwill and other intangible assets that have an indefinite useful life to no longer be amortized; however, these assets must be reviewed at least annually for impairment. The Company will adopt the standards effective January 1, 2002. We do not expect the adoption of these standards to have a material impact on the Company's financial position or results of operations.

Our Business Will Suffer in a Variety of Ways Unless Overall Economic Conditions Improve

Many of our customers are making and will continue to make significant cutbacks in their sales and marketing efforts and capital expenditures, which will in turn adversely affect our financial results.

Current economic conditions pose a variety of additional challenges to our business. The financial condition of many of our customers has deteriorated and continues to deteriorate because of their inability to raise additional funds for their businesses. The ability of these customers to generate additional revenue for us has been reduced dramatically, if not eliminated. Our inability to rapidly replace this portion of our customer base will have a material adverse impact on our business.

Recent Terrorist Activities and Resulting Military and Other Actions Could Adversely Affect Our Business

Terrorist attacks in New York and Washington, D.C. in September of 2001 have disrupted commerce throughout the world. The continued threat of terrorism and the potential for military action and heightened security measures in response to this threat may cause significant disruption to commerce throughout the world. To the extent that disruptions result in a general decrease in corporate spending on information technology or advertising, our business and results of operations could be materially and adversely affected. We also may experience delays in receiving payments from customers that have been affected by the attacks, which, in turn, would harm our cash flow. We are unable to predict whether the threat of terrorism or the responses thereto will result in any long-term commercial disruptions or if such activities or responses will have a long-term adverse effect on our business, results of operations or financial condition. These and other developments arising out of the attacks may make the occurrence of one or more of the factors discussed under "Risk Factors" likely to occur.

Our Business Realignments May Not Result in the Intended Benefits

In the fourth quarter of 2000, we announced a realignment of our business organization in an effort to streamline operations, increase revenues, reduce costs and bring staffing in line with our then current and anticipated requirements. During 2001 we took additional steps to rationalize the resources required to operate efficiently in the prevailing market. Through the realignments, our two business units, Jeeves Solutions and Web Properties, were given independent gross profit and loss accountability. Our Jeeves Solutions business focuses on licensing our technologies to corporate clients and our Web Properties business focuses on sales of our targeting solutions on our Web sites. In addition, as part of our business realignment, we have implemented workforce reductions and facility closures as necessary to rationalize the resources required to operate efficiently in the current market.

In 2001, our business realignments have resulted in reduced operating costs, however we cannot assure that we will be able to continue to reduce operating costs, or that operating costs will not increase in the future. For example, we expect that we will incur additional operating costs as a result of our acquisition of Ask Jeeves UK. If we are not successful in increasing revenues and decreasing costs, we may never achieve profitability.

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Our Workforce Reductions and Financial Performance May Adversely Affect the Morale and Performance of our Personnel and Our Ability to Hire New Personnel

Our business realignment included reductions in our workforce in order to reduce costs and bring staffing in line with our anticipated requirements. There were costs associated with the workforce reductions related to severance and other employee-related costs, and our realignment plan may yield unanticipated costs and consequences, such as attrition beyond our planned reduction in staff. In addition, our common stock has declined in value below the exercise price of many options granted to employees pursuant to our stock option plans. Thus, the intended benefits of the stock options granted to our employees, the creation of performance and retention incentives, may not be realized. In addition, workforce reductions and management changes create anxiety and uncertainty and may adversely affect employee morale. As a result, we may lose employees whom we would prefer to retain. As a result of these factors, our remaining personnel may seek employment with larger, more established companies or companies they perceive as having less volatile stock prices.

Our Past and Future Acquisitions May Be Difficult to Integrate, Disrupt Our Business, Dilute Stockholder Value or Divert Management Attention

We have acquired a number of companies, including Teoma Technologies, Inc. in September 2001 and Ask Jeeves UK, announced in February 2002. We may in the future seek to acquire or invest in additional businesses, products or technologies that we believe could complement or expand our business, augment our market coverage, enhance our technical capabilities or that may otherwise offer growth opportunities. We may encounter problems with the assimilation of acquired businesses, products or technologies including:

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difficulties in assimilation of acquired personnel, operations, technologies or products;



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unanticipated costs associated with acquisitions;



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diversion of management's attention from other business concerns and potential disruption of our ongoing business;



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adverse effects on our existing business relationships with our customers;



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potential patent or trademark infringement from acquired technologies.



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adverse effects on our current employees and the inability to retain employees of acquired companies;



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use of substantial portions of our available cash as all or a portion of the purchase price; and



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dilution of our current stockholders due to issuances of additional securities as consideration for acquisitions.

If we are unable to successfully integrate our acquired companies or to create new or enhanced services, we may not achieve the anticipated benefits from our acquisitions. If we fail to achieve the anticipated benefits from the acquisitions, we may incur increased expenses and experience a shortfall in our anticipated revenues and we may not obtain a satisfactory return on our investment. In addition, if a significant number of employees of acquired companies fail to remain employed with us, we may experience difficulties in achieving the expected benefits of the acquisitions.

We Must Continually Improve Our Systems, Controls and Procedures

We have a limited operating history, and we initially experienced rapid growth, which placed a significant strain on our managerial, financial and operational resources. We must continue to improve our

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operational and financial systems and managerial controls and procedures, train and manage our workforce with reduced resources. We cannot be assured that our systems, procedures or controls will be adequate to support our operations or that we will be able to manage any growth effectively. If we do not manage growth effectively, our business would be seriously harmed.

The Operating Performance of Our Systems and Servers is Critical to Our Business and Reputation

Any system failure, including network, software or hardware failure, that causes an interruption in our service or a decrease in responsiveness of Ask Jeeves could result in reduced user traffic on our Web sites and reduced revenues. We have network and server equipment located at MFN, Exodus, Qwest and Hosting.com in various locations in California and Massachusetts and in London, England. Although we believe that our current back-up methods are adequate, we cannot be assured that the back-up servers will not fail or cause an interruption in our service.

We have experienced slower response times and interruptions in service due to malfunction at our hosting facilities and on the Internet backbone networks, major software upgrades on our Web sites and undetected software defects. Our Web sites have had partial interruptions for periods ranging from a few minutes to three hours. In addition, our Web sites could also be affected by computer viruses, electronic break-ins or other similar disruptions. If we experience outages, frequent or persistent system failures or degraded response times, our reputation and brand could be permanently harmed. In addition, we could lose advertising revenues during these interruptions and user satisfaction could be negatively impacted if the service is slow or unavailable.

Our users and customers depend on Internet service providers, online service providers and other Web site operators for access to our Web sites. Each of these types of providers has experienced significant outages in the past and could experience outages, delays and other operating difficulties due to system failures unrelated to our systems.

The occurrence of an earthquake or other natural disaster or unanticipated problems at our principal facilities or at the servers that host or back-up our systems could cause interruptions or delays in our interactive network or a loss of data. Our systems are vulnerable to damage or interruption from fire, flood, power loss, telecommunications failure, break-ins, earthquake and similar events. We have not developed a comprehensive disaster recovery plan to respond to system failures. Our general liability insurance policies may not adequately compensate us for losses that may occur due to interruptions in our service.

Our Security Could Be Breached, Which Could Damage Our Reputation and Deter Customers From Using Our Services

We must protect our computer systems and network from physical break-ins, security breaches and other disruptive problems caused by the Internet or other users. Computer break-ins could jeopardize the security of information stored in and transmitted through our computer systems and network, which could adversely affect our ability to retain or attract customers, damage our reputation or subject us to litigation. We could be subject to denial of service, vandalism and other attacks on our systems by Internet hackers. Although we intend to continue to implement security technology and establish operational procedures to prevent break-ins, damage and failures, these security measures may fail. Our insurance coverage in certain circumstances may be insufficient to cover issues that may result from such events.

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More Individuals are Utilizing Non-PC Devices to Access the Internet and We May Not Be Successful in Developing a Version of Our Service that Will Gain Widespread Adoption by Users of Such Devices

In the coming years, the number of individuals who access the Internet through devices other than a personal computer such as personal digital assistants, cellular telephones and television and television set-top devices is expected to increase. Our services are designed for rich, graphical environments such as those available on personal and laptop computers. The lower resolution, functionality and memory associated with alternative devices may make the use of our services through such devices difficult and we may be unsuccessful in our efforts to modify our online properties to provide a compelling service for users of alternative devices.

As we have limited experience to date in operating versions of our service developed or optimized for users of alternative devices, it is difficult to predict the problems we may encounter in doing so and we may need to devote significant resources to the creation, support and maintenance of such versions. If we are unable to attract and retain a substantial number of alternative device users to our online services, we will fail to capture a sufficient share of an increasingly important portion of the market for online services. Further, as a significant p