The deal would put Diller's company into the highly competitive and rapidly growing business of Internet search, which is dominated by big players like Google Inc. (GOOG), Yahoo Inc. (YHOO) and Microsoft Corp.'s (MSFT) MSN service.
IAC/InteractiveCorp holds a collection of electronic shopping and travel businesses, including the travel site Expedia, the Home Shopping Network and the online dating service Match.com.
Unlike search engines that look up keywords and phrases, Ask Jeeves is designed to find answers to questions written in natural language. Diller said in a statement that Ask Jeeves caught on because "consumers want answers to questions."
"We believe that in the future (Ask Jeeves) has the potential to become one of the great brands on the Internet and beyond, and by beyond we mean in wireless, in the search for anything on any device," Diller said.
The proposed deal would be the largest in a months-long run of Web-site purchases by larger, often traditional media concerns. Survivors of the dot.com bust — like Ask Jeeves, based in Oakland, Calif. — are commanding strong premiums.
In recent months The New York Times Co. (NYT) bought About.com; Dow Jones & Co. (DJ), publisher of The Wall Street Journal, bought MarketWatch Inc., and The Washington Post Co. bought the online magazine Slate from Microsoft.
Ask Jeeves would continue to operate as a stand-alone business after the acquisition, and Steve Berkowitz will continue as its CEO.
Ask Jeeves shares are nowhere near the Internet-bubble highs of more than $180 and are trading 45 percent below their 52-week high reached last April. In pre-market trading Monday, its shares rose $3.81 or 15.7 percent to $28.05. IAC/InteractiveCorp's shares were off 89 cents or 4 percent at $21.40. Both companies trade on the Nasdaq Stock Market.
On Monday, IAC also launched Gifts.com, an online gift shopping resource that allows consumers to purchase gifts tailored to their interests, hobbies and personalities.