The internet investment firm headed by US media mogul Barry Diller is to buy web search engine Ask Jeeves for $1.85bn (£970m).
Ask Jeeves allows users to ask questions in natural language
Ask Jeeves is the fifth most-queried search engine in the US and has a market value of $1.43bn, one tenth the size of Mr Diller's IAC/InterActive.
Mr Diller said Ask Jeeves "has the potential to become one of the great brands on the internet".
The deal reflects rising competition between rival internet search engines.
"We are a small player in the land of the giants," said Adrian Cox, chief executive of Ask Jeeves' UK operations.
Mr Cox explained that the deal would provide Ask Jeeves with the financing and resources needed to continue its current "aggressive" growth rate.
He continued that the firm was confident of its ability to compete with rivals such as Google, Yahoo! and Microsoft's MSN Search.
"There is room for four major players," he told BBC News. "There is a certain level of loyalty, but most internet users don't use just one search engine, they use a couple."
"Search engines are the primary gateway to the internet today."
Lure of online adverts
Mr Diller's IAC owns online travel booking firm Expedia, CitySearch and internet dating site Match.com.
It is thought that Mr Diller is likely to link CitySearch, a search site for restaurants and other services in cities, with the Ask Jeeves search engine in order to boost internet advertising revenue.
Users of Ask Jeeves can ask questions using natural language, such as: "What is the capital of Brazil?"
Most of the advertising on its site is sold through an arrangement with rival Google.
Search websites account have gained 36% of the online advertising market in the US and are expected to grow by 24% a year over the next five years, according to Merrill Lynch Equity Research.
Competition in the search engine market has stepped up, and this year Google, Yahoo and Microsoft (which also has a search engine) have been rushing to add new services.
On Sunday, The Wall St Journal reported that Yahoo, a rival search engine to Ask Jeeves, is to buy Canada's Ludicorp Research & Development, which runs the internet photo sharing service Flickr.
Although no purchase price was disclosed, The Wall Street Journal reported it was likely to have cost less than $50m.
Meanwhile, internet service provider America Online has launched a test version of a new travel website, PinpointTravel, that enables users to compare different hotel and transport prices.