SAN FRANCISCO -- Barry Diller, IAC chairman and chief executive, predicts Microsoft Bing is going to be very competitive.

I asked Diller after his Q&A session Wednesday at the Goldman Sachs technology conference hs thoughts on Bing, the search engine Microsoft launched last year. IAC runs Ask.com, a competing search engine.

"They surprised a lot of people positively. They've done really good things," Diller said. "I think they are going to be very competitive. They haven't been frivolous up until now, but now they have so much potency of purpose."

In his keynote session, Diller had definite opinions on how to build search traffic with his experience on Ask.com.

Ask.com did a marketing campaign to increase search traffic "which we found to be just wasteful." Microsoft is spending an estimated $100 million to market Bing and build brand awareness. "You cannot take Google head on and think you're going to take on share," Diller said.

He does not believe Bing's Cashback promotion is going to build long-term traffic. "The idea of paying someone to do something they will do on a very occasional basis," Diller said. "Then they will revert back to what they were doing. I don't think you can buy them."

What does work, Diller said, is distribution deals. "You can gain share in search when you have distribution relationships, which MSN, Microsoft, has been very aggressive in doing." Microsoft and Yahoo's search partnership just secured regulatory approval in the U.S. and Europe last week.

Diller is differentiating Ask.com as a question-search product, which he believes is going to succeed in the mobile market. Ask.com indexes natural-language questions, rather than search terms. So rather than type in "hotel whistler," as a user would in Bing or Google, an Ask.com user types in "where can I stay in Whistler?" to get results.

"We think there is a way to compete with this question-and-answer product," he said. "Q&A product is a perfect mobile product."