IAC Thoughts

“We believe that in the future it 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.”

That’s Barry Diller on his company’s pending acquisition of Ask. Now, this bears some thinking. I wish I had an open morning to make some calls, but I’m at PC Forum, which is nearly as good as there are no shortage of opinions on this deal here. Also, last night I had dinner with a director at Ask at another event.

The long and short of it is this: This is a media play, pure and simple. Here is the third paragraph of the IAC press release, in it’s entirety.

The online advertising and search markets are growing rapidly; of the $260 billion in total U.S. advertising spend in 2004, less than $10 billion, or 4%, is online, with an expected annual growth rate of 13%. Search is now 36% of U.S. online advertising and expected to grow 24% per year over the next five years (Source: Merrill Lynch Equity Research.)

In other words, this makes sense for a company looking to consolidate and leverage its media assets – and IAC is exactly that kind of company.

All is not necessarily done in this deal, however. This marks the rise of a fourth network – after Google, Yahoo, and MSN – or maybe a fifth, if you include AOL. And that means that now that Diller has declared himself a player, others may see it in their interest to make their own play. It’s entirely possible AOL or even MSN might make a higher bid for Ask. Now that Diller’s in the game, it just might change the calculus of the others who are playing. Remember Lycos?

But enough about deals. What about the playing field post closing? To my mind, this deal augurs my long held position that search and television are going to merge. In short, the first engine to get on Comcast’s interactive guide will have a huge leadership position in terms of the video advertising revolution I wrote of here, and with Diller, who can certainly navigate the cable world better than most, Ask has a shot at being that brand.

For hints of this prior, and some of Diller’s thinking in this area, read my interview with him in B 2.0 here (sub reqr’d). He does get pretty specific on search. Selected quotes:

So you are not interested in tying your properties together?



No, no. Yahoo might say, Let’s go into the travel business. Why not, you know? But it is the difference between a general practitioner and a specialist. The specialization of Expedia’s travel product is very hard to do. Brands that resonate with people have power. I would rather compete using a brand like Match or Expedia that does a service really well instead of using a portal.

You don’t see IAC ever getting into the portal business?



If you define “portal” as a search engine, then I wouldn’t rule it out — though I also wouldn’t want to give anyone the idea that we were planning on plunging in.

You’ve spent something like $300 million trying to crack the local market. Was that a mistake?



I am very committed to Citysearch. I was recently asked at an investor conference, “When will you shut that thing down?” I said, “It’s probably going to break even in the second quarter. I think that would be ill-advised.”

Your name still comes up when there’s an opening in Hollywood, though you’ve made it clear you’re not interested. But is there some point at which the line between the Web and traditional media gets too blurry to make out?



Yes. There’s no question but that the Internet is going to change the way entertainment products are distributed. The first popular piece of this is the digital video recorder. That’s a profound change. It proves that the 500-channel universe was interim technology.

For now, there are still vast differences: Old media tends to be closed; the Web is open. Will the closed model stand?



The gatekeeper model? No, it can’t. How can you trust a gatekeeper when you know the purpose of a gate is to open and close? There will be other wires into the home besides cable. It’s inevitable. Telephone companies are stringing fiber to the door, and who knows what with wireless? That has to take away the historical highways with tollbooths.