IAC (IACI) chief Barry Diller presents to the Goldman Sachs Global Internet Conference in Las Vegas. We’ll be listening for colour on IAC’s post-breakup plans, his launch strategy for new sites, and plans to somehow make Ask.com relevant in search.
Call begins at 11 am…
Diller starts talking about iWon. Says it is a work in process. Site gets 7 million unique visitors a month. “It gives you a taste of what I think IAC is capable of doing–building an audience and sites for the future.”
Cues up promo video …
Can you talk about why it made sense to have the companies together five years ago but now they’re better off broken up?
Diller: Expedia was our first spin-off experiment. That worked extremely well. It was an overhang at IAC–all people wanted to do is talk about the travel business and nothing else. Expedia needed to be looked at purely. Once that happened, we thought that by using best practices we could range across disciplines–finance to dating, etc. We found the same thing was happening to us. We were an incredibly complicated company–hard to explain to outsiders and hard for insiders to relate.
“I thought that the time had come to less these disparate assets stand on their own and go through the same disciplined process of looking at nothing but their particular lines of business.”
We will probably be all done with this–out trading publicly (the spinoffs) in August.
Will the spinoffs, like HSN, expand globally?
Diller: IAC will have foreign revenues in the teens when it is spun out. When you’re on your own you have to expand the market definition of who you are. Yes, they will expand internationally.
How will you monetise iWon?
Diller: This is an embryonic kernel of what we think (the online gaming business) will do. Zwinky now has 14 million uniques. People are buying avatars and spending money on virtual stuff. This is a smash. This is a small group, and they have built business after business out of downloadable applications. Its growing way into double digits.
Can you talk about the investor proposition for the new IAC? What is the competitive advantage for display and search advertising?
Diller: These are highly interactive businesses but not very transactional. The concept is they are all very Internet-related. The growth of IAC earnings will be 50% in 2009. It is high growth. It is our workshop. We bought Gifts.com. We started Pronto four years ago, a $10-$12 million investment. Now it has 13% of comparative shopping market and is just now entering growth period. We acquired small (gaming) company in Oregon–pure Internet games with very high graphics. They had tools allowed you to do very high graphics. Invested $50 million in this. Instantaction.com has started off the blocks–it is pure online Web gaming experience. Rolling out these games once a month. The point of IAC is to take the established base we have with good revenue ($1.8 bil), good cash flow–but also an incubator for starting new things while taking the experience that we have. The concept of concentrating in one area, without a legacy of 30-year old businesses like HSN and Ticketmaster, now is the perfect time for this new IAC company with increased focus with all the experience necessary–is utterly unique.
Google is in one business and is trying to establish new things. All the other Internet players essentially have one line of business. We have 35.
How will you monetise online games?
Diller: subscriptions and some transactions. It is different from every other gaming site that is out there.
Will Microsoft’s search experiment limit the profitability of the business?
Diller: In the two years we have owned Ask we have realised it has a very safe, loyal audience that comes from its legacy of asking questions. It’s partly search, partly people who want to do research. That is its core. There is no question we have a better product. We know how tough it is to change people’s habits when your competitor becomes a verb and a noun and everything else.
We will give you much more value ad for answering questions. The other side is start developing vertical search–like Rushmore Drive. They have the audience they serve–African Americans–and what comes back is much more tailored to that community. This combination of content and search in queries that are questions is what Ask is doing.
Looking at HSN do you think this business will reaccellerate growth to be faster than retail sales growth?
(Peter Kafka taking over transcript duties):
Barry recounts HSN turnaround story he’s told before.
Lending Tree: We wouldn’t have bought if we could have forseen mortgage meltdown. But now Lending Tree a valuable online franchise, emerged intact, not damaged at all. Because Lending Tree’s loan portfolio less at risk than others, it fared better. Revenue certainly slashed, so had to cut staff, etc. But it’s now at break-even. Pretty good in this period. Still getting plenty of qualified forms (people inquiring about loans). Macro business not well, but: LT will get old CEO back, things looking better. And we all know that mortgages will come back – not in next few months, but in next single digit years. And when that happens Lending Tree will reap the rewards.
Will Barry talk about social network valuations? No, he won’t. But….
The analogy to social networks, is certainly closest to that of the telephone. The good thing about telephones (in the old days) was that they received a fee for use. Social networks are only getting money from ads, and ads on social networks are not effective. So you can’t say, ok, let’s find widgets and all sorts of things to put on these services… we have an investment in iLike. It’s a top 5 facebook widget. It’s great. It’s thriving. It has zero revenue. I’m not saying we won’t find ways, but we haven’t. So valuations on these type of entities are pure speculation.
What’s going on with Vimeo?
There are so many embryonic ventures. We bought College humour, and for almost nothing, launched Vimeo. Not as a YouTube competitor. It has, in its little way, taken off. I don’t know what we’re going to do with it, other than keep tending it, and letting it grow. It only generates advertising revenue, and it’s not big enough to get serious revenue, though there are other possibilities. It’s a work in progress.
What’s going with China? (Barry seems to know the audience member asking the Q). You’re not doing much there. When will you?
We started with Ticketmaster. We are embryonically starting a search business, but it will be very tough to carve anything out. Interval starting to get into timeshare/resort biz there. Bought a little personals business. “But it’s going to take, a long, long time. But, there it is.” One thing I think is true: Making big investments early in China is a fools game.
Can you talk about LiveNation Madonna, Jay-Z, etc deals?
We don’t think we’d be doing those deals. At the very early stage of Madonna deals, we and Warner Music looked at something. We offered something like 15% (or was that 50%) of what Live Nation offered. But that was all we were willing to pay.