Diller Fashions IAC Ad Network

Bands Together Targeted Audience Segments in Bid to Lift $216 Million Ad Revenue

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NEW YORK (AdAge.com) -- A high percentage of ad revenue from Barry Diller's IAC comes from a small percentage of inventory, leaving the bulk of it to be outsourced to aggregator ad networks. IAC could earn $1 or $1.50 per thousand on that outsourced inventory, but what the company really wants is to charge advertisers such as Lexus $6 or $7 CPMs to reach the deep-pocketed users who rely on its 63 companies such as Ticketmaster, HSN and time-share travel business Interval International.
IAC Chairman and CEO Barry Diller
IAC Chairman and CEO Barry Diller Credit: Nancy Kaszerman

So while it's keeping on with its plans to divide those myriad companies into five separate publicly traded business units, IAC is pooling them with an ad-sales and targeting system -- think of it as an internal, IAC-focused ad network -- that will marry data from across all its assets to sell audience segments such as wealthy consumers, travelers and sports fans. IAC is calling those groups "audience cubes."

Examples of ways in which IAC defines affluent users include those who researched expensive restaurants on Citysearch, declared incomes of $100,000-plus on Match.com, bought tickets to the symphony via Ticketmaster, browsed $700,000 homes on RealEstate.com or searched for luxury products on Gifts.com. Another cube IAC is developing is influencers: people who frequently host Evite parties or review businesses on Citysearch.

"Maybe we're not brothers and sisters, but we're cousins," said IAC Advertising Solutions President Rich Stalzer, of Ticketmaster, LendingTree and HSN, which will be separate companies but will contribute data and, in many cases, ad inventory to the IAC platform.

Large pool
The move is part of a major ad overhaul at IAC that will be central to the flagship brand's business. Last summer saw IAC consolidate its properties, which were using four different ad-serving technologies, onto one central system, Microsoft's Atlas. That allows it to pool its inventory and, perhaps more important, its very rich data.

The new IAC had revenue of $392 million in first quarter, up 22% from the year-earlier period. Of that, more than half, or $216 million, was media and advertising revenue, with a big chunk coming from Ask's search-ad deal with Google.

The ad platform IAC is building mirrors others being launched around the web, including by Microsoft. In fact, many industry pundits have suggested IAC would be an attractive acquisition target for Microsoft after its failed Yahoo bid. IAC would help the software giant build scale, add to its search share through Ask and collect very valuable, data-rich sites. IAC had no comment on that topic.

Quantity vs. quality
"IAC has a collection of sites where they'll get far more detailed or accurate data than many of the other big websites," said Augustine Fou, senior VP-digital strategy at MRM Worldwide, New York. He said that's especially important as advertisers move from believing sheer number of impressions is king to a model much more focused on who has better data and customers. Until now, Mr. Fou said, IAC has been a very quiet presence in online ad sales. Mr. Stalzer said pooling the inventory from its vast sites makes IAC a top-10 internet player.

"We can now go to Dell or Ford or GM and say we reach 57 million uniques," he said.

"The fact they're linking everything together, technology, on the advertising and sales side, will make advertisers' lives easier and make campaigns perform better," said Emily Riley, senior advertising analyst at Jupiter Research. She said the technology itself isn't difficult, but the challenge in implementing a central platform can be in the competing sales factions. When merging different product offerings, it can be difficult to figure out internally who wins.

IAC is mindful of that and won't sell certain verticals for fear it will cannibalize existing revenue from individual properties. For example, "singles" will not be an audience cube since it would endanger Match.com's biggest audience target.
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