Barry Diller to Time Warner: Name Your Price for AOL
Barry Diller is staking his future on the fast-growing, ever-changing online-advertising space.
His company, IAC, is spinning off four divisions into separate, publicly traded companies: Ticketmaster, Lending Tree, home-shopping business HSN and time-share travel business Interval International. What's left -- including Ask.com, Match.com, CitySearch and CollegeHumor, among many other businesses -- will be part of a company that will claim more than 50% of its revenue from web advertising -- a bold play, considering that, today, the media-and-advertising unit accounts for only 9% of IAC's total revenue.
Ad Age caught up with the media turned internet mogul last week to ask him why he's confident in advertising, what he thinks of Facebook's valuation and, oh, yes, whether he's hankering for AOL.
Advertising Age: What makes you confident about betting so heavily on the media-and-advertising sector?
Barry Diller: Who ever knows what will happen with the economy and will it affect the internet? There's so much pouring into the internet, I would doubt it, but I'm not the greatest predictor. But more than any media sector, I think the internet will hold up.
Ad Age: You are certainly a big online ad spender yourself -- IAC is one of the biggest.
Mr. Diller: We are very big spenders. We've got expertise in spending on the internet. I think we've got expertise in being the recipient of advertising on the internet. We're rather interestingly balanced.
Ad Age: You in the past have had a pretty good grasp on speculation. What do you think of the valuations being thrown around about a site like Facebook?
Mr. Diller: Those are not valuations based on anything fundamental; those are valuations based upon rather enormous hopes and dreams. Not that they won't necessarily come true, but at this point, that's what they are in terms of revenue and profits getting to the level that would sustain a very high asset value. ... The physics would demand that this becomes more rational at some point, I think maybe sooner rather than later. But again, that's a prediction based on nothing but hot air, to mix many different metaphors.
Ad Age: Rupert Murdoch yesterday during News Corp's earnings call called MySpace a place for self-expression and called Facebook "a web utility, similar to a phone book." Do you agree?
Mr. Diller: Mr. Murdoch is right on many things, but I don't think he's right on this. I think Facebook is far more than that. What it becomes is something I can't predict, but it's certainly far more than that right now. ... You don't get much pleasure from going to the phone book. And you get an awful lot of staying around on Facebook, because of the things you're looking at and the information you're changing, and all of that is compelling.
Ad Age: The new slimmer, trimmer IAC has a lot of cash. What might you do with it?
Mr. Diller: [Laughs] Well, we're comfortable keeping it. It doesn't cry for spending. But classically, at least for us, cash is to be used to invest in our businesses, to acquire businesses and when we're finished with those, then we repatriate it to our shareholders. That's the purpose of cash. We want to keep good cash balances because we want to be ready for any opportunity. We're essentially opportunistic.
Ad Age: Are there sizes of acquisitions you'd rule out?
Mr. Diller: Never. We'd never rule anything out. ... I don't want to set the world up for surprises. We've tended to surprise people every year with something. So I hope there'll be a few more, but hopefully not shock.
Ad Age: There's still talk that Jeffrey Bewkes could break up Time Warner. Would you ever be interested in AOL?
Mr. Diller: We've talked over the years about our interest in AOL and never been able to get Time Warner to engage with us. I've always said AOL is great opportunity for somebody. When and if Warner doesn't want it, I'll certainly be at the door.
Ad Age: You are excited about games. Talk to me about your interest there.
Mr. Diller: What we're doing is online games, meaning not console-based but online games with very good graphic quality -- not just simply casual games. That's an area nobody has played in yet, and we're going to play heavy in that.
And it's a content business ... Which we love. We've never lost our content heart.
Ad Age: Any other areas that IAC doesn't play in right now that you're excited about?
Mr. Diller: I can never really answer it. I don't want to talk about what we don't have because hopefully we'll have it. It's not constructive.
Ad Age: What's your message to advertisers about the new, focused IAC?
Mr. Diller: What I'd say to anybody, particularly advertisers, is we're -- and I don't think we ever were not -- but IAC is primarily going to be a media and advertising business. We've got real purpose about it. We've got strong revenue, strong earnings and good deal of cash, and we're serious. I hope people would want to encourage that or at least not discourage it.
Ad Age: I can't let you go without asking about Ask. Are you happy with how Ask.com is doing?
Mr. Diller: We feel great. We've been able to grow queries second only to Google. We've increased retention, frequency. All the metrics for Ask are very good. Now we have a new five-year arrangement with Google on the sponsored listings that's going to be very, very remunerative to us. Ask is going to be able to continue to innovate. To me, anyone who uses Ask -- well, I can't say anyone, but I think enough people have said other than us that we've got a very good search-differentiated product from Google, Yahoo or Microsoft, which has all sorts of value-added ways to search that people like.
I'm very, very happy that we now are certain of a very large amount of revenue coming in every year which will allow us to build the service, build the product. The only way anyone's going to succeed is to build the product. There's legacy here, meaning the legacy of Google and how hard it is for people to change habits, but one by one, eventually, they do. Since Ask is cooler than anybody else, it's starting to get viral growth, which is what you pray for.