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Barry Diller Is Out at IAC, Long Live Barry Diller

IAC went through the biggest changes in the company’s history yesterday. What’s next for the diverse web giant?

Barry Diller

Barry Diller may have stepped down as CEO of IAC and relinquished his day-to-day duties, but he plans to increase his ownership stake to 40% of the company originally spun off of his Home Shopping Network. The share-grab, coupled with Diller’s hands-on involvement with IAC from the get-go suggests he’ll continue to handle IAC like a puppetmaster.

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Diller stepped down as CEO of
IAC/InterActiveCorp yesterday. The news was coupled with the (equally
important) disclosure that John Malone’s Liberty Media will be
switching out their equity stake in IAC in exchange for evite.com,
gifts.com and $220 million in cash. Diller and Malone have a cantankerous history.

Incoming CEO Greg Blatt, former CEO of Match.com, will have his work cut out for him as he attempts to take the helm. IAC’s subcomponents may be
growing, but they’re growing slowly at best–and are well in the process of
being overtaken by competitors. Match.com, it should be noted, is an IAC property.

Here is Diller’s official statement:

“It’s been clear to me for some time
that this Company needs a full time aggressive and aspirational
executive in the CEO role. While I’m not going anywhere, IAC, with
its operating businesses growing, large cash resources and virtually
no debt, needs the kind of leadership that Greg Blatt can bring it in
order to continue to grow and thrive many years into the future […]
I have the right, and the intention to purchase additional
shares over the next nine months that will increase my voting share to
over 40%. I want this to be a long term holding for me and my family
and I want this well capitalized and growing Company to be of
enduring ambition and naming a new CEO is critical to that goal.”

With all of that baggage packed, let’s look at the mission ahead for Blatt.

First, there’s the Newsweek issue. The
Daily Beast, an IAC property, recently and famously merged
with Newsweek
. IAC owns 50% of the new Newsweek Daily
Beast Company; the other 50% is in the hands of 92-year-old philanthropist and audio industry vet Sidney Harman, who purchased Newsweek from The Washington Post Company for $1. The
Daily Beast’s Tina Brown is regarded as one of the most talented, if not free-spending, editors in the
business.

Newsweek
faces a rocky road to profitability. Like many of the venerable American
newsweeklies, the publication took far too long to adapt to the
newfound ascendancy of computers and mobile devices over print.
The
rumored discontent between web staff at
Newsweek
and the Daily Beast will be one additional headache.

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Newsweek
may have even helped contribute to Diller’s headaches: Harman did far
better financially
off the merger than IAC.

Match.com is also a bright spot for
IAC. Despite competition from both paid sites such as eHarmony and
free sites like OkCupid, Match.com remains a top performer in a
crowded field.

Then there is IAC’s success in niche
fields. Two of subsidiary Connected Ventures’ properties, BustedTees
and CollegeHumor, have become top performing properties in the 18-30
demographic. CollegeHumor is a top performing website with lucrative
advertiser tie-ins, a dedicated user base, and frequent appearances by
celebrities in videos. Video site Vimeo is another bright spot for
IAC; the site’s careful curation and self-conscious cultivation of
artists and musicians has turned them into an internet favorite.

But Blatt may also encounter IAC’s record of creating websites that
quickly acquire large market share and then stagnate before turning
into financial messes. (Daily Beast is reportedly bleeding $500,000 a week.)

IAC acquired Ask Jeeves in 2005 but
found themselves unable to generate considerable market share for the
search engine. Since the 2005 purchase, Ask Jeeves went through two
different reincarnations to become today’s ask.com.

Citysearch was a pioneering urban
living website that quickly became one of the most popular in the
United States. But Citysearch was slow to introduce new functionality
and to expand the depth and reach of their listings. National
competitors such as Yelp, MenuPages, DailyCandy, and Thrillist, along
with resurgent local competitors such as the reincarnated Village
Voice
decimated Citysearch’s
market share.

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Bloglines,
once the de-facto king of RSS readers, was similarly slow to
introduce new functionality. While Google, with their endless funds
and brainy engineers, retooled their Google Reader to overtake
Bloglines, the company seemed to avoid even trying to improve their
product. Bloglines similarly was crippled by IAC’s seeming inability
to adapt to RSS feeds becoming partially superseded by Twitter and
Facebook. Bloglines
was just purchased by MerchantCircle
.

Other
IAC properties such as Excite and iWon are old-school web survivors
with unclear future strategies. Diller’s ouster at IAC and Malone’s
cashout will significantly impact the company. While Diller is no
longer CEO, he still has significant pull. Large-scale
changes are inevitable for IAC in 2011–the question is: what will
they be?

Follow Neal Ungerleider on
Twitter
.

[Image via Flickr user
david_shankbone]

 

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