Key acquisitions put Diller among Internet survivors
Deals for Expedia, LendingTree hint at broad strategy
boston.com
By Leslie Walker, Washington Post, 6/8/2003
Barry Diller may prove Woody Allen was right when he said 90 percent of success is showing up.
The onetime Hollywood mogul first got into electronic commerce more than a decade ago, never left, and may end up being one of its biggest successes. It was 1993, soon after he entered the television home-shopping business, that he started extolling the convenience of ''buying underwear in your underwear.''
When the real electronic commerce wave arrived on personal computers instead of television, Diller regrouped and started buying Internet ventures. Yet except for his failed $18 billion bid to buy the Lycos Web portal in 1999, Diller has remained largely known as an entertainment and media executive, and his online escapades have attracted little attention.
Until now. The Internet industry is finally taking notice of Diller's online empire since his conglomerate, USA Interactive, announced a recent string of takeovers that are transforming it into one of the Internet's superpowers. Diller's moves are part of a consolidation wave gaining speed in the high-tech sector, where start-ups are still struggling to overcome depressed stock prices and an oversupply of goods and services.
''We want to be the largest and most profitable e-commerce company utilizing multiple brands,'' Diller, chief executive of USAI, declared in an interview this week. (Diller is a director of The Washington Post Co.)
Diller's recent acquisitions appear to reflect a shift toward more direct forms of commerce online, where new commercial matchmakers that could bypass traditional forms of advertising are catching on.
First, a look at Diller's march across the Web: Since early last year, USA Interactive has said it will acquire LendingTree Inc., which pairs home buyers with lenders and real estate agents online; travel agent Expedia Inc., which lets consumers make travel reservations online; British UDate.com, an online personals site; the outstanding shares of Hotels.com, an online provider of discount lodging bookings; and the remaining shares of Ticketmaster, the electronic ticketing agency in which USAI first took a 50 percent stake back in 1997.
Also in the past year, Diller's company snapped up a string of offline travel-related companies, including the Entertainment discount-coupon book, the vacation exchange network Interval International, and Britain's TV Travel Group. USAI already owned various ''back office'' services, thanks to acquisitions made a few years ago.
In 1999 it bought one of the world's biggest customer call center operations, Precision Response Corp., which also conducts e-mail marketing campaigns and database services. And USAI still owns the Home Shopping Network.
As a result of its takeovers, USA Interactive appears poised to take in more than $6 billion in revenue this year -- more than Amazon.com, eBay, Yahoo or any other Internet firm except America Online. Diller said that his Internet binge is not over. He intends to buy more Net gems and hinted that LendingTree points in the direction he is headed. (Think financial services.) Some analysts worry that the LendingTree deal, a stock swap valued at roughly $700 million, may be inflated because the home refinancing wave caused a temporary spurt in its business. But Diller discounts such talk. ''We couldn't care less what happens in the very, very, very near term,'' he told analysts when he announced the deal last month. ''What we care about is that we've bought the right business in the right category.''
Still, his company seems to garner more dollars than respect, perhaps because it resembles a giant Internet puzzle with the pieces not yet snapped into place. That may explain why Diller said this week he is flirting with changing the name of his company again.
USAI has gone by at least five names in the past, none too memorable. The latest moniker makeover came last year when it sold off its cable TV channels and replaced ''Networks'' in ''USA Networks'' with ''Interactive'' to focus more on electronic commerce.
Diller said the company's current mission is to act as a ''middleman'' between supply and demand in interactive commerce, making it more like eBay than retailer Amazon.com. Like eBay, USAI's companies typically take commissions for matching buyers and sellers. They hold little or no inventory, which lowers their costs and potentially boosts profit margins.Time will tell how much advantage can be gained from lumping together different Internet entities or ''multiple brands'' online. But for starters, there should be savings from no longer having to run five separate public accounting operations for LendingTree, Expedia, Hotels.com, Ticketmaster, and USA Interactive, all of which have been trading under separate stock symbols.After buying a controlling stake in Expedia from Microsoft Corp. last summer, USAI declared its intention to buy the outstanding shares of its key subsidiaries. Expedia and Hotels.com resisted briefly but yielded this spring.Diller said he has no plans to create an overarching Internet network with a ''single sign-on'' for users of USAI sites, such as AOL attempted with its Web properties and Time Warner did with its original magazine sites at the ill-fated Pathfinder.com.''We do not believe in unnatural synergies, and we don't have one totalitarian brand,'' Diller said. ''We only want to make relationships where natural law dictates they make sense.''
Whatever Diller winds up calling his many-headed Internet beast, it's a good bet it will grow up to be one of the surviving giants of the dot-com jungle.
This story ran on page C5 of the Boston Globe on 6/8/2003.
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