if barry diller keeps talking, this deal could die. talk away barry!
SMARTMONEY ONLINE: Diller Says Net's New Math Won't Work
By Joshua Albertson
Smartmoney Online
NEW YORK (Dow Jones)--In the end, Barry Diller thinks the "old arithmetic" of retailing will catch up with the "new math" of Internet commerce.
"It's really good to sell goods for more than you pay for them," he deadpanned Tuesday morning during the keynote at Jupiter Communications" Online Forum. "I really recommend it.'
Diller has had plenty of practice following that advice, building hugely profitable sales channels out of cubic zirconium, first at QVC, then at the Home Shopping Network (HSN). Now, the CEO of USA Networks (USAI) plans to take his direct-selling success to the Internet.
Amid a flurry of deals and dollars, Diller has built a burgeoning Web empire. He owns a majority stake in TicketMaster Online-CitySearch (TMCS), one of last year's white-hot Internet IPOs, and if all goes according to plan, soon his USA Networks will own more than 60% of portal site Lycos (LCOS), too.
Diller thinks he can do well by avoiding the Internet's new math, with its heavy reliance on advertising; high-sales, low-profit business models; and speed at the expense of thoughtful process. "Someday, real businesses with real metrics are going to be built [online]," he said.
"I want to survive by building businesses that make and sell things at a profit." Diller said he invested in CitySearch for its ability to target local customers on the Web; he bought Ticketmaster for its online and offline distribution savvy; and he plans to acquire Lycos for the eyeballs it can deliver. The distribution channel that will make everything work, replete with names, credit card numbers and addresses, is already in place at HSN.
The entertainment arms necessary to "tell everyone about it" are on Diller's television networks.
Now, the only challenge to making his Web fusion work, beyond ultimately executing the strategy, is convincing Lycos investors that he knows what he's doing. Many Lycos shareholders were and still are peeved that Diller was getting a majority stake in Lycos for not much more than the stock's open-market price. And many doubted that Diller could make the corporate fusion work. "After all," he said, "who really needed me to muck everything up?" But when the dust clears and "natural law" settles the anarchy of the new Internet economy, the media and retailing mogul is confident that he is building value. After all, he's simply marrying Lycos, the Web's fourth-most trafficked portal, with "a company formed to monetize idle eyeballs." New math, meet old arithmetic.
It's not a very romantic vision of the Web, that of a giant Home Shopping Network, but it might work.
On the heels of Diller's keynote address, traditional-media executives pondered the fate of their threatened publications and productions. And just as Diller preached process over speed, representatives from Forbes, Nickelodeon, Newsweek, U.S. News & World Report, Penguin Books and Brill's Content, said that there was no reason to scrap old media for new.
"If the printing press was developed last week, we'd be having a conference about that," said Steve Brill, editor in chief of Brill's Content, who argued that the magazine remains the "best product in business." Like others on the panel, Brill stressed the importance of brand in developing any online venture. He also extolled the "virtue of self-cannibalization before someone else does it," arguing that traditional players could not afford to let others dictate changes in the way their information is distributed.
Meanwhile, none of the magazine publishers present seemed concerned that they would lose their place as information suppliers. Some even argued that the Web would strengthen them. "I think that paper will just have to find its true comparative advantage," said Steven Karlgaard, publisher of Forbes.
Richard Smith, chairman and editor in chief of Newsweek, declared that giving away content at no cost was 'ridiculous." He also said that no one wanted to read 3,000 word analytical pieces online. 'Nuff said.
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