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Web 3.0 & IAC (Part 5)

Posted on Friday, Sep 21st 2007

Conclusion

IAC has leadership positions in the Personals, and Local / Ticketing verticals. Through Expedia, it also has a great position in Travel. However, there are concerns with HSN Network, Lending Tree and Real Estate segments, though they are strong brands with competitive positioning.

IAC holds more than 60 online properties and someone could easily mistake it for a VC with a well-diversified portfolio of Internet properties. When some of these properties start “exiting” the portfolio, they seem to be able to get much better visibility and valuation. We have already seen how Expedia has performed over the past one year after being spun off from IAC. The question is, should IAC club together more of its synergistic properties and take them public separately, while maintaining a holding company status? As it stands, IAC seems to be losing focus as well as operational efficiency, and in trying to do so many things at once, it is not doing any of them very well.

The profitability of the company is remarkably low, and that is reflected in its relatively low market cap of $8 Billion, against a 2006 revenue of $6.2 Billion.

HSN, Lending Tree and the Real Estate division are expected to see tough times in the short term due to tough market conditions. Ticketmaster, ServiceMagic, Interval, and Match.com are forecasted to do much better in the coming quarters.

However, a host of properties like Domania, Alsto, TravelSmith, Gifts, Home Focus Catalog, GetSmart, etc. are yet to establish themselves as strong brands. Most of these sites are haphazard and do not execute/monetize according to the Web 3.0 framework.

IAC should also better organize its portfolio of online properties into verticals. There are too many properties under one vertical leading to confusion in the consumers’ mind and cannibalization in the businesses. Overlapping properties without a definitive roadmap to growth and high profitability need to go.

There is discussion of an agreement between Diller and John Malone under which Malone’s Liberty Media will own the HSN domestic and IAC will operate as a pure Internet company, which would focus both. Accordingly to Malone, it is simply a matter of valuation.
In reality, it is simply a matter of time before the negotiations converge to bring QVC and HSN together, leaving IAC unencumbered and free to pursue its Internet interests. The HSN deal will give the IAC stock some lift, but may not be enough to drag it up fully. It is now languishing not too far from its 52-week low.

With Google setting the standards for Internet-style profitability, IAC must focus on a dramatically different approach to monetization. It has to get its act together and start tapping the advertising revenue potential in each of its top verticals. Similarly, it should also consider whether it makes sense to spin out its Local efforts (CitySearch, TicketMaster, Match.com) as a separate company.

Also, ASK’s journey as a horizontal search engine directly competing with Google, Yahoo, Microsoft and AOL has been a tough one, with market share steadily declining. The business, however, has costed a lot in marketing campaigns that have had questionable impact (touting algorithmic superiority, when the mainstream market probably doesn’t know what the word algorithm means).

May be, ASK needs to stop being a generic search engine, and focus entirely on being a Local Search Engine, which together with the strong brands like Ticketmaster, Match.com, and CitySearch, stands a chance at being competitive. In fact, we talked about PlaceSmart search earlier, and IAC should look into enhancing ASK with a PlaceID.

[Part 1]
[Part 2]
[Part 3]
[Part 4]

This segment is part 5 in the series : Web 3.0 & IAC
1 2 3 4 5

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I would love to see IAC go after the video game market. They could establish themselves independent of any one particular publisher, but benefit from working with all of them. This is an area they must explore.

Darren Herman Saturday, September 22, 2007 at 9:12 PM PT

Thanks for a great analysis. Only 2 small pts I would add: no mention of Insider Pages and how that fits into the portfolio, and no mention of reddit being acquired by conde nast (no longer on the market I’d imagine).

jason Sunday, September 23, 2007 at 5:32 PM PT

You are right, Jason. Reddit is no longer in the market, and hence out of bounds.

Insider Pages, on the other hand, fits perfectly with the “Local Search” organizing principle.

Thanks for bringing these two important points up.

Sramana

Sramana Mitra Monday, September 24, 2007 at 12:20 AM PT