Business

Barry Diller’s in a spin

Barry Diller has to “Ask,” What do I do next?

The mercurial owner of IAC/InterActiveCorp — whose extravagant spending is the stuff of legend — can’t seem to get a deal done.

The top man at search firm Ask.com was reimbursed more than $1.6 million for his travel last year — and that’s just his personal travel. While Diller is greasing up his bike for the media summit in Sun Valley in 10 days, the big question is, can he wheel and deal?

The IAC chief said recently he has entered into negotiations on 20 acquisitions, but they all fell apart over valuations. Analysts who cover the company say it’s more likely that Diller will continue buying back his stock.

In August 2008, Diller spun off a host of businesses, including home-loan agent Tree.com, which includes Lendingtree.com, and shopping service HSN, from the IAC mothership, much to the irritation of Liberty Media boss John Malone, who sued over a change in control of his portion of the IAC entity.

The results of that decision are, so far, mixed.

IAC stock has outperformed the market — up 26.4 percent from $16.63 on Aug. 22, 2008, when the spin-offs were completed, to $23. The Dow Jones industrial average is up only 7.3 percent over that span.

Among the companies that were spun off, Tree.com is down from $7.46 two years ago to $6.64. Shares in concert-ticket vendor Ticketmaster were then $23.09. Now the firm is part of Live Nation Entertainment, whose stock trades at $11.04. Interval Leisure was $15.88; it’s now at $13.56. Home-shopping channel HSN has been a big success story, moving up from $15.09 to $25.39.

Around Wall Street, it’s hard to find anyone who can figure out what the thrust of IAC’s business is, or how being part of a multifaceted conglomerate confers any real value.

Citigroup’s top tech analyst, Mark Mahaney, has a hold on the stock. “The fact it’s a conglomerate makes Wall Street less enthusiastic,” he said.

When asked to name Diller’s most successful IAC acquisitions, which still number some 50-odd digital brands, Mahaney responds: “It’s hard to come up with a list of excellent acquisitions he’s done. There are a few examples where history has shown there’s been significant overpayment.”

He offered Tree.com, formerly LendingTree, and Expedia as examples. “The attempt to build a conglom- erate hasn’t really panned out too well,” he said.

Mahaney, however, will give Diller, whose net worth was pegged at $1.2 billion by Forbes in May, props for trying.

“I think he’s been more willing to experiment with digital media than most media execs and he should get credit,” Mahaney adds.

If there are future deals to be done, then selling Ask.com seems the most likely, though its sale has been floated for years.

Allen & Co.’s Sun Valley retreat will certainly offer some opportunities to talk to the cream of the tech sector. Ask.com, which has an ad-supply deal with Google through 2012, provides more than half of IAC’s revenue ($199 million out of a total of $385 million in the first quarter of 2010.)

But its share of the search market has shrunk over the past few years. According to HitWise, Ask.com’s share of US searches in May 2010 was 2.14 percent. The previous year, it was 3.81 percent, and back in 2006 it was 4.40 percent. IAC bought the firm in 2005 for $1.85 billion.

Elsewhere, Diller is something of a patron of the arts, pouring money into Tina Brown’s growing news content venture, The Daily Beast, and Ben Silverman’s digital studio Electus.

Making money from online video or online magazines is no easy feat, even while interest in branded entertainment among marketers is growing.

But as one industry executive observed, “With Barry, the newest thing always overshadows the last thing he did.”

IAC’s first-quarter revenue improved from last year, rising 16 percent while net losses fell to $18.7 million, a 34 percent improvement. Net losses were $979 million in 2009, up from $156 million in 2008.

Helfstein says the stock is still trading at a discount because of concerns about what the company might do with the $1.4 billion sitting on the balance sheet.

“If they continue to do only modest acquisitions the discount will go away,” said Helfstein.

Deal Making

IAC chief Barry Diller may be ‘pedaling’ his Ask.com search site to the media confab in Sun Valley.

Possible targets:

* Zagats: the publisher of user-generated reviews.

* Yelp: the online local review Web site.

Possible sale:

* Ask.com: the search engine generates more than half of IAC’s annual revenue.