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Diller's Foxy Strategy

Google, shmoogle. Barry Diller thinks he can outsmart the Web’s superpowers. And he’s done it before.

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It’s 1997 all over again out on the West Coast—or at least it seemed that way to me the other day at the Argent Hotel in San Francisco. At the Web 2.0 Conference, the new “It” shindig for the new generation of wannabe golden geeks, all the signs were in evidence of a bubble in the making. There’s the army of khaki-clad venture capitalists, chasing after postpubescent entrepreneurs, begging to write them checks. There’s the cultlike fealty to Google, the new Netscape. There’s the frenzy around blogging as a business, which reached some kind of peak/nadir on the first day of the conference, when word rippled through the hall that Jason Calacanis (the self-styled Silicon Alley playa whose Web 1.0 flameout was a comforting sign that there was some justice in the world) had sold his company, Weblogs, Inc., to AOL for $25 million (a sign that the first sign was a misprint). There’s Rupert Murdoch (Rupert Murdoch!) taking the plunge into the Internet—into social networking, no less.

And then there’s Barry Diller—here to face the Web 2.0 audience fresh from his $1.85 billion acquisition of search engine Ask Jeeves.

Now, Diller, let’s be honest here, has never made an entirely convincing Internet mogul. The surface details are all wrong, obviously: the pin-striped suits, the celebrity posse, the air of absolute adulthood (the absence of Peter Panishness about Barry is glaring and total) and also latent menace. On a deeper level, there’s always been a sense that he wound up embracing the Internet as a fallback position. Even as he spent billions building his latest vehicle, IAC, into a sprawling e-commerce conglomerate—its holdings include Citysearch, Match.com, Evite, and Ticketmaster—the smart take was that he was biding his time, plotting his eventual, inevitable return to old media. The notion of Diller as an online shopkeeper simply didn’t compute.

Yet Diller has always been an object of acute fascination among the Silicon Valley crowd. Maybe it’s his fuck-you bluntness or capacity for reinvention. More likely, it’s the nagging sense that, if anyone was going to figure out this new-media thing, Barry would be the one.

All of which is why the Ask Jeeves deal has inspired great interest—and also much puzzlement. After all, Diller was coming awfully late to the search market and was facing entrenched opposition. Did he really believe, armed with an also-ran product whose best-known feature is a cartoon P. G. Wodehouse character, that he could take on Google? Did Diller see something (not for the first time) that eluded everyone else?

The answer is yes, although he didn’t get around to mentioning it onstage. What Diller sees is his younger self—the Diller who created the Fox network back in 1985.

Diller answers the door of his suite at the San Francisco Four Seasons wearing a mustard-colored linen shirt, no socks, and a look of abject despair. He’s having trouble accessing his e-mail account. Over the speakerphone, some IAC factotum is trying, haltingly, to get him connected. With every failed attempt, Diller’s frustration mounts—and so does the palpable terror in the disembodied voice. When the conversation finally concludes (with, shall we say, jarring abruptness), I imagine the factotum throwing up, then hitting the online classifieds.

Here we have Diller in one familiar guise: Scary Barry. But it’s Charming, Anti-Visionary Barry who flops down on the overstuffed sofa a few minutes later. I ask about the Fox parallel; initially, he pooh-poohs it. “Analogies are very dangerous,” he says, laying out the differences between television and the Internet. With broadcast TV, you had scarcity of spectrum; with the Internet, abundance. With TV, you have programming for a passive audience; with the Net, a “user experience” that’s active and variegated. “So I don’t think the Fox analogy holds,” he says. “Except, of course, in terms of competition.” As if competition hasn’t always been the ball game for Diller. And here the analogy isn’t just apt—it’s inescapable.

Consider: When Diller, with Murdoch’s what-the-hell backing, started the Fox network, he was up against a troika—ABC, NBC, and CBS—with virtually 100 percent of the prime-time audience. The Big Three had deep pools of talent, vast resources, and a hammerlock on national advertisers. To any sane observer, they looked granite-solid, impregnable.

Fast-forward to today and it’s déjà vu all over again. In the booming search business, you have another apparently indomitable Big Three in Google, Yahoo, and MSN. (AOL is No. 4, but everyone assumes, Dick Parsons’s protestations notwithstanding, it will soon become an appendage of either Google or Microsoft.) The new Big Three account for 83 percent of Web searches. Having developed a ludicrously profitable form of advertising, they are making money by the bucketload. They have deep pools of talent, vast resources, and, as they are quick to tell you, impossibly high IQs.


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