Diller’s Foxy Strategy

Photo: Illustration by David Wong

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.

So now comes Diller and buys Ask Jeeves (market share: 6 percent), and the reaction is a perfect echo of what was said two decades ago. Which naturally pleases him immensely. For all his mogulosity, Diller cherishes his image (in his own mind’s eye) as the scrappy underdog. “I have lived my life in situations where I’ve come from nonexistent or last and been able to find my way,” he says. Diller points out that IAC has as much financial muscle as anyone in the game (including $3 billion in cash). As for Google’s monopoly on high-end talent, his sarcasm is withering: “Is it really true that all the smart people are going to work there? That I can’t find anyone with a serviceable brain?”

Diller, not uniquely, has a bit of a Google fixation. “What comes to mind when you think of Google?” my friend John Battelle, Web 2.0’s impresario, asked him at the conference. “You mean the evil I would do to them?” Diller replied. (When Battelle then said, “I don’t mean it personally,” Diller muttered icily, “Everything is personal.”) To me, Diller goes so far as to claim that Ask is the superior search engine—and, hey, maybe it is for some people, but that’s really not the point.

The point, as Diller understands, is that he can’t make headway by trying to out-Google Google—he needs to counterprogram. This was Diller’s genius at the Fox network, remember. With The Simpsons, In Living Color, etc., he fashioned an alternative flavor of programming, and with it a distinctive brand. In the realm of search, however, the notion of programming falls outside the idiom. So what Diller says he’s seeking, in the lingo, is “differentiation.”

Within IAC, an argument rages as to what that might mean. Given Diller’s other Web properties, the duh move would be to think in terms of e-commerce—of using Ask as a way of ushering users from Match.com to Citysearch to Ticketmaster and back. Diller clearly finds this idea intriguing; he has taken to quoting Battelle to the effect that Ask could be the mortar between the bricks at IAC. But Diller, being Diller, is also thinking of something flashier.

Diller believes search is destined to be the de facto passageway to everything behind the screen. Today that means the computer screen, but not for long. Granted, the merger of TV and the Internet is a hoary theory. But increasingly, as both media become fully digital and driven by advertising, the commingling looks inevitable. As more and more video content is available on the Net, viewers will want to discover and display it on the tube. Diller tells me that video search is a big part of Ask’s future. As Battelle, author of a new book on search, has written, “The first search engine to get on Comcast’s interactive guide will have a huge leadership position … and with Diller, who can certainly navigate the cable world better than most, Ask has a shot at being that brand.”

On the Web, “the role of editorship is going to grow,” says Diller. “And editorship is what I’ve always been good at.”

The business implications here are hardly trivial. But Diller’s vision of where Ask and IAC are headed extends in an even more mediacentric direction. “I absolutely see my company getting involved in making product, in the vernacular,” he said at the conference. “Producing, financing, and distributing digital product in half-hour, hour, two-hour movie and television form.”

Diller isn’t alone in postulating this melding of old media and new. Up in his suite, I ask what he thinks of Murdoch’s $580 million purchase of the company behind the social-networking portal MySpace.com. “Any media imperialist trying to impose on another media is pursuing a lunatic strategy,” he says. “But Murdoch, because he’s such a player, in the best sense of player, and because he runs an utterly totalitarian enterprise, he may pull it off.”

So what exactly does this new thing look like, this marriage of search and video? Diller puts his feet on the coffee table and gropes for an answer. “I don’t know yet,” he says. “It’s all just speculation. I smell that we’re at a juncture point now. As tons of things, more than we can grasp, are available to us, the role of editorship is going to grow. And editorship is what I’ve always been fairly good at.”

From the moment Google began its rise, there has been a fault line dividing the players in search. On one side are Google and Microsoft, whose strategies revolve around technology. On the other side have been Yahoo and its ex-Hollywood CEO, Terry Semel, who see search as a media play. (For evidence, check the hiring of Lloyd Braun, former head of ABC Entertainment, and of an actual foreign correspondent.) That Diller would wind up on the same side as Semel is not surprising. But it provides vivid clarity about the nature of the next monster battle in the communications business.

About Diller it provides another kind of clarity, too. All along, as he’s assembled IAC, the question has been, “What will Barry do next?” To which I’ve always been prone to answer, He’s already doing it. With IAC, he has added billions to his net worth by venturing far afield from his media roots. But now he looks to be trying, after all, to find his way back home.

E-mail: jheilemann@gmail.com.

Diller’s Foxy Strategy