IAC’s Day Of Reckoning Will Come

IAC/InterActiveCorp (NASDAQ:IACI), Barry Diller’s Internet empire, says on its website that “our mission is to harness the power of interactivity to make daily life easier and more productive for people all over the world.”  Shareholders would probably beg to differ with this statement.

Shares of the New York-based Internet conglomerate have slumped more than 45 percent over the past five years because investors have a difficult time understanding the company. During the same time, the Nasdaq Composite Index rose more than 14 percent.   Even with the recent run-up in its stock price, most analysts rate the shares a hold.  The reason is that IACI is among the most confusing companies in the Fortune 500.

For instance,  would the 19 million or so unique US monthly visitors to the dating site Match.com also invite their dates to a party using IACI’s Evite site, which attracts 14 million visitors?  Maybe.  Would they bond over an article they read on the company’s Daily Beast site?  Perhaps.  Odds are slim. though, that they would ever discuss the bargains they found on the company’s ecommerce site Shoebuy.com, which gets about 1.4 million visitors.

Therein lies the challenge facing Greg Blatt, who Diller recently named as his replacement as CEO.   He has to figure a way to make sense of the company that Diller cobbled together through countless acquisitions, some of which such as College Humor, were baffling.   Even Diller has admitted  that the conglomerate model didn’t always work.

Expedia Inc. (NASDAQ:EXPE) was spun off in 2005.  The travel site’s shares rose more than 17 percent at the same time IACI’s fell.  Two years later, it let go of HSN  Inc.  (NYSE:HSN), Ticketmaster, Interval and LendingTree.  Now, the company will probably have to unload or spin-off even more websites for its stock to continue growing. Shares are up more than 60 percent this year as Diller resolved his long-running ownership dispute with John Mallone and IACI saw a rebound in online advertising.

When Diller acquired Ask.com, formerly Ask Jeeves, in 2005 for about $1.85  billion, the company hoped to turn it into a genuine competitor to Google.   That obviously didn’t happen.  According to the latest data from comScore, Ask had 3.6 percent of the search market to Google’s 66.3 percent. In November, IAC waved the white flag and cut 130 engineers and shuttered work on proprietary search algorithms.   Ask.com is trying to develop its question and answer service though its hard to see the point.

IACI also has countless obscure sites CursorMania, which offers free funky cursors,;  Smiley Central, which offers users a  library of 12,000 smileys,;  and the recently launched Proust, a site that is a “place for families and close friends to share the stuff that really matters.”   There are derivations of the succesful Match.com dating site such as BBPeopleMeet.com (for admirers of big and beautiful singles) and the online dating site Singlesnet.com.

For now, IACI is succeeding in spite of itself.  That can’t last.

–Jonathan Berr