BUSINESS > Barry Diller's Investment Strategy

Tony Perkins recently interviewed Jim Lanzone, the CEO of Ask.com. The full interview will be published in the Winter Issue of the AO Magazine, later this month. They discussed Diller's IAC investment strategy, and how Ask.com fits in a search marketplace dominated by Google, Yahoo, and MSN.
AO: It’s interesting that Barry Diller has pursued a strategy of waiting often until companies reach a certain critical mass and then he goes in and buys them. Sitting in your seat, how do you view his method of operating when it comes to swooping up companies like Ask.com?
JL: Well, I think Ask is a little different than some of those past cases because the search industry is so different, where Ask can be the fourth or fifth ranked search engine but the sixth largest web property in the United States, ahead of Amazon and MySpace. So while we’re not Google, Microsoft or Yahoo in size, we’re bigger than nearly everybody else. And even just specifically within search, when it comes to query volume, we’re closer in order of magnitude of 6 percent share to Google at 42 or to Yahoo at 28 than anybody below us is to Ask. And we’re just at an interesting point in the marketplace.
And we’ve got the 6 percent really with very little investment. And what Barry saw and IC saw in us was the opportunity to put some gas in the tank with our vision for product development, a brand that had not been invested in in five years and obviously, the largest growing revenue source on the internet with circuit marketing and I think it rightfully so was looked at as a golden opportunity to invest in Ask.
AO: So, again, how are all these operations and strategies being kind of choreographed? Do you see it from the 30,000 foot level?
JL: Well, I see historically—it’s interesting the announcement that AOL just made that they’re going the opposite direction from forcing synergies to happen because that was always the IC premise, was bring these great businesses together and let them operate by natural law. And really, the operating committee of IC never forced the companies to try to work together in any way. Ask brings a different animal to the table where you had all these ecommerce companies and maybe they didn’t or were not able to lend each other as much help as a search engine could add as the traffic cop of the internet.
So when you look at Ask, the other IC companies are licking their chops because they would look at us as a strong central hub for the rest of the IC network over time, especially as you build share for Ask and we get larger. And on the other hand for Ask, we look at those other companies as great sources of data that will help us build differentiated products in the different areas of search that we address. So, Ask does represent a new opportunity for IC to go in the direction of synergy and any kind of help that we can all lend each other, and I think that’s a first for the company.
AO: Now, in terms of investments going forward, we’re seeing really Microsoft and Google in particular make crazy investments in infrastructure and IT. How do you guys view that whole trend?
JL: Well, definitely scaling a search engine from an infrastructure point of view is a huge task. We’re not as large as those players but we are large and it definitely requires huge investment in infrastructure. At the same time, a lot of the battle between Microsoft and Google and to some extent Yahoo is on a completely different front than what Ask is currently addressing. They’re building products at the operating system level, at the application level and we’ve just been laser focused on the search.
And it makes a lot of sense to me why they would do that because at their market share level if they add a point of share, that’ll help them make a quarter. Whereas, if you add a point of share to Ask, it’s 15, 16 percent growth, and that’s growth in revenue. So, for us, our growth opportunity is actually as a percentage of growth just huge compared to the rest of them.
And to execute that really requires us to do search better and build products that are addressing the user need today, not of five or ten years from now and addressing better search on our site, not building new browsers or new office applications to try to extend our search box in front of more and more users. We don’t have to do that in order to grow exponentially, we can just offer a better product. So that’s where we put our focus and some of our infrastructure requirements would be less than what those guys are going for.Tony Perkins recently interviewed Jim Lanzone, the CEO of Ask.com. The full interview, from which this post is excerpted, will be published in the Winter Issue of the AO Magazine, later this month.