Throughout the dot-boom Barry Diller stood aloof. He promised he would never overpay for "Internet real estate," that he would grow his business by finding bargains. (The picture is from this Wired article where he displays far more wisdom about Internet valuations than displayed today.)
For several years he stayed true to that. You can justify the prices paid for Home Shopping Network, Expedia.Com, Hotels.Com, and Ticketmaster based on revenues and earnings. They sold stuff -- toasters, travel packages, concert tickets -- and earned real money.
But $1.85 billion for an outfit with trailing year sales of $261 million? That's over 7 times sales, about 40 times earnings.
Sorry, Barry, you finally drank the Kool-Aid.
Yeah, yeah, yeah, I've read all Diller's excuses. Synergy. Scarce real estate. Finishes the platform. Yadda-yadda-yadda.
But you don't have to own a search engine in order to be an Internet winner. There's no scarcity of search engines, either. Google came from nothing, and if someone else has a better algorithm, or a better way of doing things, they can still come from nowhere. They can do it a lot faster than AskJeeves can come from fifth with aging, gimmickry technology.
After buying CitySearch, which had nothing going for it, I thought Diller had leraned his lesson. After that he bought companies that sold stuff -- real stuff -- and derived income from it -- real income. No more "Internet advertising" and "page view" crap.
Until now.
Barry, Barry, Barry....
To those of us who still believe in value-based Internet investing, this is the unkindest cut of all.
Dana Blankenhorn has been a business journalist for over 25 years and has covered the online world professionally since 1985. He founded the "Interactive Age Daily" for CMP Media, and has written for the Chicago Tribune, Advertising Age, and dozens of other publications over the years.
1. Lyle Clarke on March 22, 2005 07:01 AM writes...
Well I for one thing it is a great thing. Perhaps there is real hope for Bloglines now.
Ask bought Bloglines a couple of weeks ago. A huge chunk of my online experience, both on a mobile phone and my desktop, has revolved around Bloglines for 6 months or so. Bloglines is my start page and for me, has become the centre of the Internet more than Netscape, Yahoo, Hotmail, Slashdot or Google (oh how time flies) ever were.
Something similar was true when Ask Jeeves bought Teoma. Teoma was hugely promising back when Google was suffering under the combined weight of blogs and SEO tricks in the index. At that stage Teoma was delivering better results than Google, and the clusters idea was working great. I was using it all the time and loving it. Then Ask Jeeves then buys it, peels off the decent interface, plonks the database behind Ask, and then stops going after Google, which Teoma clearly was pre-purchase. Wouldn't it be a real shame if Bloglines suffered the same fade away fate? Yes. Is it likely? Both Ask and Bloglines say No, but look at the Ask stable, count the faded lights, and apply salt.
So Diller buying Ask is great thing. He doesn't want to let his money go to waste, even if it is sharemarket funny money, so hopefully he will make sure good innovative things happen that I'm absolutely sure the big Ask dinosaur simply isn't capable of, even if the small guys in the respective units are champing at the bit.
Lyle
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