The Social

Citysearch is still ahead, butupstart rival Yelp is catching up. Good thing Citysearch has brought in some much-needed new social features.

(Credit: Compete.com)

Citysearch, the online business directory owned by Barry Diller's IAC/InterActiveCorp, has gotten a full makeover. It's available now at beta.citysearch.com--there's a more streamlined and Ajax-y interface, but a few important features have been tweaked as well. According to company representatives, this is about a year and a half in the making.

First of all, instead of focusing on a select number of metro areas, Citysearch has expanded to a whopping 75,000 towns and neighborhoods, meaning that you can narrow down your focus to New York's East Village or Los Angeles' Culver City. Additionally, there's Facebook Connect integration, meaning that you can see what your Facebook friends have recommended or reviewed on Citysearch. Also on the social side of things, reviewing businesses on Citysearch is easier and more up-front. Previously, there had been more attention on editorial reviews as opposed to user reviews.

And Facebook approves, apparently. "At Facebook, we've found that remarkable things happen when you get trust, user control and identity right--people share more information, and become more open and connected," Facebook communications czar Elliot Schrage said in a joint release. "Citysearch's innovative new site shows how Facebook Connect can help information flow faster through a site while creating a filter for users to engage with localized content through the lens of their friends, family and colleagues."

That's a big deal for Citysearch: fast-growing start-up Yelp has started to gain some market share in the "user-generated reviews" department. According to traffic firm Compete.com, Yelp is still smaller but catching up. (Citysearch, for that matter, syndicates some of its content to big portals like AOL.)

Finally, Citysearch has launched a mobile site compatible with a number of different browsers and handsets--yes, including Apple's iPhone.

InterActiveCorp mogul Barry Diller may be getting rid of brands like Ticketmaster, LendingTree, and HSN, but he still wants to sell ads on them.

The sprawling media company announced Monday that it will launch an ad network to handle inventory across all its brands, such as Evite and Citysearch, as well as the ones that Diller and his executive team are opting to spin off into separate publicly traded companies.

"Maybe we're not brothers and sisters, but we're cousins," IAC Advertising Solutions president Rich Stalzer told AdAge about the companies it will spin off. The AdAge article also reported that IAC currently serves only a small percentage of its own ad inventory, outsourcing the rest.

IAC's new ad strategy focuses on targeting consumers in nine "cubes": youth (18 to 34 years old), men, women, "affluents," parents, active shoppers, active travelers, homeowners, and sports fans. More cubes are on the way. But of particular priority to IAC is the "affluents" niche, which can draw in far higher click-through rates because of those consumers' likelihood to spend larger amounts of money.

For once, IAC's arguably scattershot and unfocused array of retail and media brands could be helping it move forward.

That's because there are many ways that IAC could identify Web users as "affluents" (or anything else, for that matter) through the sheer variety of properties the conglomerate owns, as well as the ones that it is spinning off.

"We're in a unique position in that we can corroborate multiple kinds of data," Stalzer explained in a release, "including declared information users offer about themselves; transactional, online purchasing activity; and inferred, such as what they do offline like attend concerts or go on dates, from the diverse portfolio of IAC sites to more precisely identify users as part of a particular audience segment."

Someone who makes pricey purchases at the company's Gifts.com, for example, or who repeatedly queries Citysearch for restaurants of the Jean-Georges and Nobu variety, could be classified under the high-income "cube."

And Diller, well known as a yacht aficionado, is even more deeply connected to the luxury-brand market than your average CEO: He's married to fashion legend Diane von Furstenberg.

A Los Angeles-based law firm with a history of targeting online media companies for click fraud filed suit Tuesday against Citysearch, the directory site owned by IAC/InterActiveCorp, as well as Ticketmaster, the ticketing site that IAC is attempting to spin out into a separate publicly traded company.

"Citysearch.com is defrauding its advertising customers of millions of dollars by not only turning a blind eye to click fraud, but in fact encouraging it as well," a statement from the firm Kabateck Brown Kellner read. The class action suit encompasses anyone in the U.S. who paid for pay-per-click advertising space on Citysearch, but the named plaintiff is Tom Lambotte, who purchased ad space on Citysearch and then claimed that the number of clicks on his ads rose suspiciously.

Representatives from IAC and Citysearch were not immediately available for comment.

According to the complaint, filed in a California court, Lambotte first purchased Citysearch ads in late 2007, didn't see a gain in traffic to his site, and attempted to cancel his ad account. The cancellation process dragged out, he said, and in the meantime his ad clicks started to escalate suspiciously. He speculated that click fraud--in which clicks to ads are meant only to drive up the rate the advertiser pays and not to purchase the product--was at play.

Claims in click fraud lawsuits are sometimes questionable, and Kabateck Brown Kellner has extensive experience in the field that could raise a red flag: the plaintiff-only firm has won against both Yahoo and Google, and attorney Brian Kabateck recently went after Google's AdWords advertising program, claiming that it deceived customers.

Consequently, a suit against yet another (smaller) player in the search market could come across as an attempt to just filch more cash from big dot-coms. Or, as the suit goes forward, Lambotte's claims, as represented by Kabateck, could show a legitimate foundation.

Search companies, meanwhile, announced a coalition against click fraud nearly two years ago in conjunction with the Interactive Advertising Bureau (IAB) and Media Rating Council.

(Credit: Ricky Van Veen, editor in chief, CollegeHumor)

With a $15 billion valuation, big-name investors, and high-profile Google employees jumping onto its payroll, Facebook can't play with the kids anymore.

That's probably why its New York branch's hyped-up beer pong tournament against dude entertainment site CollegeHumor was cancelled.

The match, scheduled for Thursday evening at CollegeHumor parent company Connected Ventures' offices near Manhattan's Union Square, was abruptly called off, according to a blog post from Josh Mohrer, director of retail at Connected Ventures brand BustedTees. "Facebook has backed out of the CH vs. Facebook beer pong tournament for 'legal and PR' reasons," Mohrer wrote. "Lame!"

For those who stepped in late, beer pong, known as "beirut" in some circles, is a popular slacker sport that involves throwing ping-pong balls at a triangle of cups half-full of beer. If you land the ball in a cup, your opponent must drink the beer in that cup. That's the basic rundown; rules and regulations differ wildly across the fabric of American college campuses.

A tipster told gossip blog Valleywag that Facebook's legal and public-relations team, which just hired former Googler Elliot Schrage as its director, took issue with the tournament.

A CollegeHumor representative told CNET News.com that the company was not familiar with Facebook's "internal stuff" and that an impending match between CollegeHumor and local blog powerhouse Gawker Media was still on the books.

Facebook declined to comment on the matter.

To be fair, Connected Ventures isn't exactly a freewheeling start-up: CollegeHumor has been around since the late '90s, its founders are closer to 30 than 20, and Connected Ventures (which also encompasses BustedTees and video-sharing platform Vimeo) was acquired by Barry Diller's InterActiveCorp nearly two years ago.

Regardless, CollegeHumor remains an entertainment brand. Facebook gets talked about in the same sentences as Google and Microsoft--it might've gotten its start as a dorm room project at Harvard, but Mark Zuckerberg & Co. is playing in the Silicon Valley big leagues now.

At the same time, Facebook still has to prove that it can live up to the hype. Google and Amazon.com executives can get away with showing up at the Nevada counterculture fest Burning Man, but Facebook still has a "college kid" reputation to outgrow.

In other words, beer pong probably doesn't help.

Just how much does Ask.com own the word "Ask?" Enough to have a problem with a question-and-answer site called "Askpedia," apparently. Representatives from the start-up Askpedia.com told CNET News.com that the search engine's parent company, InterActiveCorp, sent a cease-and-desist letter earlier this month, citing intellectual property violations in the name "Askpedia."

"(This) is likely to cause consumer confusion, particularly inasmuch as Askpedia purports to provide online informational services that are substantially similar to those provided by Ask," the letter dated March 13 reads. "In using and incorporating Ask's intellectual property in this manner, Askpedia is falsely suggesting a connection between Ask and Askpedia, and thereby misappropriating the substantial good will associated with Ask's trademarks."

IAC representatives were contacted to verify the contents of the cease-and-desist letter, but were not immediately available for comment.

Ask.com's trademark on the name was first filed April 28, 1999, when the company was still known as Ask Jeeves and had not yet been acquired by the Barry Diller-helmed IAC in 2005. These days, the search engine has been undergoing a restructuring process in order to handle its tepid market share.

The letter, signed by Edward T. Ferguson, IAC senior vice president and general counsel, and provided to CNET News.com by Askpedia representatives, goes on to request that Askpedia "cease and desist from all use of Ask's trademarks and other intellectual property, including without limitation in the name 'Askpedia' or any similar formation using the word 'ask,'" and agree not to do so in the future.

A deadline of 10 days was provided, meaning that IAC would presumably seek legal action after Sunday, March 23.

Yong Su Kim, CEO of Askpedia, which describes itself as "a knowledge marketplace for questions and answers" and awards cash prizes to the best answers, said that his small start-up has about 100,000 registered users. He sent an e-mail to CNET News.com in which he speculated that "our guess is that their lawyers have nothing better to do."

Kim continued, "Either that or they're working on a Wikipedia-like service and want the domain name and trademark."

It's no secret that InterActiveCorp is facing a corporate hurricane. But CEO Barry Diller's plan to split the company in five parts might not calm the waters.

In the fall, the sprawling new media conglomerate announced a plan to spin off many of its brands into a total of five publicly traded companies, focusing its core business on ad-supported media, in order to revive investor confidence. It needs that revival: on Wednesday morning, the company posted its 2007 fourth-quarter earnings, reporting a net loss of $369.9 million as revenues rose eight percent to $1.86 billion.

InterActiveCorp CEO Barry Diller

IAC has acknowledged that it has spread itself too thin, and splitting up is its only way out. But the company is basing its corporate outlook on a restructuring that hasn't happened yet; it could get messy, and it won't solve every problem.

Right off the bat, even the proposed split itself faces a court challenge. One of IAC's biggest shareholders, Liberty Media's John Malone, has made it clear that he's willing to do anything to prevent that split, including oust Diller from the board. The cable mogul claims that a slimmed-down IAC will hit Liberty Media where it hurts, knocking down its voting power within the company.

Malone's lawsuit is expected to go to court on March 10.

"It doesn't make a lot of sense to me why they're protesting," Piper Jaffray analyst Aaron Kessler said of Liberty Media. The judge in the Delaware chancery court where the suit was filed might not agree, though: "I think it's always hard to say how the courts are going to roll," Kessler added. Either way, executive-level instability can make any company's outlook about as clear as mud, and could offset some of that coveted shareholder confidence.

Not only that, it could mean that IAC's five-way split is dragged out or delayed, or that it doesn't unfold as expected. Diller said in Wednesday's investor call that he anticipates Malone's lawsuit will be resolved in a matter of weeks. "Our planning is continuing just as it was," he said, but then admitted that the process could stall. "Realistically, this could push us back. It could push us back quite some time." Diller added that he hoped it would not delay the split by more than a month, but he could not be sure.

The way IAC's executives see it, the core of the company--ad-supported, Web-based media brands--will remain as the "new IAC." Events retail site Ticketmaster will become its own company along with other IAC-owned ticketing sites like TicketsNow and TicketWeb. Travel and timeshare brands will spin off under the Interval International title, and the LendingTree loan marketplace, hit hard by the subprime mortgage crisis, will also split from IAC.

Diller and other IAC executives have high hopes for new, ad-focused vision of the company. "Last week, we had an all-day planning meeting for the state of the new IAC. It was nothing but exciting," Diller said in the investor call, citing that queries at Ask.com are up (even though market share isn't), and dating site Match.com has seen notable subscriber growth. "IAC is going to be a very compelling high-growth company for investors."

By keeping the new-media sites under IAC's umbrella, Diller and the rest of the company will indeed be retaining the brands that have fared the best out of the pre-split IAC. Ad-supported media brands like Ask, Evite, and Citysearch, which will make up the bulk of the "new IAC" after much of the rest of the company has been spun off, posted decent revenues that climbed 42 percent from the previous year's fourth quarter. That's promising.

And when IAC spins off its non-media brands, the company will shed some weight that's been dragging it down. It was a poor quarter for the company's retail catalog division, and LendingTree's revenues shrank 58 percent. Even Ticketmaster, which hit a record sales volume worldwide in the fourth quarter of 2007, is about to run into tough times as it faces the loss of its biggest client, concert promoter Live Nation, in 2009. This is the sort of impending problem that IAC isn't going to want going ahead.

Piper Jaffray's Kessler said that there's no reason to believe that the split won't go through. "I think, at the end of the day, they will find a buyer or spin off each of the companies," he said, and added that it shouldn't leave any scars on IAC. "Once they're spun off, there's not going to be an impact of one business on another."

But with the current economic conditions, as well as market-shaking tech industry moves like Microsoft's proposed acquisition of Yahoo, nothing is really certain. But this "new IAC" doesn't exist yet, and for all we know, it won't turn out exactly as planned. If even one of the proposed spinoffs doesn't work, it would result in bad PR, diminished shareholder value--and IAC would still be stuck with a company it didn't want.

Even if the split goes through smoothly, IAC's shakeup might still be far from over. The company plans to keep its "emerging media" brands like Vimeo and GarageGames, but these aren't exactly moneymakers.

"Those are all fairly small still right now, only about $30 million of revenue in 2007 with a net loss of about $12 million," Kessler said. IAC executives said in Wednesday's earnings call that the losses on its emerging media division may be double that in 2008. "(IAC) may decide to take a write-off, or separate some of these emerging businesses as well, or sell them off potentially," he added. If they're not contributing much to IAC's revenue, the company might decide it doesn't need them. Kessler estimated, "They'll be about two percent of revenue even after the split."

And that's the final word: revenue. The new IAC, whatever it turns out to be, will be reliant on ad dollars, and Diller is convinced that this is where the real money is on the Internet. Online ad spending, particularly in "conversational" niches like videos and and social-networking sites, is projected to keep growing, and IAC plans to create a strong ad network to become a major player in new-media marketing.

Given the current economic landscape, this is not a guarantee; research firm eMarketer has said that while online ad spending is still growing, that growth is going to slow down. "There's always a risk you'll see a slowdown," analyst Aaron Kessler said, but added that he thinks online advertising won't be hurt by a recession as much as traditional media. "We think advertisers are more likely to cut their offline advertising before they cut online right now." In other words, IAC might face continued tough times, but it'll be in the right place overall.

And Diller is pushing forward, as he should: the split, however messy, is IAC's best chance at revival. Its former buy-it-all strategy might have led to a sprawling company without clear focus, but in Wednesday's call he asserted that IAC's acquisition habits brought the conglomerate "tremendous value." He's also convinced that Liberty Media won't prevail in its lawsuit. "I shouldn't even comment on it," he said in Wednesday's call. "It's ridiculous."

In what may shape up to be one of New York media's most colorful feuds of 2008, IAC/InterActiveCorp Chief Executive Barry Diller and one of its most high-profile stockholders, Liberty Media head John Malone, are at each other's throats Mean Girls-style. And they've brought both their legal and PR teams along for backup.

A vicious press release from IAC on Tuesday morning said that Liberty "has gone off the deep end" in its attempt to control the company's board and oust Diller from his role, and that Malone's cable giant "will stop at nothing to advance their own interests at the expense of the other stockholders."

On Monday, Malone had served Diller with the latest in a series of lawsuits in a Delaware court, seeking to oust a total of seven people from IAC's board--including Diller himself--in the wake of the sprawling company's decision to split into five separate publicly traded entities. The cluttered nature of IAC was hurting shareholder confidence, Diller had argued when he made the original announcement in November. The company plans to keep ad-supported media brands like Evite, CollegeHumor, Excite, and Citysearch under IAC's scope while spinning off commerce brands like Ticketmaster and retail brands like HSN.

The spinoffs, Malone argues, will be a massive blow to Liberty Media. The cable conglomerate owns about a third of IAC's equity, but due to its ownership of all IAC Class B common stock, it has significantly broader voting power within the company. The five-way IAC split would knock that down significantly.

Diller said in a statement to The Wall Street Journal earlier this week, "I am beginning to think these people are insane."

IAC's blunt press release on Tuesday echoed that. "The contention that Liberty is now in control of the Company is inexplicable. Nothing has happened yet," the statement read. "No Board has decided anything. No shareholders have voted (or been asked to vote) on anything. No agreements have been signed. The requisite filings have not been made with the SEC. No transactions have been consummated. Even after reading the various complaints repeatedly, Liberty's theory that it now controls IAC is incomprehensible."

The statement from IAC described Liberty Media's actions in the whole legal feud, which has no end in sight, as "a desperate sideshow."

Meow.

Several sources close to InterActiveCorp (IAC) have told CNET News.com that, contrary to rumors, the media conglomerate is not purchasing youth-oriented social-networking site MyYearbook. The rumor was originally reported by Valleywag on Wednesday.

The misconception arose, one source said, because MyYearbook was one of multiple start-ups that were invited to do "mock pitches" to IAC chairman and CEO Barry Diller as part of a session at this week's exclusive Quadrangle conference (hosted by the eponymous private equity firm) at the Pierre Hotel in Manhattan. Essentially, it was like moot court for entrepreneurs.

MyYearbook was founded by a pair of teenage siblings from New Jersey while on their spring break in 2005, and has since raised $4.1 million in venture capital from U.S. Venture Partners and First Round Capital. Representatives from the social network did not respond to a request for comment.

An additional source within an IAC-owned brand, when asked about the possible acquisition, was unfamiliar with any such deal. And indeed, the timing would be rather awkward--in an attempt to refocus its sprawling array of media, e-commerce, and retail brands, IAC announced on Monday that it would be splitting into five separate publicly traded companies. The core IAC company will now consist primarily of advertising-supported online media brands.

This post was updated at 9:18 a.m. PST.

InterActiveCorp CEO Barry Diller was remarkably candid in his acknowledgment Monday that his media conglomerate will be splitting up into five publicly traded companies because it's simply spread itself too thin.

"We've been a complex enterprise almost from the very beginning 12 years ago, with hundreds of transactions over those years," Diller said in the company's announcement. "And while we've created a lot of value; I've always believed (that) our complexity and many mouthfuls of sentences to explain who we are and what our strategy is have hampered clarity and understanding with all our constituencies, particularly investors."

The new plan was given the go-ahead by IAC's board of directors on Friday and is expected to be complete in the second or third quarter of 2008; final details have not yet been approved. The transaction--which is expected to be tax-free--will allow IAC's shareholders to retain all of the equity in the five companies.

With brands ranging from dot-coms to mail-order catalogs, InterActiveCorp has grown into a large and amorphous mass that Diller said was difficult to explain and allegedly hurt the company's valuation. "Hot air--or any air--won't do it in terms of what IAC is," Diller said during a call on Monday with press, investors, and analysts. "It's confusing to every constituency."

"In a way, IAC is starting again," he asserted. "At least, it feels that way to me, so it's very invigorating."

Barry Diller

One of the five companies will remain under the name IAC and will include many of the company's popular online media brands, including Ask.com, Bloglines, BustedTees, Citysearch, CollegeHumor, Evite, Excite, Gifts.com, iWon, Match.com, Vimeo, and Zwinky. In addition, this new pared-down IAC will include the company's current investments in brands like Active.com, Brightcove, and OpenTable.

The "new IAC," as Diller underscored during the investor call, will be all-Internet. "We now can stand on our own with an IAC that's a perfectly integrated Internet conglomerate across business lines, across business sectors, that's primarily in advertising and in media."

Diller also announced that Google will be providing sponsored listings on its online brands--including its search engine, Ask. "Just hours ago, we concluded an arrangement with Google to be our sponsored listings provider for the next five years," he explained, "and the value off that transaction to us will be in excess of three and a half billion dollars."

But not all of IAC's dot-coms will remain--namely, retail brands have been dropped. Ticketmaster.com, under the new plan, will spin off into its own publicly traded company, along with other IAC-owned global ticket brands like Admission.com, Echomusic, and TicketWeb, as well as the company's investments in Frontline and social music service iLike. "Ticketmaster is entering the most dynamic era in its history," Diller said in the statement, "and its ability to participate fully (with its own currency) in shaping the live entertainment industry is critical." Sean Moriarty, currently president and CEO of Ticketmaster, will retain that role in the new company.

"That business is evolving," Diller said on the investor call, referring to shakeups in the music industry that have gone far beyond piracy and record label controversies. "I think Ticketmaster has to evolve with it."

HSN will also spin off along with a number of IAC's retail brands and catalogs, like HSN TV, Frontgate, Garnet Hill, and TravelSmith. Additionally, several of IAC's vacationing brands will join the title Interval International, and the company's LendingTree brand will also become a publicly traded company.

LendingTree has been a particular burden on IAC in the wake of the subprime mortgage crisis. "That is going to be hurt for a period of time, but by the way, that will be over. There will clearly be a lot of blood on the floor," Diller acknowledged in the press call, "but at some point it's going to be over, and when it's over, LendingTree is going to grow to be in great shape."

In IAC's official press release on Monday morning, quotations from Diller projected a clean split. "Each of these spun-off businesses is in fact a distinct business sector, and each will benefit from standing on its own, with its own capital structure, its own currency which will enhance its ability to attract and retain superior talent and make acquisitions, and a focused story investors can clearly understand and buy into," he said.

But when asked on the press call, Diller spoke only vaguely with regard to how business relationships between the newly separate companies would unfold. "The truth is, the companies go their own ways," he said.

This is not the first time that IAC has shrunk itself; in 2005, the company ditched its Expedia travel brand. "If you total all of the assets that include Expedia and IAC, it's an enterprise of about $19.5 billion," Diller said in the press call. "We thought Expedia was certainly large enough to stand on its own, and we thought that it would be enhanced as a standalone company, and that has certainly proven true."

Now that IAC's consumer-focused Web companies have matured, Diller said, IAC has been able to shake off some of the older brands that are no longer needed to bolster the development of their younger brethren. "We've been characterized as having old assets, and new assets meeting old assets meeting old hard assets in the retail business or transaction business," he explained, "and our strategy was really to use those businesses and their cash flow to start and to acquire all sorts of online businesses, which is of course where we have wanted to go since the very first time we talked about interactivity in 1992."

With new developments in Internet advertising on the forefront of Silicon Valley chatter these days, IAC's ad-focused restructuring is a sign that Diller and his company don't want to be left behind. "There's no question that Internet advertising is effective in every way. Not only is it effective, (but) against scattershot, wide advertising, it's absolutely trackable," he said on the call.

"I couldn't imagine a sector that has more wind at its back than online advertising of every kind."