The Social

NEW YORK--Barry Diller doesn't want to predict the future.

"I'm not a great predictor of these things," the IAC/InterActiveCorp CEO said onstage at his Wednesday keynote for the Advertising 2.0 conference, when interviewer and BusinessWeek reporter Jon Fine asked him when he thought the depressing economic news would finally end. (His personal belief is that it won't get much worse.) "Not that, by the way, anybody's predictions are worth very much to anybody." And he was particularly wary of commenting on the macro economy. "Oh, you certainly don't want to hear from me on that," Diller said. "You've heard from every baboon in the world on the macro economy."

IAC's Barry Diller

Advertising 2.0 was co-hosted by IAC and held in the digital conglomerate's airy, glass-walled headquarters along the West Side Highway in Manhattan's Chelsea neighborhood. The building, designed by architect Frank Gehry, opened in 2007. Less than a year later, Diller announced plans to split the sprawling IAC into five separate publicly traded businesses. The slimmed-down company now focuses primarily on online media brands like Citysearch, Match.com, Evite, and Ask.

"What we thought was that agglomeration, putting disparate assets together was fine in the great building stage...where we started about 12 years ago," Diller said. "We built up a fairly large number of disparate businesses. All of them had some form of interactivity, but they were all from selling mortgages to dating...It wasn't giving investors or commentators or anyone else a clear picture of what the company was."

Then there was a battle for board control with shareholder John Malone of Liberty Media. The two now have a "good relationship," Diller said.

While much of the "new IAC" relies on advertising revenue, Diller declared at the conference that strictly relying on advertising as a business model is not sustainable. "I absolutely believe that the Internet is passing from its free phase into a paid system," he predicted (though, keep in mind, Diller did say he doesn't like to predict). "Inevitably, I promise you, it will be paid. Not every single thing, but everything of any value. Again, take commodity away from it."

The wealth of free content on the Internet was a matter of short-sightedness, Diller explained. In his opinion, it came out of the fear of piracy.

"People were so frightened of not being dinosaurs, and baring their heads, and not having what happened to the music industry happen to them, they just slapped everything up on the Internet for free," he said. "That's an accidental historical moment that will absolutely be corrected."

Diller doesn't believe that the poor economy will make it more difficult to get people to pay for things online. One of his subscription-based businesses, dating site Match.com, is doing very well right now: "It would not shock any of you that I think that of the things that, actually, people will do when enduring a storm, financial disaster, or otherwise, is want to hook up in one way or another with other people," Diller said.

Why is he such a believer in the triumph of paid content? Look at the iPhone, Diller told the audience, and the wild success of its App Store.

"The iPhone is a great example of what's going to happen," he pointed out. ""One of the greatest barriers to buying things is the steps that it takes, and we all know the difference when you go to Amazon and you just push your little thing and it's bought, paid for, delivered, billed, et cetera., instantly, and how much that has enabled or how much that has made the difference between just browsing and buying...that little thing, that in fact you scroll it, you do it, it comes, everything else is taken care of, is the answer to what's going to happen on the Internet when, in fact, we get the applicability of that broadly."

He acknowledged that media outlets' readership rates may drop, but that their profits will stabilize once again.

Another thing that Diller was willing to predict? His own demise. Sort of. Interestingly enough, he said he's of the belief that a modern media company is unlikely to outlast its original founder successfully.

"News Corp. makes sense because News Corp. is the absolute extension, to the fingertips, of one person," he said, referring of course to Rupert Murdoch. "I think (in) every case other than that, is that once that original founder has gone, for whatever reason, then the truth is it should all be taken apart because they make no sense. You can't replace with a suit somebody who's built the thing up and understands all of its bits and pieces in the rhythm of their heartbeat."

Interviewer Jon Fine wanted to know if that would be IAC's fate, too.

"I think that's true," Diller said.

A post on the Facebook developer blog announces the big application program interface (API) update from the social network that was first reported on Sunday night, which it's calling the Open Stream API.

It's the first major implementation of an emerging (read: brand new) open standard called Activity Streams, on which Facebook has been collaborating with developers for the past few months. Basically, what it means is that third-party developers will have access to a feed of all content posted to news feeds--notes, photos, videos, links, "likes" and comments, and activity from other applications built on the social network's platform.

"We've officially moved away from the Web of just blog posts, which a lot of these formats were originally designed for," said open-source developer and advocate Chris Messina, who has been spearheading the development of Activity Streams for about a year now.

"Over time, what I think will happen is (that) you'll see something toward the type of cleverness and ingenuity that has surfaced around the Twitter community, but in a way that is even more expressive and rich," Messina said. "In the case of Twitter, you're just talking about status updates; in the case of Facebook you're talking about a lot of different activities."

Previously, only status updates--the most Twitter-like part of Facebook--were accessible to developers. That's why this announcement likely makes the biggest difference to the creators of social feed aggregation applications like TweetDeck and Seesmic Desktop.

But because Activity Streams is an open standard, other social-networking and media-sharing applications will be able to use it too. This means that there could be, say, an Adobe Air-based desktop application that brings in updates across photo-sharing applications like Facebook, Flickr, and Photobucket.

Facebook is also targeting different types of developers--specifically mobile and desktop--rather than strictly the Web app developers whose creations made Facebook's platform such a wild success when it debuted two years ago.

"One of the most important stories to tell here is this is the first time that we've ever opened the core Facebook product experience, which was previously called the 'feed' and which we're now calling the 'stream,'" Facebook senior platform manager Dave Morin explained to CNET News. "We're especially excited to see the types of desktop applications and the types of mobile applications which developer are going to build for the stream. We've sort of never really allowed this before, so we're pretty excited to see what developers come up with."

Facebook will be holding an event on Monday afternoon in Palo Alto, Calif., to introduce developers to the new API. Presenting at the event will be representatives from Adobe, which is building a Facebook application in its Air runtime environment, and Microsoft, which is doing the same in Silverlight; contact management system Plaxo and third-party app Seesmic Desktop (which already has unveiled its support for the Open Stream) are also presenting.

The "stream" took front-and-center with Facebook's controversial redesign earlier this year. Inspired by the likes of Twitter, the revamped design marked a shift in strategy for Facebook from static profiles to a real-time flow of information. At the same time, it proved unpopular among some users.

But Facebook isn't the only big social-networking player to be implementing Activity Streams. The emerging standard was behind the upgrades to MySpace's MySpaceID product that the News Corp.-owned service launched in March at the South by Southwest Interactive Festival.

"It was sort of one of the earlier opportunities we had to take a nascent spec and see it all the way through to launch," MySpaceID product lead Max Engel told CNET News, adding that his team first started working on Activity Streams last September. It's what powers a new MySpace "gadget" for Google as well as its feeds' presence on the upcoming Yahoo homepage redesign.

"It's getting where we need it to be, which is like e-mail: where you can write a POP client and know (that) it works," Engel said. "It's not even a full standard yet, so it's sort of exciting to see so many people get behind something so quickly, and it's definitely indicative of the general momentum of people who are saying we'd rather work open than work closed."

This post was expanded at 11:23 a.m. PT.

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.

(Credit: Howcast Media)

Facebook, Google, and the Google-owned YouTube are among the sponsors for the Alliance of Youth Movements Summit, an event taking place at New York's Columbia Law School from December 3-5.

Along with other collaborators--which include the U.S. Department of State, MTV, Access 360 Media, and start-up Howcast--the event hopes to "find (the) best ways to use digital media to promote freedom and justice, and counter violence, extremism, and oppression."

The companies have amassed 17 leaders of different activist groups and hope to bring them together to come up with a common set of principles and strategies, inspired by a movement against a Colombian extremist group that was formed and organized on Facebook.

"Aided by social-networking technologies, the organization inspired 12 million people in 190 cities around the world to take to the streets in protest against the FARC, an extremist group that has been terrorizing Colombia for more than 40 years," an announcement of the summit read. "The magnitude of the marches illustrated once and for all that the FARC lacked a strong support base. Within days of the protests, the FARC witnessed massive desertions from their ranks."

Speakers at next month's summit include Facebook co-founder Dustin Moskowitz, actress and talk show host Whoopi Goldberg, and State Department Undersecretary James K. Glassman.

The State Department has already partnered with YouTube for its "Democracy Challenge," a moviemaking competition in conjunction with several film schools. And in the wake of the 2008 presidential election, Facebook has been stepping up its activism and outreach efforts; earlier this fall, it sponsored the ServiceNation summit.

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."