The Social

The Onion's Baratunde Thurston gives his impression of Tony Hsieh's keynote.

(Credit: Twitter)

AUSTIN, Texas--In the dot-com world, Tony Hsieh's story is pretty much canon.

We know he got his entrepreneurial start running a pizza delivery business in college, and eventually went on to co-found LinkExchange and sell it to Microsoft for $265 million.

Then, after founding a venture firm that invested in shoe retail start-up Zappos.com, he took over the helm of the company and has been there ever since. Now nearly 10 years old, Zappos has become renowned among the digerati for its heavy investment in top-notch customer service, quirky company culture, and use of Twitter to promote corporate transparency.

"We put our 1-800 number at the top of every Web page, and we encourage our customers to call us even if it's not to make a sale," the soft-spoken Hsieh said Saturday in his keynote address here at the South by Southwest Interactive Festival. "The telephone is one of the best branding devices out there. You have the customer's undivided attention for 5 to 10 minutes."

With thousands of people filling up the Austin Convention Center's biggest ballroom and several surrounding simulcast rooms, Hsieh had a chance to really shake up the conversation in the digital-media set. Unfortunately, he didn't do it.

CEO Tony Hsieh--in a photo not from SXSW.

(Credit: Zappos.com)

He explained some of the company's idiosyncrasies: the fact that it will pay new hires $2,000 to leave the company just to make sure they're completely on board with their new jobs, the fact that customer service representatives are instructed to direct customers to better deals at competing retailers if they exist, the "Culture Book" that contains unedited contributions from every Zappos employee. Many of those in the audience probably knew most of this already. Hsieh, after all, has become a conference-circuit regular.

"The thing that ties all of these things together is really that Zappos is about delivering happiness, whether it's to customers or to employees or even to our vendors or other customers that we work with," Hsieh said.

He went through Zappos' 10 "core values," which include "build a positive team and family spirit," "do more with less," and "create fun and a little weirdness." He talked about "frameworks of happiness" and recommended some books like Timothy Ferriss' "The Four Hour Work Week" and Chip Conley's "Peak." It was a talk that would have been perfectly attuned to an audience of old-school marketers that needed to hear something totally new.

"A company's culture and a company's brand are just two sides of the same coin," Hsieh insisted. OK. But that's nothing that anyone who's been involved in the business of the Web hasn't heard before, many times. This is the sort of thing that unfortunately became a hallmark of the dot-com bust when companies invested too heavily in foosball tables and not enough in revenue models. Then, of course, there's Google and all things "Googly."

What Hsieh could have addressed was the fact that while so many of the nodding heads in the audience claim they fully grasp the admirable values that power Zappos, in reality there's a whole lot of hypocrisy out there--not to mention uncertainty. He talked about both the importance of personal branding and his distaste for egomania, two things that some people in the audience might find mutually exclusive. He mentioned "doing more with less" as a core value of Zappos, but not once even made reference to the dire financial climate. How, for example, do we have to try differently to focus on happiness these days?

Hsieh has the enormous respect of an industry. But if he's going to live up to the visionary hype, he's going to have to do more than just talk about what his company's done right and recommending a few business books.

Longtime tech mainstay IBM has announced the creation of a Cambridge, Mass.-based research center for the development of "social software," from consumer Web apps to enterprise communication tools. At its launch, researchers from Dow Jones and Thomson Reuters' health care division have agreed to be "corporate residents" in the facility.

The IBM Center for Social Software, according to a release, will take on the lofty task of "creat(ing) a new type of collaborative environment to tackle some of the toughest questions about social software, identify new business models, help discover next-generation Web 2.0 applications, and determine how and why people form viral communities and the implications they have on our daily lives."

IBM plans to collaborate with government agencies, businesses, universities, and other research institutions, and the venture capital community on future Center for Social Software projects. Partners can send employees to the facility to work with IBM's researchers on anything from internal networks at businesses to social search and discovery or cloud computing.

"Center for Social Software is a channel for the social computing community and our customers to collaborate on the most innovative social technologies being developed today," IBM fellow and Irene Greif, who will serve as the facility's director, said in a release Wednesday. "We view the center as a magnet for the top social computing scientists around the world to visit, share work and innovate."

There's no reason to panic at Google over the rumor that the perks-happy tech giant would be cutting back on free food for employees, we hear.

A source close to the company told CNET News that the rumors are really just spin over a small management decision. Google isn't depriving employees of dinner, the source explained. The issue was that several smaller eating establishments at the company's Silicon Valley campus had been seeing low attendance at dinner, and so their evening food service will be consolidated into a smaller number of cafeterias. The source said that steps are going to be taken so that nobody has to hike too much further to reach an open mess hall.

Additionally, the change does not affect any Google offices other than its main campus in Mountain View, Calif. Their cafeteria lineups will not change.

Google declined to confirm the source's information. "We are committed to Googlers and providing them a great working environment, but we don't comment on internal specifics," a PR representative told CNET News.

The change could be due to one of a few things: cost-effectiveness, or a legitimate issue with underattendance. Or, as one of my colleagues speculated, Googlers could've been picking up mass quantities of food and driving it home to their families.

Tastier than Boston Market--and free. You know you'd take advantage of it, too.

Blame the mounting economic pressures, or too many chubby engineers: Google has decided to stop offering free dinner, afternoon snacks, and its "tea trolley" to employees, according to an unconfirmed rumor floated on Valleywag.

A Google representative did not immediately return my request for comment, so this one is still hanging around in the gossip-sphere. But Valleywag reported that the changes are slated to be announced Monday, which would mean that either a confirmation or debunking should be available within hours.

A chef prepares Google food, back in 2004.

(Credit: Google)

Google has become renowned for its employee perks: massages, game rooms, gyms, laundry facilities, and free food three times a day. Google co-founders Larry Page and Sergey Brin went out on a limb in creating the free-food strategy, which they said was a worthwhile investment to make employees healthier, happier, and more efficient. The food's even good enough for Google's original head chef to have penned a cookbook.

Cutting perks always results in bad PR, something that Google learned the hard way when it shot the cost of day care for employees' kids into the stratosphere, for example. But cutting back on free food, one of Google's most visible and unique perks, may be over the top for some workers.

Critics of the perks have suggested, in addition to questioning the economic efficiency, that offering so much free food is really just a way to make Googlers spend more time at the office. Then there's the internal joke about the "Google 15" (or "Google 20" depending on who you ask), the rumored weight gain that happens after getting hired at Google and being surrounded by so much gratis grub.

Coincidentally, the gossip comes soon after the heavy blogging of a two-month-old Flickr photo that revealed Google's New York cafeteria serving bacon cheeseburgers on Krispy Kreme donuts as a novelty food. Hey, Googlers, maybe the rumored change is for your own good.

Still, this has not been confirmed, which means that it could easily turn out to be false, or perhaps overhyped (restricted to Google satellite offices, for example). But given the marketwide economic belt-tightening, it's not too hard to believe the rumor.

InterActiveCorp, the sprawling conglomerate of brands helmed by media titan Barry Diller, is formally splitting into five separate companies Thursday. And it hopes to do so quietly.

The story is familiar by now: Diller, determined to solidify himself as capable of mastering both old and new media, has long insisted that a lack of confidence on Wall Street has suppressed IAC's stock price. So last November, Diller made the big announcement that IAC would be slimming down to a core of ad- and subscription-supported Internet media brands such as Ask.com, Match.com, Bloglines, Citysearch, Vimeo, and Evite.

IAC Chairman and CEO Barry Diller

(Credit: Dan Farber)

The rest of its brands would be spun off, grouped into one of four publicly traded companies: ticketing company Ticketmaster, travel company Interval Leisure, retailer HSN (the Home Shopping Network and catalog company Cornerstone), and Tree.com (the set of real-estate and lending brands that encompasses the troubled LendingTree).

This has been talked up as an almost spiritual renewal for IAC, which simultaneously weathered a bitter proxy battle with powerful shareholder John Malone of Liberty Media. With that over, and the blueprints laid for the split, Diller festooned the June cover of Portfolio, with the magazine proclaiming a "ninth life" for the former Hollywood mogul. But Diller's renaissance may be coming at an awkward time, as the outlook for the online-ad industry--the foundation for the new IAC--is not exactly certain.

Market research firm eMarketer has reduced its estimates for online-ad spending in the past few months--twice. Fox Interactive Media, the digital subsidiary of News Corp., missed its annual revenue goal this spring. Even this year's Olympics are evidence that online advertising is a tough market, even without economic woes taken into account: just look at NBC's reluctance to stream some of the more "blockbuster" events live.

Online advertising is a relatively nascent sector of an industry that is starting to see the effects of a rough economy. That could be part of the reasoning behind why IAC's five-way split and subsequent refocus on online ads are being treated internally as business protocol rather than a ribbon-cutting spectacle.

There will be a press release but no major fanfare, an IAC representative told CNET News on Monday. There also won't be any disruption over at IAC's gleaming glass headquarters on Manhattan's West Side, as no one is getting relocated. Of the brands to be spun off, only the Los Angeles-based Ticketmaster actually has employees in the New York flagship office, and they will remain there even after the split.

That's not to say that it's a bad move on the part of IAC's board. The Malone spat aside, splitting up IAC was a decision met with nods of approval, with the harshest criticism often being that Diller shouldn't have gotten himself into such a pickle in the first place. (In 2006, New York Times columnist Nicholas D. Kristof dedicated an op-ed to him, entitled "America's Laziest Man?" for taking home a fat salary while IAC's stock languished.)

On a general level, the split will make IAC and its perception on the Street less of a mess: nobody's going to argue that it's not a true Internet media company now.

More specifically, IAC is shedding some properties that were threatening to stall, if not sink, the company's progress. LendingTree was pummeled by the subprime mortgage crisis. A $300 million writedown on Cornerstone Brands was the main culprit in IAC's second-quarter losses this year. Ticketmaster continues to perform well, but with the loss of its biggest promoter, Live Nation, the future might not be quite as bright.

However, IAC won't be permanently severing its ties with these companies, thanks to a recently announced ad network that will handle inventory for Ticketmaster, LendingTree, and HSN, as well as the company internally known as "New IAC." This means that Diller, who will remain a shareholder in all five post-split corporations, might not be fully unloading his company's problems.

IAC executives have been encouraging shareholders to look toward the company's future for months now, and with losses from the soon-to-be-gone brands set aside, IAC actually beat Wall Street's estimates for its second-quarter earnings. But on Thursday, when they're dealing with the revamped IAC hands-on for the first time, many of the old issues won't be gone. It's simply a difficult time to be in the business of online media.

IAC is no exception. Despite starting to inch up in the wake of Diller's November announcement, the company's stock has now resumed the general downturn it's been on since a high point in 2003, and there's little certainty as to what it might do on Thursday.

The company still has the task of building new properties such as FiLife and RushmoreDrive. Other brands could use some resuscitation too: Evite finally has some plucky competitors, Match.com by no means has a lock on the online-dating industry, and the IAC split won't change the fact that Ask.com still has to compete with Google. Compete.com says traffic has been tepid at CollegeHumor, the fratty entertainment site in which IAC bought a majority stake in 2006, giving Diller a legitimate shot at 21st-century youth savviness (though, to be fair, traffic has been on the rise at sister site Vimeo since early this year).

The company should nevertheless be optimistic, of course, especially considering that the Malone saga could've taken a turn for the worse and doomed the split in the first place. It's already weathered a few tough skirmishes.

With some major money losers cast off, IAC will have more financial and human resources to devote to the remaining brands, and less head shaking from Wall Street about what, exactly, the company does.

To use a nautical metaphor--yacht aficionado Diller is a fan of those--IAC has upgraded to a more streamlined fleet of ships. That, unfortunately, doesn't get rid of the thunderheads.

Heavy, a niche video content company focused on the "dude" demographic, is slimming down.

The company said Wednesday it will spin off Husky Media, its video advertising platform, into a separate company. It'll remain under Heavy's oversight alongside the Heavy.com portal, but will be run by a different team.

Husky Media operates a technology called Video-Skin, which lets bloggers and other publishers "wrap" any video player in Husky ads and then pull in revenue. Husky also runs a Video Guide that offers publishers a library of video content in exchange for splitting ad profits.

Also on Wednesday, Heavy announced that its Burly Sports Show program will be syndicated on CBSSports.com, with ads served by the Husky platform.

Disclaimer: CBSSports.com is owned by CBS, which has agreed to acquire CNET Networks, publisher of News.com. The deal is expected to close in the third quarter.

(Credit: MySpaceTV)

MySpaceTV, the video platform run by the popular social network, announced Tuesday the launch of Special Delivery, a new hidden-camera reality show.

The premise of Special Delivery's short videos is to catch delivery employees (pizza, packages, and the like) in awkward situations, roping them into stunts like "Would you do a birthday dance for my dog?" and "Will you help me propose to the love of my life?" Naturally, there's a camera hidden somewhere so it's all caught on film.

Special Delivery is the second project that MySpace.com has co-developed for its video platform, which launched last June. The first was faux-reality show Roommates. The new program was created in association with a company called Avalon TV, whose executive producers are Jason Irwin and Garth Holsinger

The programming on MySpaceTV has varied extensively in quality and reception. Prom Queen, created by former Disney czar Michael Eisner's production company, got a decent amount of buzz but Eisner admitted it wasn't profitable. The scripted drama Quarterlife, a project from the team behind My So-Called Life and Thirtysomething, was enough of a success that NBC picked it up amid the Writers Guild of America strike. But Roommates, created exclusively for MySpace, debuted to cringe-worthy reviews.

MySpaceTV also syndicates content from professional distribution partners like National Geographic and The Onion, as well as Hulu, the joint venture between NBC and MySpace parent company News Corp. The site additionally hosts an extensive amount of user-generated video.

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."

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."