Summit News

IAC's Diller rebuffed suitors

NEW YORK (Reuters) - IAC/InterActiveCorp IACI.O CEO Barry Diller said he has been approached by various parties about purchasing, but he is less interested in divesting the search engine as a stand-alone business than consolidating it with another search company.

CEO of of IAC/InterActiveCorp, Barry Diller, speaks at the Reuters Global Media Summit in New York December 2, 2009. REUTERS/Lucas Jackson

Overtures about acquiring were prompted by comments Diller made during a call with investors in October, when most believed he effectively hung a “for sale” sign on the search engine.

“The people who called us were on exploration missions, on a stand-alone buy as an asset. That is different than having conversations with other people in the vineyard, in the area of search,” he said at the Reuters Global Media Summit in New York on Wednesday.

The veteran media dealmaker said that while is not core to IAC’s future, he had not meant to suggest in October that the company was keen for an immediate divestiture.

Sweeping changes in the search market in the coming two years, including a proposed partnership between Yahoo Inc YHOO.O and Microsoft Corp MSFT.O, would likely spur more consolidation, he added.

“I think further consolidation in search is necessary given Google’s dominance,” Diller said.

IAC's is the fourth-ranked search engine behind Google Inc GOOG.O, Yahoo and Microsoft, with a humble 4 percent share of the U.S. search market, according to comScore. uses Google’s search advertising platform as its main source of revenue.

“Parting with Ask would hurt IAC’s ability to lever the sweetheart revenue share agreement the company has with Google, which is among the best in the industry and not likely to be replicated in the near future,” said Colin Gillis, analyst at Brigantine Advisors.

Diller also said he has had ongoing conversations with AOL about partnering in areas including search and local online services, but characterized the discussions as “idle chat.” He said IAC was not interested in acquiring AOL.

He dismissed the notion of buying one of the major social networking sites, like Facebook, as a stand-alone company, saying that they have yet to find ways to produce a profit.

“I think Facebook is a great community and certainly going to have value,” he said, but added that it was unlikely to emerge as the next Google.

IAC -- a media holding company with more than 50 brands, including local service Citysearch and online dating service -- finished the third quarter with roughly $1.8 billion of cash and securities on its balance sheet.

Diller said putting the cash to work is “a looming problem,” citing a dearth of attractive investment opportunities. “Large asset buying, I think, is dicey right now,” he said.

More broadly, Diller sounded a downbeat note on the outlook for advertising, the financial backbone of most media companies.

With “nothing that is pushing advertising” next year, he predicted spending would more likely be flat to down 5 percent, than up 5 percent.

While Diller said Web ad spending should take a greater share of marketing budgets, “overall to be optimistic would be foolish.”

A return to significant spending growth, he said, will depend on the economy.

“Our economy right now has got issues all over the place. The two most important pieces of it are unemployment, which is going to probably get worse, and the financing of our commitments.”

Shares of IAC dropped 1 percent at $19.22 in the Nasdaq.

Reporting by Alexei Oreskovic, Paul Thomasch and Yinka Adegoke; Editing by Matthew Lewis, Tiffany Wu and Richard Chang