[Congressional Record Volume 149, Number 82 (Thursday, June 5, 2003)]
[Extensions of Remarks]
[Pages E1165-E1166]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                    THE BINGE ISN'T OVER FOR DILLER

                                 ______
                                 

                          HON. EDOLPHUS TOWNS

                              of new york

                    in the house of representatives

                         Thursday, June 5, 2003

  Mr. TOWNS. Mr. Speaker, I submit the following article for the 
Record.

                [From the Washington Post, June 5, 2003]

                    The Binge Isn't Over For Diller

                           (By Leslie Walker)

       Barry Diller may prove Woody Allen was right when he said 
     80 percent of success is showing up.
       The onetime Hollywood mogul first got into electronic 
     commerce more than a decade ago, never left and may end up 
     being one of its biggest successes. It was 1993, soon after 
     he entered the television home-shopping business, that he 
     started extolling the convenience of ``buying underwear in 
     your underwear.''
       When the real electronic commerce wave arrived on personal 
     computers instead of television, Diller regrouped and started 
     buying Internet ventures. Yet except for his failed $18 
     billion bid to buy the Lycos Web portal in 1999, Diller has 
     remained largely known as an entertainment and media 
     executive, and his online escapades have attracted little 
     attention.
       Until now. The digerati are finally taking notice of 
     Diller's online empire since his conglomerate, USA 
     Interactive (USAI), announced a recent string of takeovers 
     that are transforming it into one of the Internet's 
     superpowers. Diller's moves are part of a consolidation wave 
     gaining speed in the high-tech sector, where start-ups are 
     still struggling to overcome depressed stock prices and an 
     oversupply of goods and services.
       ``We want to be the largest and most profitable e-commerce 
     company utilizing multiple brands,'' Diller, chief executive 
     of USAI, declared in an interview this week. (Diller is a 
     director of The Washington Post Co.)
       Diller's recent acquisitions appear to reflect a shift 
     toward more direct forms of commerce online, where new 
     commercial matchmakers that could bypass traditional forms of 
     advertising are catching on.
       First, a look at Diller's march across the Web: Since early 
     last year, USA Interactive has announced it will acquire 
     LendingTree Inc., which pairs home buyers with lenders and 
     real estate agents online; travel agent Expedia Inc., which 
     lets consumers make travel reservations online; British 
     UDate.com, an online personals site; the outstanding shares 
     of Hotels.com, an online provider of discount lodging 
     bookings; and the remaining shares of Ticketmaster, the 
     electronic ticketing agency in which USAI first took a 50 
     percent stake back in 1997.
       Also in the past year, Diller's company snapped up a string 
     of offline travel-related companies, including the 
     Entertainment discount-coupon book, the vacation exchange 
     network Interval International and Britain's TV Travel Group. 
     USAI already owned various ``back office'' services, thanks 
     to acquisitions made a few years ago. In 1999, for example, 
     it bought one of the world's biggest customer call-center 
     operations, Precision Response Corp., which also conducts 
     e-mail marketing campaigns and database services. And, of 
     course, USAI still owns the Home Shopping Network.
       As a result of its takeovers, USA Interactive appears 
     poised to take in more than $6 billion in revenue this year--
     more than Amazon.com, eBay, Yahoo or any other Internet firm 
     except America Online.
       Diller said that his Internet binge is not over. He intends 
     to buy more Net gems and hinted that LendingTree points in 
     the direction he is headed. (Think financial services.) Some 
     analysts worry that the LendingTree deal, a stock swap valued 
     at roughly $700 million, may be inflated because the home 
     refinancing wave caused a temporary spurt in its business. 
     But Diller discounts such talk. ``We couldn't care less what 
     happens in the very, very, very near term,'' he told analysts 
     when he announced the deal last month. ``What we care about 
     is that we've bought the right business in the right 
     category.''
       Still, his company seems to garner more dollars than 
     respect, perhaps because it resembles a giant Internet puzzle 
     with the pieces not yet snapped into place. That may explain 
     why Diller said this week he is flirting with changing the 
     name of his company again. USAI has gone by at least five 
     names in the past, none too memorable. The latest moniker 
     makeover came last year when it sold off its cable TV 
     channels and replaced ``Networks'' in ``USA Networks'' with 
     ``Interactive'' to focus more on electronic commerce.
       Diller said the company's current mission is to act as a 
     ``middleman'' between supply and demand in interactive 
     commerce, making it more like eBay than retailer Amazon.com. 
     Like eBay, USAI's companies typically take commissions for 
     matching buyers and sellers. They hold little or no 
     inventory, which lowers their costs and potentially boosts 
     profit margins.
       EBay mostly auctions used goods but is aggressively 
     courting sellers of new merchandise as part of its avowed bid 
     to become ``the world's marketplace.'' While analysts think 
     this could make it a head-to-head competitor with USAI, 
     Diller doesn't see it that way. He said he doubts eBay will 
     succeed in becoming the world's marketplace: ``They are not 
     going to make the transition in every category to a fixed-
     price model,'' he predicted, ``and will be predominantly 
     based in peer-to-peer auctions.''
       Time will tell how much advantage can be gained from 
     lumping together different Internet entities or ``multiple 
     brands'' online. But for starters, there should be savings 
     from no longer having to run five separate public accounting 
     operations for LendingTree, Expedia, Hotels.com, Ticketmaster 
     and USA Interactive, all of which have been trading under 
     separate stock symbols. After buying a controlling stake in 
     Expedia from Microsoft Corp. last

[[Page E1166]]

     summer, USAI declared its intention to buy the outstanding 
     shares of its key subsidiaries. Expedia and Hotels.com 
     resisted briefly but yielded this spring.
       Soon USAI will introduce loyalty incentive programs for 
     people using its various e-commerce services. Diller said the 
     first incarnation, perhaps points-based rewards, will debut 
     later this year or early next. He added that he has no plans 
     to create an overarching Internet network with a ``single 
     sign-on'' for users of USAI sites, such as AOL attempted with 
     its Web properties and Time Warner did with its original 
     magazine sites at the ill-fated Pathfinder.com.
       ``We do not believe in unnatural synergies, and we don't 
     have one totalitarian brand,'' Diller said. ``We only want to 
     make relationships where natural law dictates they make 
     sense.''
       AOL and Time Warner, of course, hyped ``synergies'' among 
     their many brands when the two companies merged three years 
     ago. Diller said the big lesson he learned from watching that 
     merger flop was not to shortchange his Internet products but 
     to keep improving them. ``They took care of everything but 
     the product itself and paid a terrible price for it,'' Diller 
     said of AOL.
       But USAI will exploit natural connections, he added, such 
     as cross-linking among its Web sites and pursuing other 
     cross-marketing opportunities. For instance, Evite.com, a 
     free invitation service owned by USAI, already rotates banner 
     ads on its online personals site, Match.com, and the 
     Entertainment book. You can imagine its Citysearch's online 
     city guides linking prominently to LendingTree's real estate 
     service, or Hotels.com offering local event tickets from 
     Ticketmaster when people book rooms.
       Whatever Diller winds up calling his many-headed Internet 
     beast, it's a good bet it will grow up to be one of the 
     surviving giants of the dot-corn jungle.

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