It’s Diller Time!

But the building provides the somewhat paradoxical sensation of feeling both distinctly of New York and somehow divorced from it. The city—mostly the industrial remains of west Chelsea and various new condo constructions sites (and the spire of the Empire State Building)—is visible from three sides, with the Hudson River and New Jersey visible from the fourth. So New York permeates the building, but is not of the building. Inside, it’s all sleek and shiny and new, and quiet—it seems like the building has been plopped down, employees and all, straight from the eager-beaver land of Mountain View, Calif.

“We’ve always been not only willing but maybe even overanxious to not be tied to anything—meaning anything we’ve written,” said Mr. Diller. “We write nothing in stone. I mean, we’re not Valley Girls—we don’t change our opinion every hour and a half—but we’re willing to say we’ve gone in the wrong direction. We turn on a dime. We don’t look back, we don’t care, we’re very mistake-tolerant—as long as you don’t keep repeating the same mistake.”

But that’s a long-standing criticism of Mr. Diller—he’s great at the pivot, but not necessarily at admitting failure. The spinoff can be read also as a distraction from what some say is the fundamental weakness of the new IAC: a seemingly random hodgepodge of companies, united under the loose banner of “helping consumers,” and a business strategy that—because it’s so unencumbered, as Mr. Diller says—seems to change almost at whim. “The guiding principle overall is, we want to be in businesses where we can materially improve the lives of consumers using the Internet,” IAC president and COO Doug Lebda said in a phone conversation. “The common glue is that they all use the Internet.”

It seems like an oddly unfocused strategy for a multibillion-dollar company, and Wall Street has long been cool to IAC. Its share price is trading near its 52-week low, and has barely budged since 2005, when Mr. Diller spun off travel Web site Expedia. In August 2003, Business 2.0 ran a story speculating what the next technology mergers and deals would be; the magazine proposed that Yahoo would buy paid-search provider Overture and then merge with IAC. At the time, IAC’s market capitalization was about $22 billion—10 percent more than Yahoo’s—and so the magazine argued that “the odds would be on Diller winning control.” Today, Yahoo’s market cap is nearly $34 billion; IAC’s is just over $8 billion.

 

EVEN THOUGH MOST of the sites that will remain in the “new” IAC are reliant, in large part, on user-generated content, Mr. Diller still seems captivated by the idea of creating original content. On the 17th floor of an office building near Union Square are the offices of Connected Ventures, the IAC division made up of CollegeHumor, video-sharing site Vimeo, and Busted Tees, which makes jokey T-shirts (“Practice Safe Lunch: Use a Condiment”). IAC bought a majority stake in CollegeHumor in August 2006, in a deal reported to be in the $20 million to $50 million range, and kept its staff and culture largely intact.

CollegeHumor, by nearly any metric, is successful; the site generates around seven million unique users each month, and the content is almost insanely perfectly targeted to its core demographic: college students and those who want to be. Its videos, which are produced in-house, are generally funny, and the site has managed to maintain its good-natured, goofy-with-a-touch-of-sex attitude over the eight years it’s been in business. It’s a site perfectly attuned to an ultimately optimistic generation and socioeconomic bracket, one that managed to evade the last economic downturn and the war in Iraq, and revels in the shared nostalgia of having grown up concurrent with, or just ahead of, Michelle Tanner on Full House.

“Barry gets us,” said the site’s 26-year-old editor-in-chief, Ricky Van Veen, sitting in his glass-enclosed office in early November. Mr. Van Veen has floppy dark hair and was wearing a checked collared shirt under a V-neck sweater, and Converse sneakers. “He recognizes that he doesn’t know what a 19-year-old male from Kansas is into, and so he doesn’t pitch us ideas and stuff, but in terms of running an editorial media business—he gives us input,” said Mr. Van Veen. “I expected when we sold to IAC, we’d get calls or e-mails saying, ‘Take this down.’ But that hasn’t happened. I’m happy with that. I thought it was a trade-off to selling out.”

He continued: “It’s pretty crazy to have a business run by people who are 25 and 26 years old—a multimillion-dollar business. It’s not crazy for a start-up to be like that, but to have an entity of a public company run by 25- and 26-year-olds—that’s a little risky. They have a lot of trust.”

The new building may be a symbol of the new IAC, but it’s unlikely Connected Ventures will ever move in there. “Barry okayed us not going into the new building because he understood it wouldn’t mesh. There was a Heely craze at the time—literally half the office had Heelys,” said Mr. Van Veen, referring to the sneakers with built-in wheels that seemingly every child in the world was wearing at one time. “Talking to Barry, I think he realized he didn’t want Heelys scraping up those brand-new floors.”

But while CollegeHumor has maintained its momentum, some of the homegrown original content sites IAC has incubated are struggling. Last month saw the launch of comedy Web site 23/6, which had been in development since the summer of 2006 and was plagued by staff turnover pre-launch and differing visions of what the site would be. The concept seems to be a sort of Daily Show on the Web (the site’s newest editor, Jason Reich, is an eight-year Daily Show veteran who came on board in October), but so far the execution has fallen flat. “23/6 is very much a work in the very beginning,” said Mr. Diller, somewhat defensively, when asked how it was doing. “It doesn’t even have its walking legs.”