paidContent.org - Interview: Part II: Barry Diller: 'The Business Model For Content Is To Be Paid For It'

The backdrop behind the front desk in the lobby of IAC's Chelsea headquarters shows glittering lights on a world map, each one signaling a visit to one of the company's websites?more than 835 million across its network in April from roughly 194 million uniques, according to comScore (NSDQ: SCOR). Use a blue wheel and you can see a specific site: search engine Ask, Citysearch, Match.com, ServiceMagic, virtual worlds Zwinky and GirlSense, Daily Beast and more. But not as many as there were before IAC (NSDQ: IACI) spun into five pieces, leaving this version a more manageable size with only 35 or so brands. No Expedia. No Lending Tree. No Ticketmaster. No HSN (NSDQ: HSNI). Barry Diller's grand dream of convergence that once included cable networks and transactions has been pared down to a pure internet company that doesn't rely on synergies.

In part one of his interview with paidContent focusing on that shift in digital strategy, Diller, the chairman and CEO of IAC, talked about his realization that "a 'glomeration,' or multiple disparate assets, was a bad management concept." In part two, he talks about what's left at IAC, the further "editing" of its emerging businesses (yesterday, IAC confirmed RushmoreDrive.com is closing), and why it's "silly" to talk about business models for Tina Brown's Daily Beast. Edited excerpts below.

Staci D. Kramer: Citysearch. You've gone though a remake of it. You added Urbanspoon. What does it signify to you?

Barry Diller: It gives unique content. Urbanspoon is a nice, little application ? and it's perfect, of course, for Citysearch because of the reviews it contains and the ability for Citysearch to use that content. We've also bought Insider Pages, which is the same kind, also review based, because the more content Citysearch has, the stronger it's going to be. It has a huge audience 25-28 million uniques a month. That's huge.

Who do you see as its main competitor?

The next competitor would be Yelp, which is a bit of a different concept. Vegas.com is a good example.

In terms of the big players ?

For Google (NSDQ: GOOG), Yahoo (NSDQ: YHOO), Microsoft (NSDQ: MSFT), Ask, the players of search, AOL (NYSE: TWX)?their efforts at local, they have never really attacked the way Citysearch has city by city, merchant by merchant, which is where Citysearch really has established itself. It has a lot of publishers, a huge number of publishers, and an awful lot of traffic in a circle of commerce. A lot of applications have online versions of themselves but none of them have really done the job.

The directory businesses are in huge trouble.

The directories businesses still make nothing but money. They're overleveraged, they're bankrupt entities, but they still are the largest. This is all going to move online over time. Why Citysearch and ServiceMagic are so important to us, is because nobody has really colonized it yet completely. There's no question that local activity is going to continue forever. Organizing it online is probably the most difficult area (thumping desk for punctuation) because it is so local. There are so many merchants, so connecting it into a service that both gets you the things you want to know about all of those services in one place and then has the commerce relationships, the merchant relationships?talk about impossible tasks. Citysearch has been working on it for 10 years and it's a third of the way there, 20 percent of the way there. It's way ahead of everybody else.

Ask isn't going to be the #1 search engine.

Ask is a distant player in search. Search is a big market and it's a smaller player but it has revenues for us in excess of $500 million a year so that's not nothing. We believe that can be built upon.