Technology

Barry Diller: Online Travel Wiz


Position: CEO, USA Interactive

Contribution: Has assembled some of the Web's hottest e-commerce properties in a quest to build an online travel juggernaut

Challenge: Can he weave together his disparate holdings adroitly enough to make the whole greater than the sum of the parts?

Old media players have generally been burned when trying to figure out how to make the Web work for them. Witness Time Warner's willingness to be acquired by America Online (AOL), plus the string of Web disasters at Walt Disney (DIS). Nonetheless, a handful of old media hands have shown enough smarts and determination to profit from the simple fact that the Web can reach more customers less expensively than any other medium.

Exhibit A is USA Interactive (USAI) CEO Barry Diller. In 2001, the man who cut his teeth at Paramount Studios and Fox Television snapped up controlling stakes in the biggest online travel agent, Expedia, and the biggest reseller of rooms online, Hotels.com. And he has been looking like an e.biz genius ever since.

Indeed, the online travel business has continued to soar, even as growth in the other branches of e-commerce has decelerated into the low double digits. Expedia (EXPE), in which USAI holds a 64% stake, posted a 66% increase in gross booking revenues from the second quarter of 2001 to the same quarter this year. Hotels.com (ROOM), in which USAI holds a 71% stake, posted an 83% increase in the number of room nights it sold.

Those two units fueled a 57% increase in USAI's net income in the second quarter, as revenues rose to $1.117 billion from $940 million in the second quarter of 2001.

"OUT OF NOWHERE." Diller's stable of properties grabbed more Web visitors in June than e-commerce king Amazon (AMZN), according to traffic tracker comScore Media Metrix. His companies now control nearly 25% of total online leisure-travel sales, according to e-travel tracker PhoCusWright in Sherman, Conn. Diller "came out of nowhere," says Philip Wolf, CEO of PhoCusWright. "The rest of the industry is old travel hands."

Now comes the tricky part. While online travel is almost certain to continue growing at a healthy pace, Diller also hopes to increase revenues by exploiting synergies across his companies. For example, Expedia is now prompting travelers to buy event tickets from Tickemaster.com, another USAI subsidiary. And dating site Match.com, also a USAI subsidiary, is opening a travel site that caters to singles.

The search for such synergies has proven elusive in the brief history of e-commerce and could yet turn into a costly boondoggle for USAI. It's possible that Hotels.com and Expedia will end up eating each other's lunch: Expedia has moved aggressively into selling hotel packages to offset the lower commissions that cash-strapped airlines pay on plane tickets. But either way, USAI stands to profit, and Diller seems likely to end up as one of the highest-flying birds in e-travel. By Alex Salkever, Technology editor for BusinessWeek Online


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