N.Y.-based IAC to open Bay Area venture
FIRM'S STYLE ALARMS SOME AREA START-UPS — IAC/InterActive Corp., the New York-based media and e-commerce conglomerate run by former Hollywood mogul Barry Diller, already has pieced together an empire of dozens of Web properties …
Context & Ripple Effects
Barry Diller has assembled IAC's Web empire almost entirely through acquisition — paying nearly $2 billion for Ask in late 2006, then letting Citysearch pick up local search site Insider Pages in March 2007 — with Diller publicly leaning on Ask to knit the local operations together under real performance pressure, per his push to make Ask grow back in December 2005.
Opening a physical Bay Area venture marks a shift from buying Valley companies remotely to planting a flag among them, which is precisely what unsettles area start-ups: the conglomerate's aggressive, Diller-style integration playbook is arriving at their doorstep.
First-order effects
- Bay Area start-ups in local search and consumer Web now have a deep-pocketed acquirer operating locally, raising both exit prospects and the fear of being absorbed into IAC's integration-heavy portfolio rather than staying independent.
- IAC gains direct access to Valley talent and early-stage deal flow for units like Ask and Citysearch, whose mandates depend on keeping pace in local search.
Second-order effects
- Rival acquirers hunting the same local-search targets will face stiffer competition for deals as IAC scouts from inside the region, likely inflating prices for promising start-ups.
- Venture-backed founders weigh IAC offers against the risk that a conglomerate parent constrains their product roadmap — the very 'style' the Mercury News reports is alarming entrepreneurs.
Third-order effects
- If the outpost works, it validates a structural shift in how East Coast media-and-commerce conglomerates compete in Silicon Valley: standing operations and serial acquisition instead of one-off distant purchases.
- The counter-risk, visible in Diller's own high-pressure management of Ask, is whether a sprawling roll-up can out-innovate focused local players — the open question this expansion forces the industry to test.
The trend: Large non-Valley media and e-commerce conglomerates are moving from remote acquisition to physical Silicon Valley outposts as they chase the consumer Web roll-up wave of the mid-2000s.