I read a fascinating analysis of IAC (InterActiveCorp) this evening and wanted to share my view. First, please read the article written by Sramana Mitra entitled Web 3.0 & IAC.
IAC holds more than 60 online properties and someone could easily mistake it for a VC with a well-diversified portfolio of Internet properties. When some of these properties start “exiting” the portfolio, they seem to be able to get much better visibility and valuation. We have already seen how Expedia has performed over the past one year after being spun off from IAC. The question is, should IAC club together more of its synergistic properties and take them public separately, while maintaining a holding company status? As it stands, IAC seems to be losing focus as well as operational efficiency, and in trying to do so many things at once, it is not doing any of them very well.
The profitability of the company is remarkably low, and that is reflected in its relatively low market cap of $8 Billion, against a 2006 revenue of $6.2 Billion.
One area where IAC can innovate within is the video game arena. I believe that IAC can grab a leadership position by working independently of any one particular video game publisher but doing business with all of them. There are different ways to play within the games industry including both long tail and hit-driven models, subscription, virtual goods, and retail sales models. IAC certainly has the resource to get behind such an initiative and they are currently on their way into venturing into the market.
InstantAction was setup by IAC and has been underway/underwraps for months. They are buying their way into the games market by acquiring Torque (GarageGames) recently and looks like they are enabling game developers to use their engine to monetize their games (give out the tools and monetization assets to anyone and let IAC monetize their games…. and take a % of the action). Should be interesting to see what IAC does here… and if the above is correct, InstantAction will probably be a solid standalone company.
Just remember: subscriptions, virtual goods, in-game advertising, are all emerging ways of monetizing games. Some do much better than others depending on the type of game/environment/gamer, but if used correctly, could do extremely well for the game publisher/developer. I am assuming IAC understands this and is building for the future.