Barry Diller’s System of Discovery, Debate, and Development. Part II.
“If you hire people at senior positions, you are a failure.”
This is the second of two pieces on Barry Diller. In the first essay, I gave my take on Diller’s background which I believe is key to understanding IAC’s culture. In this piece I’m going to explore Diller’s “system” or philosophy around people and ideas.
A young leader’s pitch.
IAC is about to spin off Vimeo, a SaaS business serving video creators valued at $5.7 billion in its latest private funding round. The business had been acquired “almost by accident” in 2006, as part of the $26 million purchase of Connected Ventures, a company that owned CollegeHumor. Vimeo was a web player used for the site’s video sketches. As IAC’s CEO Joey Levin wrote in the latest shareholder letter, Vimeo lacked a sustainable business model. It offered a higher quality experience and more control for creators than Youtube. But it lacked scale crossing $200 million in revenue as recently as 2015.“We debated selling it, and in its darkest moments, even shutting it down.”
By 2016, change was in the air. Joey Levin was taking over as interim CEO. While the core software product for video creators was growing, Levin planned to enter the content streaming wars. He wrote: “the gold rush in the transformation of pay TV and movies is showing too much opportunity to pass up.” “Vimeo has the once-in-a-generation opportunity to, following in Netflix’s footsteps, deliver compelling subscription viewing experiences for consumers in the market for pay TV. I believe we can do so at a fraction of the cost of other major competitors by virtue of the audience and content benefits conferred upon Vimeo through our existing marketplace.” And 2017, Vimeo hired a team from Paramount and Hulu to work on this subscription VOD offering.
At the time, Anjali Sud oversaw Vimeo’s software product. Like Khosrowshahi and Levin, Sud had started her career as an investment banker. Unlike them, she had been rejected by the bulge bracket banks and worked at a boutique firm called Sagent Advisors. “I got rejected from every single big investment bank. I remember leaving one of the interviews, and they told me that they didn't think I had the personality to be a banker. That definitely was a low point.”
She continued undeterred, attended Harvard Business School, and worked at Amazon and Diapers.com before joining Vimeo. Sud had a different vision of Vimeo’s future: “Vimeo always had an identity crisis. We had an amazing brand and platform, but it was hard to see what to do with it.”
She noticed the demand from creators and small businesses who used Vimeo to post advertising clips and product demos. “It was everything from mom-and-pops to tech startups to the marketing department of large corporations. They were so diverse, it had to be a trend.” People used the platform to host videos to distribute them on the big social media platforms and their own websites. “There was a huge group of users that no one was serving.”
“YouTube and Netflix are destinations for watching videos. Vimeo isn’t a destination. Our future is all about finding impactful and innovative ways to empower video creators. I can make this business much bigger under the strategy that I’m learning.”
Sud believed IAC underestimated the market potential. She pitched Levin and Diller on a change in strategy: abandon the original content effort and focus on turning Vimeo into the premier publishing platform for video creators. She wanted more resources to build tools for creators and businesses.
“It became really clear that look, the stakes in original content, people were investing billions of dollars in original content and there were all these other platforms out there that were solving that need for audiences. Everyone was focused on the viewer experience over the content, but what about all the people that had to make that content?”
Pretty bold of her to question the strategy just announced by her CEO to shareholders.
Still, Levin backed her play with a team and resources. When it took off, she was promoted to CEO of Vimeo in 2017, at 32 years old.
“When I stepped in as CEO, it was really to focus Vimeo on being, what we say internally is 'creator first,' which means every decision we make is always through the lens of the creator. We aren't a destination as much anymore as we are an enabler for you to get your videos out there everywhere.”
This story encapsulates Diller’s philosophy. A young and hungry executive pitched an idea. Levin and Diller listened. Probably debated a bunch, challenged the idea. But decided to back Sud, let her take the risk. And when it worked, they immediately rewarded her with more responsibility. Finally, they let go. And while College Humor has been sold back to its founder, Sud and Vimeo are about to enter Diller’s prosperous diaspora of great leaders and companies.
Barry Diller’s system.
Barry Diller’s business has always been to bet on ideas. First on TV programming, then movies, then businesses at the intersection of commerce, content, and communication.
Both as a leader and a capital allocator he preferred in-house development. In Hollywood, he trained his team to put together their own projects instead of buying neatly assembled packages from the talent agencies. On the Internet, he pursued a buy-and-build acquisition strategy rather than engaging in bidding wars for trophy assets. He wanted control of the concept and the budget.
I believe he built an intuitive process that reflected his personality and suited the industries he competed in. He needed ideas, a way to identify the good ones, and talented people to handle execution.
While people were key to Diller’s success, he doesn’t have, or won’t disclose, a specific way of hiring stars. Rather, he seems to operate on a combination of intuition and testing. He “pushes responsibility down,” testing people with more responsibility than they feel they can handle. He lets people take risks. And keenly watches if they grow, if they sink or swim.
He emphasized hiring young executives who would keep him in the flow of new ideas. It’s an elegant way to contest the seemingly inevitable closing of the mind to innovation over time (see Douglas Adams’s framework of ordinary, exciting, and against the natural order).
When it comes to new ideas, “nobody knows anything.” Even great ideas are often dismissed early on. Diller himself stated that business decisions routinely have to be made with insufficient information, that the right answers are “not obvious.” For him, the path to answers is called creative conflict. When Diller had to allocate millions to movie pitches, he needed a process to eliminate weak ideas and unearth conviction. He demanded that his people show passion and advocacy for their projects, or he would refuse to back them. The production of a movie or creation of a business would require years of hard work. This way, Diller could at least de-risk the human component. Did his executive have enough passion to fight for the project for years, to will it into existence, no matter what? You could say making movies came at least partially down to having the courage to yell back at Barry.
I see it all coming together as a system for discovering and developing ideas and people through debate and testing. A kind of incubation-to-spin-off flywheel that let Diller allocate financial and social capital and reap the benefits through an expanding universe of protégés and projects. One of Diller’s great strengths is that he feels no need to hold on to a great executive or company. He is confident he will find new ones. And he knows he will keep his relationship with those who left to grow outside the “mother church” IAC.
“Push responsibility down” the hierarchy to young execs.
Turn the team into an human search engine.
The System of Advocacy: identify the highest conviction ideas through creative conflict.
Let them take risks.
“One fateful day, my boss at ABC threw me a script and said, ‘Read this and tell the producer what you think.’ I was terrified. That producer was the emperor of television and he had something like eleven shows on the air. I studied the script. I hated it. When the producer cornered me, I croaked out my opinion – an inarticulate, incompetent response. The guy let me have it, up one side and down the other. That’s when I discovered the secret to success: Plunge into the uncomfortable; push or be lucky enough to have someone push you, beyond your fears and your sense of limitations.”
“Push responsibility down” the hierarchy to young execs.
“If you hire people at senior positions, you are a failure.”
"I would say that my preferred method is not to ever hire outside your company for senior positions. It is at least 50% disappointing. I mean, because there is organ rejection. Every once in a while, for a certain position, you have to do it, but if you do it consistently, I think it’s the definition of a poorly managed company."
These are strong words from someone reliant on finding top talent. Diller clearly prefers to hire young and develop talent in-house. But how does he find great people? This was his answer to the question about “what traits indicate great talent?”
“I would say there are none, when [employees] begin. Bring people into an organization–young, inexperienced, but with energy, and edge–and drop them into water above their heads as quickly as you can. Some survive. And those who survive answer your question. Everything is idiosyncratic. There’s no rule book.”
Playboy Magazine once asked him how he found Michael Eisner and Jeffrey Katzenberg:
“Because I liked them both. Honestly, it’s all instinct. What connects. What appeals to you. You have to feel something going on between you and somebody else in the room. If you feel it, then you have to follow it. I don’t respond to people simply because they agree with me. Never. I respond to people who have something interesting to offer.”
Rather than looking for hard and fast rules, Diller looks for people who are interesting. Whatever that means. Perhaps more important is his inclination to “drop people into water as quickly as you can.” Perhaps he knows his instinct is faulty, that what is interesting, or what is on paper, needs to be tested quickly, that no amount of intuition will do the job reliably. He looks for performance under fire – and growth.
“When you drop somebody into deep water, and you see they flounder, and they really are gasping—unless that happens, development rarely happens. And then slowly they get above the waterline, and then they start to go.”
“He kept just pushing decisions down on me - he was a really fine executive in that way - he forced me to make recommendations and fight for what I believed in.”
To Diller, the way to develop and to learn, is through action:
“Put them to work! Let us assume that the task is writing, something you may be familiar with. The only way to write, say, for television or film, is to write. Hopefully you will be sending that first or twentieth draft to somebody, and if they’re any good, they’ll help you [develop] your craft. It’s process. It’s one [foot] in front of the other.”
Of course, this reflects Diller’s own experiences at ABC and Paramount where he gained responsibility “out of competence.” Where he had to learn quickly and prove himself to avoid drowning. As a leader, he has shown the same willingness to fast-track his stars. We’ll look at three examples: Dara Khosrowshahi, Joey Levin, Jeffrey Katzenberg.
Khosrowshahi met Diller when he was an investment banker at Allen & Co (my thread on his family background). He worked on Diller’s failed attempt to acquire Paramount in 1994. Diller later told Barron’s that he knew Khosrowshahi was “the smartest guy in the room” the moment they met. Diller hired him to head strategic planning: to source and execute deals. “I think he just said, ‘Come work for me.’ It wasn’t really a question; it was more of a statement. And it worked,” Khosrowshahi recalled.
“He’s the quintessential example of someone who we immediately saw had talent—raw talent. We believe in throwing people into the water, and hopefully having them sink a little. And that process is a kind of window into their real character. He had no experience of any kind operating anything, and we threw him into that water. And he more than mastered the job.” Diller about Khosrowshahi
In order to “sink him a little,” Diller rapidly stepped up Khosrowshahi’s responsibilities. Khosrowshahi joined IAC (then USA Networks) in 1998. First came the acquisition of Ticketmaster, also in 1998. Then Diller tasked him to find other businesses where the Internet would disrupt existing transactions. This led them to Hotel Reservations Network in 1999 (which became hotels.com). In 2001, IAC took a controlling stake in Expedia (which had been incubated within Microsoft before going public) and later acquired and merged it with Hotels.com and other travel assets. In 2002, Khosrowshahi became CFO of IAC. When Diller decided to spin out Expedia in 2004, he picked 36-year-old Khosrowshahi as the CEO. In 2017, he left Expedia to become CEO of Uber. Diller wrote a famous email wishing him well.
“I have Barry to thank for pretty much everything in my professional career.” Khosrowshahi
“Dara Khosrowshahi started with our company, was at Allen and Company as a junior analyst, he came to us as a junior analyst. What we did is we made him CFO—he had no experience, he didn't know what a CFO was—of a division, and he just kept going from there.” Diller
Khosrowshahi: “I didn't know how to work with an audit committee. My accounting expertise was quite lacking but Barry has a habit of throwing people kind of into opportunities and letting them either rise or fail. But he gave me the opportunity and you know, in that job, for the first year or year and a half, I had a tough time but I learned what it took, Barry did give me the time, he allowed me to make some mistakes, some of them were painful and after that tough year, year and a half, things started turning in the right direction, and I was Expedia CEO for 13 years.”
"Each year or two or three, we threw more and more at him until we finally said to him, after he had become CFO of one of our public companies, “We’re going to spin off Expedia, and I think you’re going to go run it.” He said, “But I don’t have any operational experience.” And I said, “Yeah, that’s the good thing.” Twelve years later, he left to go run Uber after having spectacularly grown Expedia.” Diller
IAC’s CEO Levin also started his career in investment banking, working on technology transactions at Credit Suisse. Diller hired him in 2003 to work on acquisitions. In 2005, IAC acquired Ask Jeeves (soon renamed to just Ask), a small search engine and web portal. Together with other IAC properties it became IAC’s search and media business. In 2009, this segment was renamed Mindspark, a collection of web properties and search toolbars, and Levin was put in charge of it. In 2012, he became head of the new Search and Applications business, which included both the Ask business and the newly acquired About.com. In 2015, IAC’s CEO Greg Blatt became CEO of Match Group which was spun off. Diller tapped Levin to become CEO of IAC, twelve years after joining the company.
While I readily admit to not being an expert on the byzantine structure and combinations of the various web properties within IAC’s consumer business, Levin’s path strikes me as very familiar. He joined IAC in his 20s and started in the “idea search engine.” He was given responsibility to see those ideas through, becoming head of a business unit. Today he is 41 years old and has served as CEO of IAC since 2015.
Katzenberg is another example of how quickly people could rise in Diller’s orbit. His career started in mayor New York City John Lindsay. When Lindsay’s administration ended Katzenberg left politics. A friend introduced him to Diller who was looking for an assistant. Katzenberg recounted a brief interview, at the end of which he confronted Diller: “Excuse me. I have a few questions. What exactly is this job? If it involves your laundry and your dry cleaning, I’m really not interested.”
One of his key tasks as Diller’s assistant was to source and review scripts. Katzenberg earned the nickname Golden Retriever for his ability to fetch scripts. Diller soon moved him to the marketing department. And a year later he became the assistant to Don Simpson, Head of Production at Paramount. His pace of work, was incredible with hundreds of short calls a week connecting him to everyone in the business: “nicknamed Spiderman and the Golden Retriever, because he would bring his masters at Paramount every new script almost as soon as the writer had photocopied the first draft and before any other studio knew about it.”
His big test was the production of the first Star Trek movie, a project that was on life support. The film was behind schedule, over budget, and the screenplay was a mess. There was bad blood producer Gene Rodenberry (the creator of Star Trek), screenwriter Harold Livingston (a former volunteer in the early Israeli air force), and various actors. The movie was plagued by animosity: Leonard Nimoy (playing Spock) didn’t want to join what he thought was a cash grab. Livingston quit three times. Rodenberry blocked edits. Due to the special effects, the movie’s budget ballooned to $45 million, which compared to an average production cost of $10 million at the time.
Simpson had warned Katzenberg the movie was “a nighttime freight train. It’s bearing down on you at two hundred miles per hour. Get off the fucking track!” Katzenberg described it as “the single most stressful moment of my life.”
He travelled to New York to watch Nimoy in a play and spent days resolving grievances to get him on board. At one point he locked Livingston in his office, telling him “you’re not getting out of this office until you agree to come back and work on this picture.” He then put Livingston in charge, steamrolling Rodenberry. Studio lore has it that Katzenberg either quit or was put on leave as he spent a few days at home until Simpson and Eisner brought him back. Tom Pollock, his lawyer, remembered: “Jeffrey spent two and a half years in Star Trek hell. His career was hanging in the balance.”
The movie had to be finished by December 1979 or Paramount would lose $35 million in guaranteed payments from theater owners. It was distributed at the last moment via chartered planes. “The movie was horrible, and we were scared to death,” Diller remembered. And yet, Katzenberg had successfully kept the project on track and saved Paramount from what could have been a black hole of financial losses. Better yet: despite its flaws, Star Trek fans loved the film. It was a box office success, earning $139 million. More importantly, it anchored a new franchise for Paramount. When Simpson left to join producer Jerry Bruckheimer as an independent producer, Katzenberg succeeded him to head production.
“I started as Barry’s gofer. In retrospect, Barry was the most important mentor of my career. Over seven or eight years he put me in almost every area of the business. I was in marketing, distribution, international, negative pickups, and business affairs. I think it was deliberate: he was training me for someday actually becoming the head. When they made me president of the studio, I had already worked in all the key areas.”
Turn the team into an human search engine.
“I want to be in the rights business in everything. Rights are programs, programs are ideas and ideas are value.” Diller as head of Paramount’s leisure division.
To Diller, ideas are value. And to find that value, he needed a sourcing machine of hungry, hard-working associates. Khosrowshahi, Levin, Eisner, and Katzenberg all started by sourcing ideas.
Diller’s post-Hollywood reinvention is testimony to the fact that he retained a beginner’s mind. However, it also required a network of young executives and friends who were closer to the bleeding edge of technology and taste. On his road trip, he met with seasoned executives like John Malone but also young entrepreneurs like Bill Gates and Steve Jobs. He sought out experts like Kara Swisher: “You were like, “You, girly, seem to know about the internet. Come in and speak to me.”
Match Group might be IAC’s biggest success with a market capitalization of more than $35 billion today. How did Diller decide to invest in online dating? His son-in-law, Alexander von Furstenberg, told him: “There's a site you should buy, it’s called Friend Finder.” Diller looked it up: “Alex, this is a hooker site in Canada. No, we're not doing that.” But it was an insight about another vertical that the Internet could solve. It led Diller and his team to “a tiny little company in Texas called Match.com.”
Diller emphasized personal connection and interest in the idea. Here is how he explained to Katzenberg what to look for. He gave him the manuscript for Looking for Mr. Goodbar and asked him:
D: “Tell me what you think. Do you think it’s a good story to make into a movie?”
K: “I imagine women will be really interested.”
D: “How would you know? You’re not a woman, are you?”
K: “Not that I know of.”
D: “Your job is to go out and find ideas that interest you, that you love— not like—that you love sufficiently to put your career on the line, to have a level of passion to want to make something and to have the courage of your convictions. There is no way you will ever know what a housewife in Kansas or a businessman in Chicago wants to see. Your job is to find things that interest you. Then what you do is you say, ‘Yes.’ You close your eyes, cross your fingers, and pray that there are millions of other people who feel the same way you do. Anytime you presume what someone else will like, you will lose.”
The System of Advocacy.
Asking people to source mountains of ideas presents a filter challenge. Starger described Eisner at ABC: “Mike would come in with ten ideas, seven of which were absurd. But three would be crackling good ideas. He was the ideal development person. You want somebody who’s totally free, not somebody who edits himself.”
Eisner’s job was to find ideas and turn them into movies. Diller’s job was to be the editor. To find the great ideas among the duds. He subjected all ideas to a kind of Darwinian struggle. He challenged the ideas, pushed back, and probed for conviction. Only the ideas with the most passion and conviction behind them were supposed to survive. Dawn Steel called the process an “aggressive advocacy and yelling system” and at least in Diller’s Hollywood days it must have involved a lot of shouting and expletives.
Diller and Eisner were the prime example:
“Any meeting that Barry and Michael were in, you could sell tickets to. It was unbelievable how they would scream and yell and fight with each other. And they could walk away and there was no residual negativity from the meeting.”
In Diller’s words:
“It was Michael and me, me and everyone. We had a system of advocacy which produced endless argument, almost every day.”
Diller called viewed it as creative conflict:
“I’ve always said that I believe deeply in creative conflict, and that means passionately arguing–whatever your thoughts are, whatever the point is. Some people love that and it helps them grow, learn, etc. Some people run for the hills. I’ve always said to people, “Look, it’s not a room for everybody. If you like this environment, great. If you don’t, please leave, because it’s not good for any of us.”
“Creative conflict can be "noisy," he said. "I think you have to pull barriers down to get at what people really think." Although some people don't like that kind of frank give-and-take atmosphere, "it's totally fair," he said. "We have a rule that there is no stupid idea—even though we may say, 'This idea is the dumbest thing we ever heard.' Nothing you say, no matter how stupid it is, is stupid. That leap of illogic is vital to the process."
Only ideas with full conviction and commitment were supposed to be backed with capital:
“One quality above all others that Diller demanded of his executives: a sense of passion for any idea or product they were trying to sell to him. Often Diller would initially seem to be negative about a project, offering probing, rigorous critiques to prove a reaction from the person making the presentation. If the executive wasn’t willing to kick and scream and demonstrate his or her passion, the project was as good as dead.”
“People who work for Diller know to be thoroughly prepared, able to defend their positions, and, when all else fails, ready to duck. When things go well, however, Diller's method can be quite rewarding. "He's very Socratic," says Pleasants, "very inquisitive. He likes to poke at things. People say he's picking up on random details, like the color of a Web page, but in fact he's scratching. He's trying to find the essence of things all the time."
Why was passion so important? Movies were significant investments, often involving tens of millions in upfront cost, and could take years from inception to payoff. Diller needed to have complete confidence that the person behind the project was going to fight for their baby all through the process.
When Dawn Steel was a junior executive at Paramount, she picked up the script for Flashdance. To get the movie made she had to convince people up the hierarchy. She quickly learned the Paramount formula: “To get movies made you had to have three things: a good idea. Passion. And perseverance.” Supposedly Diller told Steel her at a meeting: “If you have enough passion to get up on top of this table and tell me why I should make this movie, then chances are I’m going to make this movie.”
I don’t know if she climbed on that table, but she fought fiercely for the movie, badgering people until it got the green light. Flashdance became a big success and at a party Diller remarked that “finally someone junior got something done.”
After Diller’s departure from Paramount, Steel would go on to lead Universal Studios. About Diller she wrote: “He had fantastic personal power. Nothing anyone ever did was good enough for him. Consequently, he pushed you into finding out how good you were.”
“You can’t buy material, you can only advocate or influence. Diller ran Paramount on an advocacy basis.”
Diller viewed debate and creative conflict as tools in his quest for better decisions, as an anti-dote to the paralyzing influence of bureaucracy:
"Rarely in business do you ever get enough facts to make a decision that's got a factual basis. It's usually a minute or a mile short. It means [the solution is] not obvious. The process of doing that, for me at least, is filled with creative conflict."
“Arguing out of conviction and belief is positive to the creative process. Years ago, I started to worry, How do you keep your instincts clean? How do you get to what you really think, rather than just repeating the morning line? To make the fewest mistakes, you've got to find out where the real opinion or passion lies. And that only comes alive in argument.”
There is a “dark side” to this process. Diller was not only demanding, his style could also be described as brash and confrontational. Some anecdotes suggest he could let emotions get the better of him. Once he had an argument with Fox’s head of production and threw a videocassette. It got lodged in the wall and the executive drew a picture frame around it to commemorate the occasion.
The passionate debate that made the process useful could, if taken too far, intimidate people and stifle the creativity Diller was seeking. And a “killer” culture can become political. For the movie Working Girl about an ambitious secretary Fox gave away coffee mugs with the slogan “There's more to life than filing, smiling and dialing.” Apparently, the inside joke at Fox was “There's more to life than scheming, screaming and reaming.”
Early in Katzenberg’s tenure, Diller yelled at him over a mistake. Katzenberg walked over to his office and immediately confronted him:
“I just want to tell you one thing,” the diminutive Katzenberg declared with all the dignity he could muster. “This is the first time and the last time that you will ever talk to me that way while I work for you. If you do not want me here, I will leave. If you ever do this again, either start with ‘You’re fired’ or end with ‘You’re fired.’ Because if you ever do this again, that will be the last conversation we ever have. Let’s file this under ‘getting to know each other.’”
But not everybody has that confidence or can afford to lose their jobs. I can see the value of fostering creative conflict in any idea-driven business. And it’s not unique to Diller (Julian Robertson is an example of an investor known for fierce debate of ideas). But I hope Diller has mellowed a bit over the years. It seems to me the System of Advocacy either requires some guardrails, perhaps even some practice and training for people who aren’t used to it. Or it can backfire and self-select for a monoculture of people comfortable with constant fighting.
“I am difficult, that’s true. But I think difficult is good, especially if you're dealing with the 'creative process,' in which you have to make editorial choices… All you really have to contribute is what you think. There is no rightness involved, only being true to oneself.”
Michael Eisner and Raiders of the Lost Ark
An example of the System of Advocacy is Michael Eisner’s fight to make the first Indiana Jones movie, Raiders of the Lost Ark. The film was the brainchild of George Lucas and Steven Spielberg. Spielberg was a rising star after making Jaws. George Lucas had just finished shooting Star Wars II. Together they were perhaps Hollywood’s hottest director-producer package, and this fact was not lost on them.
They wanted to change the traditional financial arrangement that would give them a share of the backend, after the studio had subtracted a laundry list of expenses. Instead, they asked for points, a percentage of the sales. This would put them on equal footing with the studio. In addition, Lucas wanted to own 50% of the film rights and have control over sequels and merchandise decisions. These demands were unheard of. Studios that were enthusiastic about their talent and the idea passed instantly after learning of the financial structure. Even Sidney Sheinberg, Spielberg’s mentor at Universal, called the deal absurd and declined to even make a counteroffer.
Diller and Eisner believed in so-called “high concept” movies with a strong and engaging premise. Raiders of the Lost Ark fit the bill: a rogue archeologist’s hunt for a lost Jewish artifact in a race against Nazis, his scientific mindset challenged by the mystery of the ancient Ark. Eisner was pounding the table for the movie. Like others, Diller balked at the risky financial arrangement. The two fought relentlessly about the deal.
“Barry would tell Michael how stupid he was and how his ideas were insane, and it was like water off a duck’s back. Michael was relentless. He never took it personally. He’d say, ‘You don’t know what you’re talking about! This is why this is going to work!’ That was the strength of the relationship.”
Eisner finally challenged Diller: “How can I run this company if I can’t make the movies I want?” and Diller caved. It was a controversial move, indicative of the shifting power between talent and the studios. Sheinberg commented that “Eisner just made a deal that’s going to destroy this business!”
The movie grossed $242 million and established one of Paramount’s most valuable franchises. I have no doubt that Diller would have killed the risky venture if Eisner had wavered, if he had not shown deep conviction and a willingness to fight for it.
Let them take risks.
Picking promising young people and challenging them to fight for their best ideas is pointless unless they are given the chance to take risks and see things through. We already know of Vimeo’s crucial pivot. The turnarounds of two other IAC properties, HomeAdvisor and DotDash, illustrate the same idea (as well as the ups and downs of IAC’s portfolio and the power of Google).
ServiceMagic / HomeAdvisor
In 2004, IAC acquired ServiceMagic, a platform to find home service professionals (everything from handyman to carpet cleaning) that had been founded during the dotcom boom. In 2011, IAC hired Chris Terrill to reinvigorate the company. Terrill had previously worked at IAC’s Match.com before departing for jobs at Blockbuster and Nutrisystem. His turnaround proposal included an overhaul of the business model and a name change to HomeAdvisor.
Terrill wanted to focus exclusively on home services, the business’s most promising vertical: “There is no go-to, ‘Trip Advisor’-like brand in the homes space.” This would streamline the offering significantly: “We got rid of all our other verticals. No party planning, wedding photography, senior care, deejays, or dog walkers.” A wayback machine look at the website in 2011 reveals a Wikipedia-like maze of categories, including pet care, weddings, and maid services. Terrill paired his overhaul with the acquisition of the HomeAdvisor brand from Microsoft.
But a relaunch meant the business would drop out of Google’s rankings. The company would have to stomach an immediate hit to traffic and revenue: “There were 10 million [internet] pages that needed to be indexed. You disappear from Google when you do that.” Terrill was given the green light. As expected, the company dropped off Google’s front page and traffic declined. When tens of millions in sales were lost, Terrill worried about his job: "Did I take this thing that was pretty good and just completely destroy it? Or was it going to be okay?"
Diller tested Terrill’s conviction along the way, probing whether he still believed in the new strategy. Terrill did, and eventually data suggested the business would turn the corner. It was a painful but necessary restructuring, followed by the merger with Angie’s List in 2017.
Reset at DotDash
When IAC acquired about.com from the New York Times in 2012, it’s collection of consumer-facing properties needed a turnaround strategy. Ask.com, dictionary.com, and other websites struggled with changes to Google’s search algorithms and the emergence of the social media platforms as dominant destinations. IAC hired Neil Vogel, a former investment banker and online content entrepreneur. Asked what he thought of the business, Vogel replied: “I don’t think of About.com.”
Still, Vogel was initially optimistic: “When I got there in 2013, I was positive the best asset we had was this brand that we’d be able to rejuvenate, we’d clean up this content, we’ll sell some ads, this would be easy, this would work.” He soon changed his mind: “what we figured out is, About.com wasn’t a brand that was helpful to us—it was actually an albatross. On the internet today, you can’t be everything to everyone. And About.com was still trying to do that.” He broke the bad news to IAC’s top brass: “we just went in and we said, “Listen, this isn’t working.’”
Levin wrote about the strategy pursued by competitors at the time: “Publishing competitors were raising small fortunes, farming user data, creating “promoted content” for social networks, and racking up audience counts by churning out articles comprised of clickbait-y lists known as “listicles”, quizzes, or other trending and low-intent content.”
Vogel on the other hand proposed a complete revamp of the business model. He wanted to create high-end, focused content: “What Conde Nast should be. We can turn About.com into what Hearst should be. We’re gonna throw away all of our content that we don’t think is any good. We basically said, “Give us 12 months, we’re gonna spend a bunch of money, and we’re gonna take About.com and we’re gonna launch our new brands that we’re gonna make up from whole cloth.”
Vogel had some 75% of the content removed and relaunched sites that could gain critical mass in the most valuable verticals: health, personal finance, tech, travel, and home. He shuttered About.com and launched Dotdash.com (morse code for the letter ‘A’) as an umbrella for properties such as Verywell Health, Investopedia, Brides, Lifewire, Treehugger, Tripvsavy. It was another risky transition: “The darkest time was two months after the Verywell launch. We had some green shoots that it was gonna work. We were already like half pregnant with our next two verticals, like there’s no going back on this. There’s very few things you can do on the Internet that you can’t reverse. This was a non-reversible thing.”
It worked. Today, Dotdash is growing profitably, with Levin commenting on the “enviable position with engaged readers and recurring direct-sold advertisers who retain like Vimeo’s enterprise customers.”
“My favorite Barry Diller stories are always like the times when you’ll disagree with him, you’ll be in the shower two days later, be like, “Ugh, he was totally right.” He’s just seen so much stuff that he just has ... he might not always use words you totally get, because it might be like a Hollywood word you don’t know or whatever. But he’s by and large, his view is correct. And they’re incredibly patient. I think that the reason we were able to do this and the reason why there have not been very many if any real consumer turnarounds is usually there’s no patience.”
A lasting legacy.
“As many know from our actions over the last 20 years, I'm not a believer in simply agglomerating assets in perpetuity. I've long felt that as entities grow into size and maturity it's healthy to give them separation and independence from a mother church.”
Much like Diller is happy to give companies independence as they mature, he finds himself with a diaspora of people he helped mentor and develop at a young age. It’s a group he threw into the deep end, whose ideas he challenged, and who grew as he let them shoulder outsize responsibility.
As leaders, they carry elements of his philosophy with them. Principles like “pushing responsibility down,” letting people take risks, the relentless search for new ideas, and open debate to unearth conviction. I can’t think of a more lasting legacy.
Barry Diller Story, George Mair
King of Media
Barry Diller Story, George Mair
Dawn Steel: “They can kill you, but they can’t eat you”
Time Magazine, 1993. “An old Fox learns new tricks”
Newsweek, 1994. “Regarding Barry”
Playboy Magazine, 1989