3 Reasons IAC Thanks Microsoft

by: Andy Beal

Barry Diller: Microsoft, how do I love thee? Let me count the ways.

1. Your deal with Yahoo shadowed our poor Q2 financial results.

While the whole world focused on the minutiae of the search deal between Microsoft and Yahoo, Diller’s IAC (IACI) released its quarterly numbers. They weren’t up to analyst estimates, so I’m sure Diller was glad to have the insulation offered by the Microhoo hype.

IAC said revenue from its media and advertising unit, which includes search engine Ask.com, fell by 10% to $168.6 million. The company’s overall revenue declined 4% to $340 million.

2. When our deal with Google expires in 2012, we now have options.

Diller expressed enthusiasm for the deal between Yahoo (YHOO) and Microsoft (NASDAQ:MSFT) because is provides him with leverage when his current search deal with Google (NASDAQ:GOOG) expires on Dec 31st 2012. With a stronger alternative, Diller will have a better chance of negotiating more favorable terms.

"We do better when there are two big competitive forces out there." Diller said "the plot" right now is for IAC to boost the value of its searches—making it even more crucial to consumers—in order to stoke a bidding war with what he expects to be two hungry competitors by then. "I want to have two players out there," he said during his conference call. "That’s good for all parties."

3. You did what I couldn’t–move Ask.com up to #3 in search share.

It’s probably not the way that Diller had envisioned Ask.com achieving the #3 spot–he would have preferred that Ask had organically increased its share of searches–but I’m sure he’ll take it. With Yahoo effectively out of the search engine business, Ask.com moves up to the third spot. That said, Ask.com shouldn’t get too excited. Hitwise data suggests that Ask.com and 53 other search engines share just 3.4% of market share.

Any other ways that you think Diller’s loving the Microsoft/Yahoo deal today?