Barry Diller: Net's new poster boy?

Barry Diller knows movies, and all good movies have acts that eventually lead to a finale. Given the dot-com implosion, one might assume that if the Internet were a movie, it would have already left theaters and hit DVD or HBO.

But wait! The movie may not be over.

If anything, the Internet may still be in its first act. In fact, it looks as if Barry Diller may be the screenwriter, director, producer and lead actor.

Yet again, this week Diller struck a megadeal to buy a digital property. This time the acquisition was of LendingTree, a top mortgage intermediary. The price tag was a cool $734 million in stock. While many other CEOs have been complaining about the burst of the bubble, Diller, chief executive of USA Interactive, has been methodically picking up the pieces from the rubble.

He now controls Hotels.com, Match.com, and Expedia--which are all in the middle of the hottest growing areas of the Net. He is such a rabid dot-commer that he recently quit his job as CEO of Vivendi Universal Entertainment. (Perhaps his license plate is now USADTCM.)

So what advice might Diller give aspiring dot-commers? Actually, if it weren't Diller saying these things, he would probably be booed off stage. But here's a look, anyway:

Bring back the old clichés
Get mind share. It's a land grab. Build an incredible brand. This stuff really works. Look at LendingTree. Despite being founded in 1996, the company has enormous brand recognition on the Web: Sixty-seven percent of Web surfers know the brand. (This is what a typical global bank would have as its rating.)

A company with a brand as strong as LendingTree's certainly should have decent market share. However, the firm only has less than 1 percent of the consumer lending market. Keep in mind that the online consumer lending market is between 5 percent and 7 percent of the total market.

The middleman is good
There are many brick-and-mortar companies that are not particularly good at marketing. A better approach would be to find distribution channels. That's what the LendingTree has done.

The company cost-effectively attracts potential consumers and then presents them with a variety of qualified lenders. It's a win-win all around.

LendingTree's marketing approach is so successful that it actually rejects many of the lenders that apply for admission to its system--because the demand is so high and the screening requirements are so strict.

Get local
Let's face it. We like the travel agent who has helped us for the last 10 years and is located just a mile away in town. Dealing with a big institution or a national online provider is too impersonal.

A big element in the success of consumer online businesses is to develop a localized experience. Diller has done this with properties like CitySearch. You gotta get close to the customer.

Conglomerates work
Many thought that it was absolutely nuts for an online company to branch into unrelated product lines. Amazon.com selling power drills? Well, Amazon sells quite a few diverse products. And so does eBay.

Apparently, in the online world, you can build a successful conglomerate. However, the site needs to be organized and personalized to the needs of each customer. The site also needs to build trust with the consumer. Offering good deals helps, too.

So far, Diller has about 40 million online customers. He is now beginning the process of data mining and warehousing so as to provide even better value.

"We think that there is a natural law there," he said. He described the LendingTree deal as a "natural alliance that will take place," stipulating his belief that the company "will probably in a year or two become quite significant."

As for the future, expect much more migration to the Web. This means powerful growth trends. In the case of LendingTree, Diller is expecting 70 percent annual growth rates in earnings until at least 2007. Even in Hollywood, that's a story you can sell.