Diller: Even Old Media Moguls Can Learn New Tricks

NEW YORK (03/01/2000) - Television and new media magnate Barry Diller has lost tens of millions of dollars trying to figure out how to launch Internet sites that crashed and burned, never to return to life, he openly conceded today to a crowd here at Gartner Group Inc.'s Internet & Electronic Commerce (iEC) show.

Yet, the experiences were invaluable, and inevitable, on his path to launching a series of Web enterprises that are part of USA Networks Inc., where he is chairman and chief executive officer, he said in a keynote speech.

"You have to get bloodied," he said of his experiences on his way to becoming a new-media guru.

While he acknowledged to the IDG News Service after his keynote that his online properties are still losing money, he is nevertheless amassing a group of companies that could be a major force in online retailing.

The maverick media mogul who shook up television by launching the Fox TV Network in 1985, learned to work a computer on his way out of the company seven years later, he said. Now, eight years after he sent his first fax via a PC, his USA Networks owns direct TV and Internet marketing companies QVC Inc., Home Shopping Network Inc., Ticketmaster Corp. and Internet Shopping Network Inc. A month ago he bought search site Lycos Inc. He is now in the process of merging some of his holdings into USA Lycos Interactive Networks Inc.

Diller feels lucky to be "old enough, and young enough" to be a player in forces shaping the Internet revolution, he said.

His key war story of the day: About a year ago he tried to get a niche jewelry site up and running, with a budget of $32 million, by September, in time for the Christmas shopping season. By July, he learned that it would take $62 million, and by August, "it was clear it was $85 million on its way to $100 million ... and we truly were not happy."

After it finally got up and running, for over $100 million, the site fell, and couldn't get up.

His bottom line lesson: "You get in there ... you get bloody, you bounce around, and then correct your course." Trying to offer his audience here some value-add advice, he came up with some pithy, bullet-point lessons, including:

-- Don't sell your soul to an integrator ... you need a good vision of your own;-- Use contractors as tools, not as ends in themselves;-- Use open business processes that can be repeated, to leverage them in new areas you get into;-- Systems that require constant modification are not e-commerce ready;-- Don't allow yourself to fund a project that's supposed to last over nine months, because by the time it's finished it will be outmoded;-- Don't allow any one person to have more than 50 percent of the knowledge required by a project;-- Don't scrimp in the planning process;-- Work with adults -- 25-year-olds are smart and know technology, but they're on their first job and will take the stock options and run.

One final point he made was that "scale is king." With a portfolio of direct marketing properties, each of which had their own order-fulfillment systems (some of which, he admitted were not that good), he decided to pool the back-end customer relationship systems. Essentially, he outsourced to central units the customer-relation and order-fulfillment systems for his various business units. He did this by merging some internal units with a company he bought, Precision Response Corp.

The resistance in his company to this was tremendous, and the reaction to change -- brought on by the requirements of direct-marketing on the Internet -- is another key issue that companies have to deal with, he said. His advice was to "obtain re-education training for mid-level managers who need to get with the new paradigm of direct marketing on the Web ... because on the Web, everything is direct marketing."

Even some of his competitors in the audience agreed, at least on the key points.

"You have to move fast but you have to do it right, there's no sense in pushing something out for Christmas if you're going to give customers a bad experience," said Eric Sherman, regional vice president for iSky Inc., a customer-care service outsourcer based in Massapequa, New York, which competes against Precision Response.

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