“People with talent and expertise at making entertainment products are not going to be displaced by 1,800 people coming up with their videos that they think are going to have an appeal,” Diller said during a Web 2.0 conference in San Francisco in October 2005.

Well, if that’s the case, why is Viacom suing YouTube and why are NBC and News Corp. scrambling to find a foothold into the rapidly growing online video market?

(Image courtesy of James Duncan Davidson/O’Reilly Media, Inc.)

As YouTube and many smaller Web sites create fresh, interactive video content and also encroach upon the entertainment world with unauthorized airings of movies and television shows, the media giants have figured out that Diller was wrong and that there is great value to be found in the online video market.

In fact, it is among the fast-growing elements of Web 2.0 – the new generation of Web-based communities based on social networking. In just two years, YouTube has led the way in the video market, becoming the biggest conduit for sharing home-made videos and making itself so valuable that Google recently bought it for $1.6 billion.

YouTube is so pervasive that it owns 45 percent of the online video market share, drawing upwards of 50 million people per month. MySpace, the social networking site owned by News Corp., is a distant second in the video area, with 20 percent of the market. And then there are the other big players, including Google’s own video service (10 percent) and Yahoo and MSN video (6 percent).

While Viacom is trying to keep YouTube from sharing professionally created entertainment content, NBC and News Corp. have decided to try to get in on the act and take control of their TV shows by finding a place in cyberspace.

In Viacom’s $1 billion copyright-infringement lawsuit against Google-YouTube filed in March, the cable and movie company said, “There is no question that YouTube and Google are continuing to take the fruit of our efforts without permission and destroying enormous value in the process. This is value that rightfully belongs to the writers, directors and talent who create it and companies like Viacom that have invested to make possible this innovation and creativity.”

That certainly sounds like an entertainment giant that feels threatened.

And it explains why NBC and News Corp. have pumped $100 million into their scheme for pimping their products online, trying to pull some of the audience from the amateur-video sites to view the traditional TV entertainment via its original sources. The yet unnamed NBC-News Corp. project would offer popular shows such as “The Office” and “The Simpsons” on sites where people already go to watch video: AOL, CNet, MSN, MySpace and Yahoo.

But, as Viacom did when it went after YouTube for copyright infringement, NBC-News Corp. might have to scare off the little guys—sites like dailymotion, GoFish, All South Park, and VideoHybrid—who are doing the same thing.

And those sites have already created a niche for themselves. While YouTube is the gold standard for social video sites, the others have found audiences as well. In its 2007 Web 2.0 awards, SEOmoz voted YouTube the top video site, but dailymotion was right behind and was rated higher in content quality and interface and design. So was MetaCafe.

So NBC-News Corp. has some catching up to do to find its place in a Web 2.0 world that suddenly seems a lot more threatening to the media giants than Barry Diller predicted it would be.

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Confused is currently owned by Admiral, but, according to a statement given to the Financial Times, “Admiral notes the recent press speculation regarding Confused.com and confirms that it has received approaches from several parties regarding the business.”

“The group is reviewing its options in relation to Confused which include retention of the business or a partial or full disposal,” the statement continued, but, “[t]here can be no certainty that any transaction will take place.”

Still, in the traditional anything-you-can-do-I-can-do-better corporate spirit, any interest on Ask’s (owner’s) part could make Google, Yahoo, and/or Microsoft think about buying Confused.  Stress on “could.”

Confused is, to be honest, not particularly attractive (from an aesthetic standpoint), but it’s apparently quite the little moneymaker.  The BBC reports that Admiral, as a whole, “[l]ast year . . . reported profits before tax of £147.3m, of which £23m came from Confused.com.”  Hence the bids of up to 700 million pounds.

Will Confused be sold?  Won’t it?  And what role will Ask (or any other search engine) play in the acquisition?  All right – you knew this pun had to come sometime – but this really is all very confusing.

So what does it offer?

* Instantly compare prices and view similar products while you shop online at many of your favorite merchants.

* Set Price Alerts on products you view. Get an alert when Pronto finds a merchant selling the product at or below your target price.

* Automatically apply money-saving offers to products you are viewing online.

* Easily track price changes and keep a history of products you’ve viewed online.

Andy Beal is an internet marketing consultant and considered one of the world’s most respected and interactive search engine marketing experts. Andy has worked with many Fortune 1000 companies such as Motorola, CitiFinancial, Lowes, Alaska Air, DeWALT, NBC and Experian.

You can read his internet marketing blog at Marketing Pilgrim and reach him at andy.beal@gmail.com.

IAC/InterActive owns a variety of internet businesses. Its principle holdings are Expedia, Ticketmaster, Home Shopping Network, Match.com and CitySearch.

IAC/InterActive is expected to acquire Ask Jeeves in a stock transaction, exchanging shares in IAC/InterActive for shares in Ask Jeeves then buying 60 percent of the just-issued IAC/InterActive shares back for about $1.2 billion.

Wow, that’s pretty big shake-up in the industry and also huge validation for not only Ask Jeeves but the entire search engine space. IAC can now pair-up its local search business, CitySearch, with the global search engine reach offered by Ask. Jeeves also stands to benefit from the technology IAC has at its other divisions.

Andy Beal is an internet marketing consultant and considered one of the world’s most respected and interactive search engine marketing experts. Andy has worked with many Fortune 1000 companies such as Motorola, CitiFinancial, Lowes, Alaska Air, DeWALT, NBC and Experian.

You can read his internet marketing blog at Marketing Pilgrim and reach him at andy.beal@gmail.com.

The transaction value is $720 million net of expected tax benefits.

The company will join IAC’s Electronic Retailing unit and HSN. HSN Catalog Services, consisting of Improvements and Alsto’s, will become part of Cornerstone Brands. This will provide HSN Catalog services with access to Cornerstone’s state-of-the-art centralized platform and allow the companies to share in significant cross-promotional benefits.

Thomas J. McInerney, EVP and CFO of IAC and CEO of IAC Electronic Retailing, said, “This arrangement enables us to immediately and significantly increase our position as one of the world’s leading interactive retailers by expanding our presence across the multiple channels of catalog, TV, and online. Catalog shoppers have been the fastest retail shoppers to migrate online and aligning the promotional power of TV and the catalog, together with the convenience and dynamic experience of the Internet, will provide compelling shopping experiences for current and new customers. Internet retailing is a substantial and expanding part of the overall retail landscape, and with this acquisition we are well positioned to capitalize on this trend. We expect this transaction to be accretive to our earnings, and to drive continued organic growth, and provide a platform for add-on investments.”

The Cornerstone Brands portfolio includes the catalogs and websites of Frontgate, Ballard Designs, Garnet Hill, Smith and Noble, The Territory Ahead and TravelSmith. The company reported revenues, EBITDA, and Operating Income Before Amortization of $720 million, $66 million and $59 million, respectively, for the fiscal year ended January 29, 2005.

Cornerstone is an industry leader in direct marketing and multi-channel merchandising, with more than 2 million active customers. Cornerstone’s distinctly unique, proprietary and exclusive product line (65% of sales revenue) enables the Company to continuously outpace the category, with top- line growth averaging more than 19% per year for the past 2 years.

Marty Nealon, President of HSN U.S., said, “HSN’s mission is to provide great products and compelling shopping experiences to its customers. The individual brands of the Cornerstone group are leaders in their categories, and they will add tremendous breadth and variety to our on-air and online programming. We will seek to develop meaningful ties between the HSN and Cornerstone brands and consumer bases, share our significant Internet experience to further Cornerstone’s online presence, and leverage operating efficiencies. We are excited to welcome the talented Cornerstone team to IAC and HSN.”

John Schaefer, currently President and COO of Cornerstone Brands, said, “All of us at Cornerstone are extremely excited to be joining IAC and particularly our new colleagues at HSN. We see this event as a testament to the hard work of everyone at Cornerstone, in that it resulted in the interest and eventual acquisition of our company by one of the leading e-commerce enterprises in the world. Individually and collectively our brands are positioned for continued growth, and our access to the TV retailing and interactive expertise of HSN and IAC will elevate our natural course, especially online.”

The transaction is expected to close during the second quarter of 2005.

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Operating Income Before Amortization was $324 million, up 11%, or 20% excluding a supplier liability adjustment in the prior year period (see page 3 for further detail). Adjusted Net Income was $250 million and Adjusted EPS was $0.33 (see page 14 for an explanation of comparable net revenue and definitions of non-GAAP measures).

On a GAAP basis, operating loss was $32 million, net loss was $46 million, and Diluted EPS was $(0.07), all adversely impacted by a $185 million impairment charge related to Teleservices goodwill and a $33 million impairment charge related to certain intangible assets of TV Travel Shop. These charges impacted Diluted EPS by $0.28 per share.

“2004 was pivotal for IAC,” said IAC Chairman and CEO, Barry Diller. “Revenue grew by 15% to $6.2 billion and Operating Income Before Amortization by 19% to more than $1 billion, delivering Adjusted EPS of $0.97. Satisfactory number performance, but beyond that and far more importantly, we put down many tracks, many initiatives, many tuck-in acquisitions that should lead to growth for years to come.”

“There were worthy accomplishments in the businesses: IAC Travel grew U.S. revenue by 20% amid a hotly competitive environment and by 66% internationally, and HSN delivered on its potential, with domestic revenue growing by 8% and operating profits expanding by 16%. Our other businesses, particularly those in the Financial Services and Real Estate and IAC Local and Media Services groups, made real progress in developing the strategies we all believe will begin to pay off in 2005. More than anything, we made the structural decision to simplify our company and create a new publicly-traded entity called Expedia, making both ‘new’ IAC and our travel services far clearer in both their individual focus and in their understanding by all constituencies — pivotal for the future of both.”

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According to InterActiveCorp, TripAdvisor is the seventh most visited travel site, with customer reviews of travel facilities hovering around 90,000. TripAdvisor receives in the area of $20 million a year from travel business that is done through the site.

This acquisition, paired with InterActiveCorp’s ownership of Expedia.com and Hotels.com, adds to IAC’s growing list of Internet properties that owner Barry Diller has purchased. The company also has ownership of the Home Shopping Network and Match.com.

Terms of deal were not disclosed.

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