InterActiveCorp (IAC), controlled by media mogul Barry Diller, was one of the most aggressive acquirers in internet history. Through a series of strategic acquisitions in the early 2000s, IAC assembled a portfolio of search, media, and commerce properties that generated billions in annual revenue — much of it from a business model that most internet users never fully understood: the toolbar economy.
Barry Diller and IAC's Internet Strategy
Barry Diller, the legendary media executive who had built Fox Broadcasting and Paramount Pictures, pivoted to the internet in the late 1990s through his company USA Networks. By 2003, he had renamed the company InterActiveCorp and was aggressively acquiring internet properties. IAC's portfolio at various points included Match.com, Ticketmaster, Expedia, Hotels.com, Ask Jeeves, Excite, iWon, Evite, Dictionary.com, Thesaurus.com, and dozens of other properties.
The common thread in IAC's strategy was traffic monetization. Diller understood that the internet was fundamentally an advertising business, and that the key to profitability was owning properties that generated large volumes of search queries — queries that could be monetized through paid search results.
The Ask Jeeves Acquisition and Search Stack
IAC's acquisition of Ask Jeeves for $1.85 billion in 2005 gave it a complete search engine to power its monetization strategy. But the real value wasn't in Ask.com's direct search traffic (which was a distant fourth behind Google, Yahoo, and MSN). The value was in the ability to distribute Ask.com's search technology through toolbars, browser defaults, and bundled software installations.
IAC also acquired Excite.com and iWon.com from Ask Jeeves in 2004 (Ask Jeeves had purchased them from their bankruptcy proceedings). These properties, along with Dictionary.com and Thesaurus.com, gave IAC a network of high-traffic sites that could be monetized through search advertising.
The Toolbar Distribution Model
The Ask Toolbar was IAC's most profitable product. The toolbar would be bundled with popular free software — Java runtime updates, Adobe Reader, media players, download managers, and hundreds of other applications. When users installed these programs, they would often inadvertently install the Ask Toolbar as well, because the installation wizard pre-checked the toolbar option.
Once installed, the Ask Toolbar would set Ask.com as the browser's default search engine and homepage. Every search performed through the toolbar generated revenue for IAC. The company paid software developers and download sites a per-installation fee — typically $0.50 to $2.00 per toolbar install — creating a massive distribution network.
At its peak, IAC's toolbar network was generating hundreds of millions of search queries per month, translating to hundreds of millions of dollars in annual advertising revenue. The business was so profitable that IAC's search division was consistently one of the company's top revenue contributors, despite Ask.com's relatively modest direct search market share.
The Regulatory Backlash
The toolbar bundling model eventually attracted regulatory attention. The FTC investigated practices around bundled software installation, and several states' attorneys general raised concerns about deceptive installation practices. Microsoft, Google, and Mozilla all updated their browser policies to make it easier for users to identify and remove unwanted toolbars. Windows Defender began flagging certain toolbar installers as potentially unwanted programs (PUPs).
As browsers became more sophisticated and users became more aware of toolbar bundling practices, the model's effectiveness declined sharply. IAC gradually wound down its toolbar business and shifted its focus to other properties within its portfolio.