Barry Diller Needs a Second Life

So now Google (Nasdaq: GOOG  ) wants to be the next social-networking kingpin? Step aside, Rupert, here come Larry and Sergey? Nonsense.

If there's an aspiring social-networking overlord among today's crop of billionaire barons, you can bet it's Barry Diller, CEO of IAC/InterActiveCorp (Nasdaq: IACI  ) . He's the one who desperately needs a second life.

How to be a social butterfly
That's no comment on Diller's social calendar. He's a Hollywood insider and a big player on the massive stage that is Manhattan. But Diller doesn't have a hammerlock on the social-networking market. No one does.

But shouldn't IAC? Much of the $6.5 billion in revenue it collects annually arrives via a digital service. You know most of them: Ticketmaster, LendingTree, Citysearch, Evite,, and, of course, the ever-present

Social networking, however, is only starting to take hold at Diller's digital empire. IAC launched Zwinktopia in April, a site for preteens that's somewhat reminiscent of what Ganz is doing with Webkinz, and what Disney (NYSE: DIS  ) is doing with Virtual Magic Kingdom and its recently acquiredClub Penguin.

And business is good. TechCrunch reports that Zwinktopia now has 4.6 million active users, who average 64 minutes a day of online time.

How valuable is that? Users have spent more than 500 million in Zwinktopia's virtual currency, known as "Zbucks," since the site's launch. Zbucks can be either earned online or purchased from IAC, which sells batches of 2,000 for $10 in cold, hard moola.

Advertising and sponsorship opportunities add to Zwinktopia's revenue engine.

Barry Diller ... this is your Second Life
Obviously, there's an opportunity here. But social networking is also like fashion; its patrons are fickle. Just ask the good folks at Linden Lab, creators of the iconic Second Life virtual world.

Think of Second Life as a Web-based version of Electronic Arts' (Nasdaq: ERTS  ) The Sims, but with all the accoutrements of the real world: currency, entertainment, work, shopping, and so on, all run on a platform powered by Intel's (Nasdaq: INTC  ) latest acquisition. For months, Linden's virtual world had been social networking's cool kid. Growth had gone wild. Even the IRS was interested.

And now? Not so much. According to a new report from researcher Yankee Group, Second Life has almost become passe. Residents are spending just 12 minutes online a month, Yankee says. By comparison, social-networking superstar Facebook -- which could be valued at a lofty $10 billion -- keeps its readers occupied for 186 minutes a month.

Apparently, Second Life needs is some spice. A partner to liven things up. IAC could be that partner. Wait; let me rephrase that. It should be that partner.

Think of the possibilities. and Chemistry could each offer virtual dating services to Second Life residents. LendingTree could offer loans to would-be Second Life Trumps. Ticketmaster could sell seats to Second Life concerts. Front Line Management could book acts. And so on.

For the most part, social networking is a distraction. Diller could make it more useful and, in the process, more profitable. Think about it. What if you could arrange a virtual date on Second Life before spending $100 on an awkward "so what do you do?" outing to the local Chili's?

My point is simple: Profits follow utility. Right now, Second Life doesn't offer enough utility to transform it from a neat time-waster into a cash-producing e-monster -- the sort of business that Microsoft (Nasdaq: MSFT  ) appears to believe Facebook has become.

Let Google be Google
As cool as it sounds to have avatars strolling Google Earth, it's hard to ignore that DoubleGoo does best when it boots you off its site and toward the furthest reaches of the Web -- preferably to a site that paid to get you there.

Could that change? Sure, but in the here and now, Second Life needs a boost. It needs help crafting a more compelling universe, one that's accessible anywhere. Does anyone do that job better than Diller?

Not in this life.

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