Barry Diller's Home Shopping Network has plowed a new round of financing into CitySearch, the regional online guide company that is locked in a city-by-city battle with Microsoft's Sidewalk, pitting Diller, big media's most aggressive kingdom builder, against Bill Gates, the software zillionaire who makes no secret of his own media empire ambitions.
CitySearch said today that it had secured more than US$34 million in new funding from a range of heavy-hitting media, finance, and computer partners led by the Home Shopping Network and including Microsoft co-founder Paul Allen.
With the new financing, CitySearch said it expects to take root in 27 cities in the United States and internationally by the end of 1998, up from the current 11 metro regions, and to further develop the guide's technology, site features, and editorial content. Microsoft's Sidewalk now operates in eight cities and has its sights set on three more. The new financing is almost certain to escalate the carpet-bombing ad campaign that has taken over bus posters and billboards in New York and San Francisco, the two US cities where the two city guides compete.
Diller, a veteran ABC and Paramount executive, pioneered the Fox Network for Rupert Murdoch in the 1980s before setting out to form a new network of his own. After several false starts, Diller has assembled the pieces of a broad media conglomerate by gaining control of USA Network, with its Sci-Fi Channel, the Silver King network of 12 local TV stations, Universal Studio's TV operations, and the Ticketmaster entertainment agency, among other properties. Reflecting Diller's aspirations, HSN plans to change its name to USA Networks.
Gates' media moves include a $1 billion investment in cable company Comcast, along with several similar deals rumored to be in the works with any or all of the top US cable networks, including Tele-Communications Inc., Time Warner, and US West's MediaOne. Of course, Microsoft plunged into media content via the Microsoft Network, Slate, and its MSNBC television and online venture with NBC.
"We believe the best organizing infrastructure for interactivity and electronic commerce is local," HSN spokeswoman Jennifer Goebel said, pointing specifically to HSN's controlling interest in Ticketmaster and its network of local US TV stations. "That is CitySearch's business model, and it connects to ours in both electronic commerce and broadcasting," she said.
CitySearch chief executive Charles Conn said HSN's investment opens up a host of partnership possibilities between the two companies, although there is no specific obligation to do so by either party.
"CitySearch could form a relationship with Ticketmaster, with HSN's network of local TV stations, or participate in the electronic-commerce applications that Home Shopping Network is setting up in local regions," Conn said. "This investment gives us a good impetus to pursue all these things," he said.
HSN's investment in CitySearch complements the company's existing Internet Shopping Network, one of the leading Internet commerce sites, which had revenues of about $3.3 million during the third quarter ended in September.
While specific financial terms were not disclosed, Conn said that "Home Shopping Network's investment is a very big chunk of that [$34 million]." In return, HSN will receive a seat on CitySearch's board of directors.
Additional investors announced today included Schibsted, a Scandinavian media company, mutual-fund group T. Rowe Price, and a fund backed by Donaldson, Lufkin, and Jenrette, along with Intel, which took a stake amounting to a single-digit percentage of the company. Previous investors, including the Times Mirror and Washington Post newspaper chains, also boosted their existing stakes in CitySearch.
CitySearch announced a partnership last week with Schibsted to create online community services in Sweden, Norway, and Denmark.
CitySearch has raised a total of $75 million since its inception in the summer of 1995. Conn said that the latest round of funding is likely to be the last before a possible initial public stock offering. "We would think the next financing would be a public offering - but that depends on the volatility of the stock market," he said, giving no time frame for such a move.
The CitySearch business strategy is to partner with one or more major media companies in each city to provide news and other editorial content, freeing up CitySearch to develop soft content like entertainment listings. In Toronto, the site is known as StarCitySearch.com, signaling cross-promotional links to the Toronto Star newspaper. In San Francisco, it's called CitySearch7, denoting the site's close ties to the local ABC affiliate, Channel 7.
CitySearch's Conn said there were no plans yet to forge similar links with HSN's local TV stations, but did not rule out the possibility.
The nation's capitol appears to be the next battleground for the city tours hawked by Diller and Gates. CitySearch is working with WashingtonPost.com to offer an integrated version of their separate services by December, while Sidewalk gears up to enter the market by year's end.
With Diller's money jingling in its pockets, CitySearch may finally have found something like equal footing to square off with the big dollars backing Sidewalk. So, this battle of wannabe media tycoons may actually come down to who runs a better show.
