IAC-owned Match.com this morning announced that it has acquired a 20% interest in Zhenai, a provider of “online matchmaking services” in China, for an undisclosed sum.

Launched in 2005 by CEO Dr. Song Li, Zhenai provides integrated Internet and telephone matchmaking services to Chinese singles looking for long-term relationships. Zhenai is said to boast a user base of over 30 million registered members.

According to the press release announcing the investment, Zhenai commands “especially high” subscription rates due to subscribers’ access to over 1,000 professional matchmakers at Zhenai’s call centers, who provide subscribers with advice and consultation throughout the dating process.

Online dating site OkCupid is making a big move today in the mobile space—the service is adding location-based functionality to its Android and iOS mobile apps. For background, OkCupid singles tend to be younger, which is one of the reasons why IAC’s Match.com decided to buy the dating startup for $50 million earlier this year.

The use of mobile apps for dating and even meeting friends is definitely on the rise, and it seems that the future of this industry could lie in mobile platforms. Co-founder Sam Yagan agrees, and says that Grindr, a dating app for Gay men, helped pioneer this. But there’s still room left for innovation in other markets, he says.

Which is why OkCupid is bringing location to the mix with the latest version of its mobile apps. You can now broadcast if you are free, want others to join in plans and more. The bonus of OkCupid is that you can set up the feature to only send these broadcasts to people who are personality and interets matches for you in your location.

Other functionality includes the ability to chat with other people nearby, share photos, and more. If OkCupid finds a good match for you in their database for someone who lives nearby, the app will recommend the potential date. You’ll also be able to browse all your matches nearby.

There’s no doubt that the trend of matching people based on their interests and location is catching on. Andreessen Horowitz-backed LikeALittle is a startup that is also playing in this space. And it would make sense for more dating apps to start including location in their mobile offerings.

According to the release, the agreement, through which Google provides IAC’s search products and network partners with sponsored listings and other search-related services, is comparable to the previous agreement.

CEO of IAC, Greg Blatt, said in a statement that its search business has grown from $58 million in Operating Income Before Amortization in 2006 to $125 million in 2010, and generated pre-tax free cash flow(i in excess of $500 million over that period.

Handing over search advertising and technology to Google has been a good bet for the company. Google has actually been contributing to a portion of IAC’s Ask.com’s search results and last Fall, IAC announced that it would be completely outsourcing Ask’s search (although it’s unclear to which company, it could be Google).

IAC has made a business out of developing or acquiring mobile applications based on its popular properties. In fact, IAC’s mobile apps, which include apps for Match.com, CityGrid, UrbanSpoon, and Dictionary.com, have seen over 40 million downloads as of end of the year 2010. Today, we’ve learned exclusively that IAC is furthering its mobile strategy by launching Hatch Labs, a technology sandbox devoted to incubating mobile startups and innovations.

Hatch Labs is the brainchild of Dinesh Moorjani, who was formerly the SVP of IAC Mobile. At IAC, Moorjani started the mobile group in 2007 and helped lead all product strategy for mobile. During his time, Moorjani helped doubled mobile revenue annually for IAC. He tells us that for the past five years IAC has been acquiring mobile technologies and apps, but this can be an expensive endeavor. Moorjani and the company wanted to help incubate more innovation within IAC, particularly in the mobile sector and thus Hatch Labs was born.

The incubator, which is located in IAC’s New York office, is financially a joint venture between Xtreme Labs and IAC (financial terms have not been disclosed). Hatch Labs is bringing in talent to prototype and develop new applications, tools and platforms that tackle emerging problems in mobility. Moorjani, who serves as CEO of Hatch Labs, manages multiple teams of handpicked engineers and entrepreneurs, who work on developing mobile applications.

Moorjani says that three ideas/products are being incubated a any given time, and expects five businesses to be spawned from Hatch by the end of 2011. The most promising ventures, which will ranged from consumer facing to B2B apps, will seek additional capital from IAC and outside investors, to further grow the businesses, and could even be fully acquired by IAC.

In terms of equity and initial seed funding, Moorjani declined to give us specifics but says it is competitive and similar to the equity arrangements with other startup incubators, such as TechStars and Y Combinator.

Of course, recruiting talent is key to the success of Hatch Labs and its businesses and Moorjani is using equity incentives to attract talent that not only has experience in the mobile industry, but also has developed and sold busineeses previously. For example, Hatch’s first general manager to run one of its initial businesses is BumpTop’s former COO, Nina Sodhi. BumpTop was acquired by Google last year.

Details on Hatch’s first product Blu Trumpet, which is expected to launch in Q2 this year, are limited but Moorjani says that it is a monetization and distribution platform in mobile, that aims to help publishers make money off apps and provides a distribution portal for advertisers. Another business being developed within Hatch involves group texting, but Moorjani declined to reveal any further details.

Housing an incubator within a large company has its advantages and drawbacks. First, the incubator will need to be free of any corporate regulations, mentalities and rules for innovations to flow freely. While this sounds simple, it can be tough. Of course, IAC has tons of cash to put into these ideas, which is an added bonus. It should be interesting to see the quality of products that hatch from Hatch Labs.

IAC has expanded its board of directors with a thirteenth seat and elected well-known businessman Michael Eisner, who served as chairman and CEO of The Walt Disney Company from 1984 until 2005, to join said board, effective immediately.

Prior to his long tenure at Disney, Michael Eisner served as the President of Paramount for eight years after starting his career at ABC. In fact, he was hired at ABC by none other than Barry Diller, until recently chief executive at IAC.

In 2005, Eisner founded an investment firm called Tornante. He’s also chairman of Vuguru, a studio focused on producing programming for the Web and other digital platforms that was incubated at Tornante.

Eisner also serves on the boards of the California Institute of the Arts, Denison University, the Aspen Institute, the Yale School of Architecture Dean’s Council, and The Eisner Foundation.

IAC is a media company with a wide range of businesses, including Ask.com, CitySearch, Vimeo, CollegeHumor, Dictionary.com and Match.com.

Editor’s note: Guest author Ashkan Karbasfrooshan is the founder and CEO of video site WatchMojo. In this post he examines looks back at the online video deals of 2010 and what deals could happen in 2011. You can find his previous guest posts about online video here.

With the recent rumor that Google’s YouTube unit was looking at acquiring video content company Next New Networks, it’s clear that anything can happen in the rapidly growing online video space.  While some are shocked to see that Google may cross over and own content, the rumor does sound plausible:

• Next New Networks generates the vast majority of its views on YouTube and if the companies were under one umbrella, it would remove some of the monetization obstacles and challenges Next New Networks probably faces when trying to sell their YouTube inventory.
• YouTube, meanwhile, has massive online video street credibility but totally lacks the human sensibility required in media and content in particular to take a rising star on the site and take them to the next level.  That is Next New Networks’ business.

The combination would allow YouTube to fold in Next New Networks and use it as a talent management platform, basically, and give the video aggregation site the ability to create videos if need be.

Loaded with nearly $25M in venture financing, it’s not quite the initial public offering that some of their investors were hoping for, but let’s face it, an exit to Google is nothing to be ashamed of.

Close, but no cigar: IPO Talk Will Increase

In fact, while you can blame Sarbanes Oxley or a lack of credible initial public offering (IPO) candidates, it is likely that 2011 will come and go with very few, if any, major liquidity events in the public markets for online video startups.  As such, the most likely path to liquidity for venture capitalists (VCs) remains mergers and acquisitions (M&A).  With VCs having invested in so many online video startups and industry revenues still not matching the lofty expectations that whet VCs appetites in the first place, a lot of boards will cash out in 2011 when buyers come knocking.

Only Certainty: Dealmaking Will Continue

After many years of expected consolidation, 2010 saw a wave of acquisitions:

• AOL acquired StudioNow and 5Min (as well as TechCrunch, of course)
• Specific Media acquired Broadband Enterprises
• Undertone acquired Jambo
• VideoEgg acquired SixApart
• Tremor acquired Scanscout

Apart from Video Egg’s merger with Six Apart which was largely based on the shared VCs doing some financial engineering, with these deals, we saw examples of both vertical and horizontal integration.

The terms horizontal integration and vertical integration are used in microeconomics and strategic management, whereby:

• horizontal integration describes a strategy used by a business that seeks to sell a type of product in numerous markets. Horizontal integration occurs between two firms which are in the same industry and in the same stage of production, ex: a car manufacturer merging with another car manufacturer.

Conversely:

• vertical integration combines companies in a supply chain by a common owner. Usually each member of the supply chain produces a different product or (market-specific) service, and the products combine to satisfy a common need.

Vertical Integration

AOL’s moves were examples of vertical integration:

• StudioNow gives it a platform to hire producers to create videos for its AOL properties and myriad brands.
• 5Min gives it the opportunity to distribute its own videos and those it has licensed to more places around the Web.

These deals have given AOL an end-to-end capability in video.

Horizontal Integration

Meanwhile, we saw display banner ad networks venture into online video:

• Specific Media acquiring Broadband Enterprises and Undertone acquiring Jambo enabled giant ad networks in the display banner arena to enter the video market rapidly.
• Tremor acquiring Scanscout is plain consolidation among two competitors who probably got tired of tussling in the marketplace and eating into each other’s margins.  The deal gives them a bigger footprint and a march towards an initial public offering.

In this context, horizontal integration occurred between potential or actual competitors.

2011 Storylines

There is nothing to suggest that 2011 will be less busy on the online video deal front.  Here are some of the trends I think will drive M&A activity in 2011.

Ad Networks

Ad networks are rife for consolidation and can be broken up into:

• The source of technology, Ad Servers: the software required to properly serve ads and offer the kind of targeting and reporting that advertisers and publishers expect these days.
• The source of media, Ad Networks: the matching and intermediating between advertisers and publishers

A few firms have footholds in both: Auditude (ad server) also runs Cross Point Media (the ad network), Tremor runs the Acudeo ad server; while some operate under the same moniker (Adap.tv).  Some focus just on one space: LiveRail doesn’t have buy or sell media, it only offers an ad server.

With Jambo in the hands of Undertone and Broadband Enterprises part of Specific Media, expect display banner ad networks (such as Specific Media, Undertone or Tribal Fusion) to acquire video networks or see consolidation within video ad networks and servers.  There are no shortage of remaining players: Adap.tv, Auditude/Cross Point Media, Brightroll, Freewheel, LiveRail, Overlay.tv, Panache, Spotxchange, Tidal TV, Video Egg, Yume . . .  to name a few, with Tremor becoming a leading IPO candidate.

Big Media: A state of inertia

We have yet to see traditional media companies with their large purse strings step into the ring.  It’s only a matter of time though, as Magna’s latest figures show that online advertising will overtake newspapers by 2013, though TV advertising will still command the lion’s share of all ad dollars through 2016, with an estimated 40 percent share at that point.  Although, by then online video will account for $11.4 billion in global ad spend.  Where online video trumps television advertising is in growth rates: online video will grow at an average rate of 19.6% through 2016 (with estimated 50% growth in 2011 alone), versus a 7.5% growth rate for TV advertising.

With large media companies hoarding more cash than ever, it’s fair to assume that those who attempted to “build” from within and failed will soon shift gears and look to “buy”.

But the reality is that big media, by and large, still doesn’t know what it wants to do in the arena.  With Rupert Murdoch divesting from the Web in general and shifting focus from paywalls to iPad publications, it’s unlikely that News Corp. will ante up much for online video.  How about CBS?  With changes at the very top of’ management, I also don’t see them making too many shifts back into online video. Disney is more focused on gaming than online video.  NBC Universal, now in the hands of Comcast, will probably be stuck in integration mode for most of the year.  Time Warner seems intent on continuing its TV Everywhere initiative to maintain its margins and offline revenues.

Newspaper companies stand the most to benefit from online video, but they will spend the first half of the year wading through the opportunities to understand what strategy and targets will most help their business: technology to serve ads or video content to sell ads against.

The Portals and Major Online Companies

AOL certainly put itself in an enviable position with a series of moves, though integrating the various moving parts as its dial-up business continues to shrink will remain a challenge.

It’s now Yahoo!’s turn at bat.  With Ross Levinsohn coming on board and being a content guy with a penchant for deal-making, Yahoo! will mimic AOL and get more serious about video, but what they actually do is anybody’s guess.  They just unveiled their local strategy.  Is video next?  Don’t hold your breath.

Microsoft shuttered its Soapbox property and it remains to be determined what it will do in online video.  With Redmond admitting it offered Facebook a $15 billion offer and Steve Ballmer courting Twitter’s CEO Dick Costolo, I suspect Microsoft has priorities other than video.

Meanwhile, with $25 billion in cash and equivalents, Apple can move in multiple directions, namely:

• mimicking its acquisition of mobile ad network Quattro Wireless with an acquisition of a video ad network that could enable its foray into advertising; iTunes is a cash cow, yes, but it could hedge itself by monetizing its booming Apps business via advertising and the iPad is the perfect video consumption device
• it bought Lala to enter the music streaming business.  By the same logic, it could buy a CDN company to stay one step ahead of the surging bandwidth needs of mobile video delivery and find a way to rely less on carriers (BitGravity, Edgecast, Limelight Networks or Panther Express are some targets)
• the acquisition of a major ad agency (or a parent holding company); this is one of the more unlikely of scenarios, but judging by some of the challenges Apple has had with its iAd initiative, it’s not crazy altogether
• a livestreaming platform such as Justin.tv, Kyte, Livestream/Mogulus, Qik, uStream
• a video search engine or discovery tool, to attack Microsoft and Google in the next area of search (it would be crazy to attack Google head on in traditional search) and it can find a plethora of companies looking to exit: Ramp (formerly Podzinger/Everyzing), Blinkx, Dabble, Pixsy, Cast TV, Clipblast, Mefeedia.

Amazon has its hands in storage (S3) and content delivery (Cloudfront).  It’s possible it will buy a video player technology to offer end-to-end solutions.  There won’t be any shortage of likely targets: Ooyala and Brightcove might be too expensive but the list of eager sellers includes bliptv, Kaltura, Feedroom and VMIX.

Ooyala and Brightcove will themselves look at tuck-in deals as they ramp up their own growth.

Facebook is a major player in online video, peaking at No. 2 in comScore’s August video rankings when it surpassed Yahoo! (though Yahoo! regained the No. 2 spot the next month in September).  Facebook has a tendency to acquire companies for its people, but like Apple, it could also acquire:

• an authentification system to differentiate the massive amounts of video it is hosting
• a CDN company to ensure stability and lower hosting costs as it continues to grow
• a livestreaming platform such as Justin.tv, Kyte, Livestream/Mogulus, Qik, uStream
• an ad network to make money from video.

InterActive Corp. (IAC) is sitting on a lot of cash and investing in content creation efforts via Electus and Notional.  It would be logical for them to now invest in some kind of distribution play to ensure that their programming is actually seen: potential targets include DailyMotion, Metacafe or Nabbr.  It does own Vimeo, but that doesn’t offer the kind of reach marketers need.  We saw Sony do this via their Grouper acquisition a few years ago, renaming the website Crackle and using it to showcase their programming.  While the jury’s out on the success of that deal, we might see IAC pull a similar move.

Will any of these deals actually happen?  Who knows.  Predicting this kind of thing is a recipe for failure, but there is an adage that says “buy on the rumor and sell on the news.”  With more hype and expectations surrounding online video, the buying will continue.

Big move for Liberty Media, IAC and the latter’s Barry Diller today. The former has exchanged its entire equity stake in the Internet holding company for a combination of assets and cash in a transaction intended to be tax-free to both companies. Liberty has exchanged approximately 12.8 million shares of IAC stock for all of the capital stock of a wholly-owned subsidiary of IAC that holds the Evite and Gifts.com businesses, and approximately $220 million in cash.

Barry Diller is also stepping down as IAC’s CEO, and will be replaced by Greg Blatt, formerly chief executive of IAC portfolio company Match.com.

Right before Liberty’s exchange of shares with IAC, Barry Diller, who will now serve as the company’s Chairman and Senior Executive, exchanged about 4.3 million shares of IAC common stock held by him for an equal number of shares of Class B common stock held by Liberty.

This exchange took place pursuant to the terms of a pre-existing stockholders agreement between Diller and Liberty.

According to a statement, Diller says he is “not going anywhere”.

True enough, Diller still currently owns shares representing approximately 34% of the total votes of all classes of IAC stock, the largest individual voting stake in the company.

He also gets to exchange up to 1.5 million additional shares of common stock he may acquire within the next 9 months for an equal number of shares of Class B stock held in the treasury of IAC.

If he buys those shares, his shares will represent approximately 41% of the total votes of all classes of stock.

Evite and Gifts.com will become part of Liberty Interactive’s eCommerce companies portfolio.

The news comes week after IAC laid off most of its Ask.com staff and effectively surrendered its search operations to its competitors.

Diller’s statement on the exchange, in full (John Malone is Chairman of Liberty Media):

“These last 17 years of my association with John Malone and Liberty Media have been a great, and occasionally, wild ride. We began this grand tour of interactivity a few years before the internet became widely used, and we were able to create, acquire and build up substantial businesses over that time.

While I’ll continue my association with Dr. Malone in Expedia, and as significant shareholders of the multiple spun-off companies, Liberty’s exit from IAC is a turning point, and I want to state my thanks and gratitude to Dr. Malone for his support and encouragement throughout (with one brief period of mutual discontent which we both believe was an aberration).

This has been a most productive partnership and I’m glad it will continue in other venues.”

IAC in its third-quarter earning release reported that total revenues for Q3 2010 were $422 million, up 25 percent compared to the same period last year.

After a series of on-again, off-again talks, Newsweek is merging with The Daily Beast, the IAC-owned online news site run by Tina Brown. The new joint venture will take the ungainly name of the Newsweek Daily Beast Company. Last August, the Washington Post Company sold Newsweek for $1, plus the assumption of $40 million in debt, to stereo tycoon Sydney Harman.

Now Barry Diller is getting his hands on Newsweek and mashing it together with his high-profile media play, the Daily Beast. It sounds as though the two publications will remain separate for now, with Tina Brown becoming the editor in chief of Newsweek as well. That makes sense. Who wants to read the Daily Beast in print? It is like the TMZ of news.

Combining the two news brands would be a disaster. Just look at what each publication stands for. Newsweek is a storied publication whose tag line is, “What Matters Most.” The Daily Beast’s, meanwhile, is. “Read This Skip That.” Some of the headlines on the Daily Beast right now are: “Mel Forced To Pay Oksana 60K In Child Support,” “Inside The Mind Of A Monster,” and a photo slide show of “Controversial Poses: Naked, Pregnant, And Gorgeous.” Newsweek’s headlines are more along the lines of “In Iraq, a Government At Last.”

The plan seems to be to combine the newsrooms and the ad sales, but keep the properties independent. The magazine will be a place for longer narratives and investigative pieces. The web will be for breaking news. Brown writes:

And for Newsweek, The Daily Beast is a thriving frontline of breaking news and commentary that will raise the profile of the magazine’s bylines and quicken the pace of a great magazine’s revival.

Newsweek is a valuable brand, and Brown is capable editor who once ran the New Yorker. But why make a bet on a dying, debt-laden print magazines now? And online it might make more economic sense to combine the two sites and gain broader reach. (Update: IAC confirms the two sites will likely be combined under the Daily Beast). Comscore estimates that the Daily Beast is pulling in 2.9 million unique visitors a month, while Newsweek.com is attracting 5.4 million. But those are two very different audiences looking for different things.

Also, that name, the Newsweek Daily Beast. It just hurts my eyes.

The saga continues. After informing us in September that the IAC-owned Bloglines was to be shut down permanently, Ask.com (the IAC property that operates Bloglines) has resurrected the troubled RSS feeder, the company tells TechCrunch exclusively. IAC has transferred ownership of the property to an unlikely new patron: MerchantCircle, an online marketing network for small business owners. Financial terms of the deal were not disclosed but we do know that the deal was sort of in the family—IAC invested in MerchantCircle back in 2007. We are told Ask.com will maintain the current Bloglines service until December 1 of this year, after which the service will be transitioned to MerchantCircle.

IAC and Ask.com put Bloglines out of its misery after a tumultuous history. Bought by IAC’s Ask.com in February 2005 for around $10 million, the site has been in trouble, facing competition from Google Reader and a shift away RSS to realtime news streams.

While we heard IAC was looking for ways to either refurbish, or sell Bloglines, it looks like they finally got around to the latter. But MerchantCircle is a surprising candidate considering that it is not a media property.

MerchantCircle, which has been quietly snapping up companies, provides a business directory for merchants in smaller towns and currently lists 1.4 million small businesses. The startup has long targeted merchants in small locales versus catering towards the consumers, as sites like Yelp and CitySearch do. MerchantCircle has local business members in 95% of the 24,600 U.S. cities and towns with populations over 200. And the company could be eyeing an IPO in the coming year.

Ben Smith, co-founder of MerchantCircle, says he has big plans for Bloglines. The technology will be integrated into MerchantCircle to allow business owners to create RSS feeds on local news around their town, or city as well as their specific trade (i.e. feeds around plumbing, law, or construction). Smith says the platform will also be able to bring in feeds of local daily deals and coupons.

For all you loyal Bloglines users (the site has 2.7 million users), don’t fret. MerchantCircle will be keeping the former standalone service in place for non-MerchantCircle users, at the RSS platform’s present URL and Smith assures the the transition will be seamless for previous users (i.e. same log-ins and UI). One notable feature that will be missing is the Clippings feature, and users won’t be able to merge their saved clippings to the new platform. MerchantCircle will also offer Bloglines users customized local RSS feeds that users can opt into for hyper local news and deals. Smith adds that Bloglines has been tweaked slightly for a “richer, faster experience.”

Doug Leeds ,President of Ask.com says Ask was approached by a number of companies who were interested in giving new life to Bloglines but in the end MerchantCircle makes sense a new parent because they are “corporate cousins.”

Here’s the full email IAC will be sending to Bloglines users tomorrow:

As you may have heard, Ask.com has entered into an agreement with MerchantCircle who has agreed to keep Bloglines up and running. Stay tuned over the coming months as MerchantCircle works to improve the Bloglines service by creating a richer and more local user experience.

In the near term, your news feeds and access to the service (with your same password) are still available. You can read more detail about MerchantCircle and its plans for the service at the MerchantCircle blog.

For now, here’s what we want you to know:

Timing: Ask.com will maintain the current Bloglines service as is until December 1, 2010. After December 1, 2010, the service will transition wholly to MerchantCircle. During the month of December, you will be able to easily port your feeds over to the MerchantCircle-powered service. It’s an easy process, and we’ll provide you with complete instructions well in advance.

Logging-In: You will keep your same password as before.

Current Bloglines features: Your Bloglines subscriptions will seamlessly transition to the MerchantCircle service, however, the Clippings Tab will no longer be available and you will not be able to transport saved articles to the new service. We’re very sorry for any inconvenience this will cause – the infrastructure requirements and costs are simply too great to justify maintaining

Barry Diller realizes that his Ask search engine isn’t going to gain market share anytime soon, but search can still power growth for IAC if it just keeps up with the growth in the overall search market. IAC released third quarter earnings this morning. Total revenues were up 25 percent to $422 million. Operating income quadrupled to $36 million, and adjusted earnings per share came in at $0.32 versus Wall Street estimates of $0.27. (However, after stripping out the adjustments due to one-time sales of stock and other assets a year ago, net income was actually down 19 percent).

Search represented nearly half of revenues ($205 million). The search business grew 20 percent, goosed primarily by a 55 percent increase in active toolbars to 97 million. IAC’s toolbar business is its secret distribution weapon, but those searches tend to generate lower revenue per query than those on Ask.com, which itself is still growing and is now ranked as the sixth largest website in the U.S. LAst month, Ask CityGrid Media’s new local advertising network also contributed to overall search revenues.

But search wasn’t the fastest growing part of IAC’s business. Revenues for its media and other properties (such as CollegeHumor, The Daily Beast, Electus, Evite, and Vimeo) grew 44 percent to $63 million. Match’s revenues jumped 31 percent to $106 million, with paying subscribers up 30 percent to 1.8 million (“organic” growth in subscribers, though, was 16 percent). The rest of IAC’s revenues came from ServiceMagic, up 10 percent to $48 million.

In terms of operating profits, the two biggest contributors were Match ($38 million) and search ($29 million). The media businesses showed an operating loss of $4.6 million. The company also bought back $125 million worth of shares during the quarter. The stock is up about 5 percent this morning to $27.85 on the earnings news.

Online analytics company Compete has just published its ranking of the top 50 websites for September 2010, giving some insights into current visitor trends (and not absolute numbers, as the company tends to undercount traffic for most websites).

Compete’s data compilation shows increasing traffic to Microsoft’s search engine Bing (up 11.7 percent for the month and 108.5 percent for the year) as well as Ask.com (up 8.7 percent for the month and 75.3 percent for the year). On the other side of the spectrum we – unsurprisingly – find MySpace (unique visitors down 5.53 percent for the month and 19.1 percent for the year) and MapQuest (down 5.8 for the month and 22.1 percent for the year).

If MySpace’s redesign will help buck the trend remains to be seen.

Perhaps more surprisingly, Yahoo’s Flickr.com seems to have lost some of its shine lately, showing a 14 percent decline in unique user visits in September 2010.

And what about IAC’s Ask.com, which actually jumped over online juggernauts such as Amazon.com and MSN.com last month, according to Compete’s data. The search engine is now ranked in sixth place, trailing sites like Wikipedia, Yahoo, Google, Facebook and YouTube.

Other winners include Disney’s Go.com and Mozilla.com, which showed the largest monthly unique user visitor gains (15.8 percent and 30.5 percent, respectively).

On stage today at our TechCrunch Disrupt conference in San Francisco, Vinod Khosla, the founder of Khosla Ventures, recalled a story from the days when he backed Excite, one of the original Internet portals. Specifically, he spoke briefly about the time they failed to acquire Google.

This story has been circulated for a while, but not many people know about it. Khosla stated it simply: Google was willing to sell for under a million dollars, but Excite didn’t want to buy them.

Khosla, who was also a partner at Kleiner Perkins (which ended up backing Google) at the time, said he had “a lot of interesting discussions” with Google founders Larry Page and Sergey Brin at the time (early 1999). The story goes that after Excite CEO George Bell rejected Page and Brin’s $1 million price for Google, Khosla talked the duo down to $750,000. But Bell still rejected that.

Whoops. As of today, Google’s market cap stands at $167 billion.

Excite, meanwhile, was acquired by Ask Jeeves in 2004. That company became Ask.com, and now it’s owned by Barry Diller’s IAC. As Diller stated at Disrupt today, Ask would probably be better off outside of IAC at this point.

What might have been…

Today at our TechCrunch Disrupt conference in San Francisco, IAC CEO Barry Diller took the stage for a fireside chat with our own Michael Arrington. They covered a lot of topics, but the first thing Diller keyed in on was the most important: net neutrality.

“All of you have to get out there and start arguing for this strongly,” Diller emphatically said. He clearly feels very strongly about this topic. “It is the lives of you all and the people coming after you — we have to protect that,” he continued.

He noted that some Republicans are in opposition to the idea of net neutrality on the grounds that they don’t want government rules on anything. “It’s absurd,” Diller said. “We have to unleash the FCC,” he continued noting that they were bogged down with typical bureaucracy.

Diller said that the FCC has to help get broadband Internet much more developed in this country. He noted that the U.S. is 16th in the world with regard to broadband. “It’s shameful,” he said noting that we’re the leaders in technological innovation.

He then talked a bit about search neutrality. “I want search to remain as neutral as possible,” he said. He said he was worried that Google is starting to get more vertically integrated. He admitted that he had a vested interest in search neutrality as he owns a lot of content — and also Ask.com. Though, the latter, he isn’t exactly bullish about.

Many of us may have forgotten that Ask.com is a search engine just like Google and Bing. It seems that IAC’s Barry Diller, who owns Ask.com, seems to have no memory of Ask’s value as well. Diller sat down with Michael Arrington today at TechCrunch Disrupt, and spoke candidly about the future of Ask.com.

Says Diller, “I don’t think Ask.com is going to gain search share; everyone copied us.” He added that Ask is not competitive with Google at all. When an audience member asked whether Ask would be more valuable outside of IAC rather than within the network; Diller quipped: Ask has no value inside of IAC, so why would it add value as a standalone site? He also said that IAC hasn’t been able to grow Ask the way he thought the company would be able to.

To Ask’s benefit, he did add that if you enter a natural language question into the search portal, Ask.com will give you a good answer. The company has tried to expand into the Q&A realm, recently launching a Quora-like feature to the search portal.

Ask, which was originally known as AskJeeves, was acquired by IAC in 2005 for $1.85 billion.

UPDATE: IAC and Barry Diller has issued this response: “I did not say that Ask has no value inside of IAC, period. In response to a specific question, I said that many of our assets are not ‘valued’ in the stock, and Ask is one of them…I was asked specifically if Ask would be better off with us or another company or standing alone. In the context of that question, I said that since it wasn’t valued in IAC – like so many of our businesses, because we have so many – that it would only be ‘valued’ stand alone.”

UPDATE 2: It was Google’s Don Dodge is person who posed the question to Diller; his interpretation seems to be the same as mine. Others reported the same response as well.

UPDATE 3: We looked at the video of Diller’s interview and he did definitely say Ask “has no value inside IAC,” but he was arguing more that the stock market doesn’t ascribe any value to it. Here is the full exchange, which starts at about the 24:30 mark (bold added for emphasis):

Q: “Do you believe Ask is worth more as a separate public company, or as part of IAC or as part of another company”

Diller: “Well you can never tell if it is worth more as part of another company because you don’t know what that other company would do with it. But as a standalone, I don’t think it would be, no. The truth is it has no value inside IAC, so I would think that it might have value standing alone. Because if you do a sum of the parts of IAC as against a private market value of any of these assets, and particularly Ask, I don’t think anybody ascribes any meaningful value to Ask.com“

Bought by IAC’s Ask.com in February 2005 for around $10 million, the site has been in jeopardy ever since the launch of Google Reader long ago, compounded by the shift from RSS to realtime news streams. Over the past few years, the site hasn’t launched any new or innovative features to boost usage. While we’ve heard in the past that IAC was considering shutting down the site, the company held off on killing the site permanently and was looking for ways to refurbish Bloglines.

Doug Leeds, President of Ask.com tells us that the reasoning behind closing Bloglines came down to the fact that the market for people who use Bloglines (and RSS readers, he adds) isn’t growing, and is actually shrinking as people shift to realtime news streams such as Twitter to consume content on the web. In IAC’s market research, according to Leeds, there has been a 20 percent decline in people who are consuming RSS feeds as a whole. He says that Ask.com will continue to focus on drive traffic to and enhance its question and answer site.

Bloglines isn’t the first RSS reader to throw in the towel; Newsgator shut down its online newsreader last year. Now, Google Reader is all we have left; though even that product is slowly being replaced. We’ve put Bloglines in the TechCrunch Deadpool.

Meet Dorkly.com, a new videogame humor property that caters to “all gamers, be they nerds, geeks, or even dweebs”. That sounds like you, so we thought we’d share.

According to the press release, Dorkly.com will feature original articles, comics, user-submitted photos and viral videos relevant to the gaming community, edited by Brian Murphy. Dorkly essentially wants to become the web’s go-to source for funny content about games and gaming culture. Example: Christian-Approved Versions of Controversial Games.

On a sidenote: you can write for Dorkly too, if you’re content with their pay-out schemes: $25 for 10,000 pageviews, $50 for 25,000 pageviews, and so on.

Go check it out. But do come back.

DailyBurn will become part of IAC’s Mindspark Interactive Network, which is also is home to social and entertainment destinations like Zwinky, IWON and Girlsense, personal interest sites such as Life123 and Excite, and interactive products such as Webfetti and My Fun Cards.

From our earlier DailyBurn review:

The overall purpose of the site is to help you lose weight and gain muscle by tracking every aspect of the food you consume and your workouts, all presented in a very attractive interface. The site offers a database of thousands of foods, allowing you to quickly figure out how many calories you’ve eaten throughout the day.

You can input stats from your daily exercise regime (number of miles run, bench-press weight, etc.), so you can track your progress over time on slick graphs. The site’s social features allow users to share exercise plans and try to motivate each other.

DailyBurn currently has about 500,000 members.

The company was launched as Gyminee and debuted publicly at TechStars’ Demo Day In August 2008. The startup went on to raise $525,000 more in seed funding in a round led by FF Angel (Founders Fund), with a number of angels including Garrett Camp (StumbleUpon), Matt Mullenweg (Automattic) and Tim Ferriss participating.

For TechStars, DailyBurn marks the fifth significant exit after Socialthing (AOL), Intense Debate (Automattic), Brightkite (Limbo) and Filtrbox (Jive Software).

On the face of it, UrbanSpoon for the iPad may not seem as useful as it is for the iPhone. After all, most people don’t just whip out their iPad on the street when they’re looking for a restaurant (though some may when the 3G version hits, who knows). But plenty of dinner choices are made right before you leave the house — and that’s what UrbanSpoon for the iPad is perfect for.

The app, which just went live in the App Store, looks beautiful. It’s like the iPhone version except there is a persistent map below the regular “slot machine” area where you pick and choose (or have the app pick and choose) your options for food. Once you make your selections, you can either hit the red “Spin” button or shake the iPad — yes, just like the iPhone. The choices will be highlighted on the map. Or you can choose a “List” view which then shows the details about each place, including their UrbanSpoon rating.

Check out the video below for more.

Find UrbanSpoon in the App Store here. It’s a free download.

There’s no denying it. People love to shake their iPhones. It’s almost as if they want to see how much they can shake it before it breaks. But shaking it is half the fun, especially when apps take advantage of the built-in accelerometer to turn shaking into a feature. One of the earliest apps to make shaking a central element of its interface was Urbanspoon, the restaurant recommender. You shake the slot-machine inspired app to find nearby restaurants.

Since launching in the summer of 2008, Urbanspoon’s iPhone app has been shaken more than half a billion times. The app has been installed more than 9 million times, and continues to be popular (currently it is the No. 5 most popular free app in the Travel category, right after Yelp).

Since being acquired by IAC last year (it is now part of the Citysearch business), its Website has also grown. According to Citysearch’s internal numbers, Urbanspoon.com is getting 7 million monthly unique visitors, up 220 percent from a year ago right before the acquisition.

Comscore shows 2.3 million monthly uniques worldwide as of January, 2010, and 1.8 million in the U.S. as of February, 2010, with 129 percent and 83 percent annual growth respectively. (Comscore’s numbers are estimates, but they corroborate the upward trend in traffic reported by Citysearch). Below is the U.S. chart from comScore:

As you know, today is Valentine’s Day. As such, I thought it was the perfect time to write a love sonnet for my new favorite company: Expedia.com. Actually, I’ll do the opposite.

Seeing as it’s a long weekend in the United States (President’s Day is on Monday), I decided I was going to set up a little trip to get away with the girl I’m seeing. A few weeks ago, I set up all the plans for what I thought would be a nice, relaxing weekend. It’s actually been anything but relaxing. My mistake? Using Expedia to book it.

After a few hours of driving, we pulled into our destination yesterday and attempted to check-in to the hotel. Problem 1: they’ve never heard of us. My name is nowhere to be found in their reservation system. Problem 2: they were completely booked. Problem 3: even if there was a cancellation, there was a waiting list for a room because apparently, Expedia had done this exact thing to no fewer than four other couples — just at this hotel alone.

So what happened?

Well, it took me a couple hours to get a straight answer out of anyone, but apparently, the system that Expedia uses to book reservation with its partner hotels is a mixture of antiquated and just completely fucked up. Because it would be too much of a hassle, and more importantly, cost too much money, Expedia has an automated system for communicating with its partners. Sometimes this is done with an email, sometimes this is done with a fax. Yes, a fax.

In my case, Expedia’s system apparently faxed the reservation to the hotel I booked. It then claims it got a confirmation back that my hotel room was all set and ready for my arrival. The only problem? According to the hotel, not only did they not receive the fax, but obviously they never sent the confirmation back. And why would they? It turns out all their rooms had already been booked before I attempted to book mine through Expedia. Of course, according to Expedia, there were plenty of rooms available when I booked — I even had many room options to choose from.

The icing on the Valentine’s Day cake though was my subsequent six calls to and from Expedia. For the first one, after waiting on hold for 45 minutes, I was told that according to their system, my reservation was indeed confirmed. I knew this would be Expedia’s stance because I received an email from Expedia a few days prior stating that it was confirmed.

After I made it very clear to the poor girl (poor, both for having to face my wrath, and working for this awful company) that there was definitely no room under my name at my supposedly booked hotel, she didn’t seem too clear about what to do. I was demanding a full refund (obviously) and demanding that they book me another room in the city and pay for that. She put me on hold so she could talk to her manager.

When she came back on 15 minutes later, she wanted to make sure I booked the room correctly in the first place. I demanded to speak to her superior. This guy was great (that’s sarcasm). Not only was he trying to convince me that this wasn’t Expedia’s fault, but he wasn’t sure they’d be able to reimburse me for the room that they had never actually booked for me, and that I clearly wasn’t going to be staying in. He said he’d have to call me back.

Meanwhile, I get a call from another Expedia agent whom the hotel had apparently called because again, this had happened a number of times just this day for the same hotel with Expedia. He wanted to let me know that the hotel was overbooked and my reservation wouldn’t be honored. Thanks buddy.

The other agent finally calls me back. Good news: he thinks he can refund what I paid for the hotel that I’m not staying at, but wants to make sure I want another room booked for me in the city. If so, they might take some of the refund to pay for that. At this point I start really yelling. On the street. With a lot of children around.

After a solid five minutes of verbal abuse from me including no shortage of swear words, he sees my point. But he still has to call his supervisor to okay any kind of deal he can cut. He needs to call me back again, but assures me that when he does, he’ll have another room for me and the refund in my account.

He calls me back. The good news: the refund has been processed. The bad news: there are no other rooms in the city that Expedia can book for me. Not one.

Further, if I am able to find my own room outside of Expedia, the company can’t do anything for me in terms of reimbursement. He is only authorized to offer me a $100 gift certificate to use for a future Expedia purchase. If there is anything in the world I want less at this point, I can’t think of it. I’m certainly never going to book another trip through this site again.

Hearing me still upset, he suggests that maybe if I book a more expensive place, Expedia can make up the difference. That’s a ridiculous proposal for a number of reasons, but the best is that there is no way I’m going to be able to find a hotel nicer than the one I had thought I had booked to stay at on Valentine’s Day weekend. The only options were going to be shittier ones — and those are probably taken too. So maybe Expedia was trying to trick me into paying me negative $500, I’m not sure.

At this point we’re almost 2 hours into my little romantic getaway so I ask for his supervisor’s number, his supervisor’s email, my reference number, anything he can give me. I hang up the phone.

I tried calling them. It’s a switchboard. No one seems clear as to who I should talk to.

So I write this now from my quaint (used kindly) little motel that I had to book myself, at a ridiculous rate because it was so last-minute on a busy weekend, with my own money. Never in my life have I had an experience as bad as I just did with an online company. This includes Comcast and AT&T. Expedia just made them look like models of business perfection.

Expedia, which was founded as a division of Microsoft in 1995, was later spun-off into its own company in the IPO-happy days of 1999. Ticketmaster then bought it in 2001, and eventually, it became a company under the IAC conglomerate. IAC spun it off again in 2005 as Expedia, Inc, which also includes the sites Hotels.com, TripAdvisor, HotWire, and others. In other words, the company’s history has been a mess.

Despite being an industry bicycle (everyone has had a ride), Expedia still manages to make $3 billion in revenues a year — undoubtedly helped by cases like mine where they try to make you pay for places you can’t even stay at because they can’t seem to figure out how to properly do a confirmation. Well, except if that confirmation is with one of their never-ending chain of superiors who needs to confirm a Kleenex in case an employee sneezes.

And so ends my love story about Expedia. I write this now both because it’s a nice Valentine’s Day tale, but also as a warning to anyone using the service. A simple Google search yields results that show I’m hardly alone in my experience. In fact, the number of hate sites specifically about Expedia is quite impressive.

There are far too many other competent companies out there that do the same thing, including a number of startups. Kayak is the one you hear about the most, unfortunately, they have a deal to offer up Expedia results first. Feel free to leave your favorite travel startups in the comments, I’d really like to know the best alternatives.

I also write this because even if Barry Diller (Chairman) or some other higher-up sees this post and offers me a full reimbursement of my trip, I’m not accepting it at this point. They may not have ruined my Valentine’s Day, but it wasn’t for a lack of trying.

Dearest Expedia,

Happy Valentine’s Day.

It’s over.

Love,

MG

Update: Some commenters are wondering if TechCrunch is really the best place for this type of post. To that, I say we have to hold these companies accountable for their crap customer service. It shouldn’t matter if they’re talking to a writer for one of the biggest blogs in the world or anyone else. Expedia routinely fails in customer service, but they get away with it because most of the time people don’t have this type of platform to expose these stories.

For a great example of how screw-ups and customer service should be handled, look at Netflix. Sure, I hate their new 28-day window policy, but they absolutely nail it in terms of customer service. A few months ago, their streaming service had a brief outage. Most members didn’t even notice, but Netflix emailed all of them offering a partial refund for the month. The same exact thing happened last week also.

Compare this with Expedia offering me a $100 gift certificate to use their service more only after I bitched for over an hour. And screwing up a travel arrangement is obviously a bigger fiasco than a streaming movie not working. Even the airlines seem to understand this. When they screw up, they not only pick up your hotel for the night (if you have stay overnight), but they often offer you a pass for free air travel somewhere else in the future. Most would argue that their customer service is still awful, but there’s no denying that it makes Expedia look like the absolute worst.

Also remember that by using Expedia, I’m putting my faith in them that they’ll be able to come through and ensure my travel arrangements — or else, why use them? When they send me an email saying everything is “confirmed” (which they actually did not just once, but twice), I take their word for it. Why wouldn’t I? Well, I won’t ever again but only because I’ll never use them ever again. And I’d recommend that any traveler do the same, or at least be very wary of their “confirmations.”

Update 2: Expedia has finally responded with the key words, “we accept full responsibility.”

I’ll paste the full mea culpa below, but the basic gist is that if a user books a reservation through them, they have every right to expect that it will be honored. Expedia says it is still investigating what exactly went wrong (as I noted in the original post, both sides seemed to be blaming a fax machine), but acknowledges that it really shouldn’t matter what the issue was, just that there was an issue and that they should have done more to try to resolve it.

The company is offering me a full refund of my original trip, as well as offering to reimburse any accommodation expenses I incurred as a result of the situation. They’re also now offering me a $200 coupon for future travel (up from the original $100 they had offered me). As I said in the original post, I don’t plan to accept any compensation beyond my original refund. This was never about the money, it was about Expedia doing what is right for its customers, no matter if they’re a random person with their family, or someone with access to one of the largest blogs in the world.

“We have already taken steps to improve our customer service and confirmation process based on this situation,” they write. And I hope they mean that — for all of us.

The email:

Mr. Siegler,

I am writing on Expedia’s behalf about the issue you endured over Valentine’s Day weekend.  We are terribly sorry that this happened. This situation is not acceptable, and we accept full responsibility.

Please know that we and the hotel are conducting a thorough examination of the circumstances that led to your unacceptably bad experience.  We have already taken steps to improve our customer service and confirmation process based on this situation.  We understand that the specific details of the confirmation process should not be a concern for any of our travelers. You should have every expectation that any reservation you book through Expedia will be honored.

While we understand that nothing we do can make up for your experience this past weekend, we are offering the following resolution: In addition to refunding your credit card in full, which we processed Sunday, we will also reimburse the accommodation expenses you incurred in rebooking yourself to a new hotel.  We will also provide you with a coupon for $ 200 off any future hotel or package booked with Expedia.