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Diller Sees Online Travel Rebound?

Barry Diller has made a bet on online travel and his investments are starting to yield results.

Financial results released early Tuesday by Diller's InterActiveCorp. (IAC) and Expedia point to renewed health in the online travel e-commerce sector.

IAC said second quarter profits increased, but only slightly. Its profits for the quarter declined to $92.9 million, while revenue rose to $1.5 billion. But IAC's overall revenues increased, in part, as result of its recent online travel deals.

Expedia posted a top-line gain of 73 percent, while Hotels.com , Diller's other online travel property, grew by 47 percent. Only two months ago, Diller's company bought the 32 percent of Hotels.com stock that it didn't already own for $1.77 billion. IAC is also buying the close to 42 percent that it doesn't own in Expedia Inc. for around $4.93 billion.

InterActiveCorp. earned $96.2 million, or 16 cents a share, on revenue of $1.53 billion. IAC topped analyst expectations, according to consensus data compiled by Thomson First Call, by one cent.

The company said its overall revenue from electronic retailing were up 18 percent to $527 million. Ticketing revenue grew by only 7 percent to $187.5 million from $175.4 million. The company went onto say revenues from personals grew by 62 percent to $48.2 million from $29.7 million.

In addition to its online travel sites, IAC also owns the Home Shopping Network cable-TV channel, Ticketmaster and Match.com, the online dating service. In May, IAC added to that roster with LendingTree Inc., the online consumer loan service -- a deal worth close to $830 million in stock.

But it's the online travel services that are driving IAC's growth. On Tuesday, Expedia also issued its financial results, posting a profit twice of what it earned a year ago.

Expedia said it earned $41.3 million, or 30 cents a share, in the second quarter compared with earnings of $20.1 million, or 15 cents a share, last year. Revenue was $247.5 million, up 71 percent from last year.

Expedia generated revenues from package deals with hotels and airlines, increased by 82 percent year over year to $155.8 million, while revenues from travel agencies, increased by 57 percent to $86.2 million.

The company reported 4.6 million total hotel room-nights stayed in the quarter, including 3.7 million merchant room-nights.

Expedia said it had quarterly gross bookings of $2.0 billion, up 53 percent year-over-year. While net revenues reached $247.5 million, up 71 per cent over last year.

On Tuesday, Forrester Research said it expects U.S. e-commerce revenues to reach "nearly $230 billion in 2008."

"While offline retail sales continue to struggle, online retail will grow at a steady 19 percent year-over-year growth rate, from $95.7 billion in 2003 to $229.9 billion in 2008," Forrester Research said.

Forrester goes onto "online retail sales will account for 10 percent of total US retail sales by 2008."

"Forrester predicts that nearly 5 million new US households will shop online in each of the next five years, totaling 63 million US online shopping households in 2008."

"Forrester projects the most dramatic growth in the food and beverage category, with sales increasing from $3.7 billion to $17.4 billion over the next five years. Sporting goods, which have found a niche in the used goods market, are predicted to grow from $1.7 billion to $6 billion, with nearly a third of sales coming from used products. Conversely, books, which generated 14 percent of U.S. eCommerce sales in 2000, will fall to 3 percent of total sales over the next five years," Forrester said in its new e-commerce report.