Throughout the dot-boom Barry Diller stood aloof. He promised he would never overpay for "Internet real estate," that he would grow his business by finding bargains. (The picture is from this Wired article where he displays far more wisdom about Internet valuations than displayed today.)

For several years he stayed true to that. You can justify the prices paid for Home Shopping Network, Expedia.Com, Hotels.Com, and Ticketmaster based on revenues and earnings. They sold stuff -- toasters, travel packages, concert tickets -- and earned real money.

But $1.85 billion for an outfit with trailing year sales of $261 million? That's over 7 times sales, about 40 times earnings.

Sorry, Barry, you finally drank the Kool-Aid.

Yeah, yeah, yeah, I've read all Diller's excuses. Synergy. Scarce real estate. Finishes the platform. Yadda-yadda-yadda.

But you don't have to own a search engine in order to be an Internet winner. There's no scarcity of search engines, either. Google came from nothing, and if someone else has a better algorithm, or a better way of doing things, they can still come from nowhere. They can do it a lot faster than AskJeeves can come from fifth with aging, gimmickry technology.

After buying CitySearch, which had nothing going for it, I thought Diller had leraned his lesson. After that he bought companies that sold stuff -- real stuff -- and derived income from it -- real income. No more "Internet advertising" and "page view" crap.

Until now.

Barry, Barry, Barry....

To those of us who still believe in value-based Internet investing, this is the unkindest cut of all.