But the problem is that most seem unable to assemble the right people, and give them the right autonomy, to really enable them to behave in a startup-like manner. Instead it just becomes recruitment joke where recruiters say "it's like a startup in a big company!" while the candidate rolls their eyes.
In a way I think it's the opposite story of skunkworks. Those try to replicate a startup-like independence while also emphasizing the parent brand's ultimate credit for any output (e.g. ZFS was developed by a Sun skunkworks and proudly claimed by Sun). Here it looks like IAC wanted exactly the opposite: a fake startup that didn't really have independence and instead just implemented IAC's strategy for this vertical, but which emphasized its own brand and kept quiet about the parent brand.
One other area I can think of where that's fairly common recently is in fake microbrews launched by the big brewing companies. The recipes and market positioning are entirely dictated by the parent company, but there's a kind of microbrewing identity that is presented to the public.
So why wouldn't that approach work for something like online dating?
The article describes quite well how successful this approach can be if you do it right. A company like Microsoft has such a massive amount of talent and resources, that even allowing a sliver of that to work on a project in isolation and freedom can lead to huge success.
I've personally experienced a 'startup in a big company' situation, and that also seemed to work quite well at first. Sadly, the whole thing fell apart once the big company started trying to take control back. In fact, I think the resulting situation was worse than if the 'startup' had never had a taste of independence.