Match Group Inc (MTCH) 2008 Q3 法說會逐字稿

Good morning.

My name is Christy and I'll be your conference operator today.

I would lining to welcome everyone to the IAC earnings call.

(OPERATOR INSTRUCTIONS)

I'll now turn the over to Mr.

Tom McInerney, Executive Vice President and Chief Financial Officer.

Thanks, operator, and everyone for joining us this morning for our Q3 earnings call.

Barry will make some comments after which I will come back to quickly take you through some housekeeping issues.

But, first, I'll remind you during this call we may discuss our outlook for future performance.

These forward-looking statements typically are proceeded by words such as we expect, we believe, we anticipate or similar statements.

These forward-looking statements are subject to risks and uncertainties and our actual results could differ materially from the views expressed today.

Some of these risks have been set forth in our Q3 2008 press release and our periodic reports filed with the SEC.

We will also discuss certain non-GAAP measures.

I refer you to our press release and the Investor Relations section of our website for all comparable GAAP measures (audio cut out) reconciliations.

With that, I'll turn it over to Barry.

Thank you, Tom.

Good morning, everybody.

Congratulations to those who supported the winner and condolences to those who didn't.

After a short pause we'll be on to election 2012.

I want this call today to be mostly a dialogue between us.

I think that getting to the questions and answers rather than going through scripted remarks is just a much better process.

I've noticed lately for us and for other companies that the scripted portion runs 20, 25 minutes and I just don't think that is very productive.

I also don't think, this will not surprise anybody, obviously, that we (audio cut out) concentrate on (audio cut out) of the numbers.

We report, we put in our press release as much information as it's possible for us to do, and of course we will continue to do so.

And there may be technical questions and other questions that come up from it which are fine investor relations department or any of us here today with me is not only Mr.

McInerney but our Vice Chairman, Victor Kaufman, and our General Counsel, Mr.

Blatt, and we are always ready to answer any questions.

But, the quarterly call itself obviously is something that points up quarters and there's no real way around that.

At the same time, I want to make a compromise with that.

We really do run the company long term.

We run the company not on a quarterly basis.

We do not want to be in the position that because of these calls and because of the way kind of things are done that we get into that habit.

It does not make sense for this company, certainly not this company at this time.

The other thing I really want to talk about before we go to questions and hopefully this dialogue will have about, which we'll talk about trends, we'll talk about any subject that any of you wish to talk about, but let me talk for a minute about capital.

We certainly have a lot of it and that's good, certainly at this time in our queasy economy.

That capital is not burning a hole in our pockets.

We do have a number of acquisitions that are in the search and local areas that we're in the process of thinking about determining whether we'll do some of them or not.

None of them are very large.

I don't contemplate being by themselves very large or even in the aggregate.

I can tell you with absolute assurance that this process of ours in acquisitions is going to be extremely disciplined as I believe it has been in the last couple of years.

As I think the acquisitions that we've made and the reports that we made to you, every one of them has been sensible and is going according to the internal plans that we had for them.

I would tell you also that we are probably not going to spend the greater percentage of our capital on acquisitions and that, of course, leaves obvious eventualities none of which I will go into because obviously we can't.

We've always said that we are opportunistic about buying back stock.

That continues to be our policy.

Our policy is also clearly not to talk about it until we've done it and then we report on a quarterly basis.

So, with that, we'll take questions.

Sorry.

I will turn it back to Mr.

McInerney who has some items he wants to cover before we get into questions.

Thanks and just while we are going to continue with our no guidance philosophy, we want to give you certain information about a couple of go forward matters when we have it and it doesn't require speculation.

So let me go through this.

Corporate expense impacting OIBA excluding spinoff expenses was $20.4 million for the quarter just ended.

Q4 should roughly mirror that and we don't anticipate any further spinoff expenses.

IAC is a smaller company, obviously post the spinoffs, and corporate expenses will decrease from historical levels over time to reflect that.

So in 2008, excluding the spinoff expenses, the number will end up roughly around $[85] million for the full year and in 2009 we look for at least a 15% reduction to that.

The tax rate in Q3 was skewed by a number of spin related factors.

I won't go into.

Described in the release.

In 2009 we expect an adjust net income tax rate kind of back to where our long-term average was in the very high 30s percent range.

Capital expenditures for our go-forward businesses, for the current year will end up totaling approximately $75 million to $80 million.

In 2009, we preliminarily anticipate CapEx of approximately $50 million, so a meaningful reduction to this year.

And finally just a word about cash flow.

While obviously a function of the operating environment about which we are not going to speculate at this point.

As a result of planned CapEx less than depreciation which I just mentioned favorable working capital aspects of our business and some unusual tax benefits we expect next year to realize related to the previously completed EPI sale and certain of the internal restructuring steps in connection with the spinoffs, we expect cash flow next year to exceed OIBA.

I'm referring here to free cash flow as we've always defined it plus these unusual tax flows so some of which may technically hit our free cash flow, may not technically hit our free cash flow definition, but obviously reflect real expected in flows nonetheless.

Obviously, our GAAP cash flow will be affected by these items plus other items less forecastable at the current time including but not limited to net M&A activity, any buy backs.

With that, Operator, please let's go to questions.

Certainly.

(OPERATOR INSTRUCTIONS) Our first question comes from Justin Post with Merrill Lynch.

Your line is open.

Great.

Thank you.

The first thing is as we look through the median advertising disclosure that you gave, you said Ask US queries were down and you are not getting the nice Google benefit this year, but I just want to understand how you're going to grow the Ask business next year, what are your thoughts are on marketing, tuck-in acquisitions or just getting the core user base to search more.

And then, if you can, give us any disclosure on how October has started relative to the third quarter given the economic uncertainty?

Well, Tom, you want to talk about October and then I'll talk about what our strategies are for '09?

Sure.

Justin, I'm going go broaden it.

You probably intended this anyway.

But let me talk about all the businesses just as best we see it at this time.

In these tips of businesses early stage Internet businesses with all the dynamic change that's going on, it's a little bit hard to get a handle on kind of economic impact.

What we can tell what we see right now.

Right now I kind of break it down three ways.

I think in the Citysearch and Match businesses roughly representing a third of our revenue.

We are seeing no discernible impact.

One would expect you might see it in local advertising at some point, we are not seeing that so far, which is a good thing.

In the Service Magic business was another 10% of our revenue and even higher percent of our profits.

There is some discernible impact so the growth rates are off a little bit from what they've been and you see the numbers in Q3, but still very strong growth year-over-year and I know we get the question a lot and a lot of people are wondering, can that business continue to grow.

Obviously, again, anything in the future is speculative but right now we are getting very good growth which is just a testament to the secular forces underneath that.

On the search side, roughly half our business, we are seeing the impact in the trends have not been good over the last 30 to 60 days.

In some of our properties it's on the query side, particularly on commercial oriented queries.

In general, there has been modernization weakness manifesting itself in CPC declines which has been wind at our back all year even aside from the impact of the Google contract, and it's very hard right now to pin down the magnitude of it, what it means going forward.

There's obviously a lot of product change, a lot of things we are doing.

So how it will all rolls up and what this means it's hard to know, but the trends have not been good, I'd say, over the last 30 to 60 days on some of the query pockets and then some of the modernization.

Yes.

I think we don't know.

There's some effects we think, most of these effects we think are the general broad economy.

People are generally querying less in commercial areas, whether key words are dropping in price to some degree, which is -- which certainly can be expected certainly in the areas which have been particularly affected by the economy.

But let me talk a bit about what we are going to do next year.

It's a large group of effort.

It's not one effort.

We do not think that what we are going to do is to frontally, let's say, attack Google and spend a great deal of money marketing in that regard.

We do not think that that's a sensible strategy.

We do think that given the new site that we have and given that we think we now set a level playing field, that we can more and more tell our audiences that we really are the best for getting specific answers to things, that we think that will have over a period of time a natural effect in increasing retention and frequency.

That's for Ask.com itself, but what we are also doing as you can see with our acquisition of dictionary.com, with our really foot to the floor development of verticals of all kinds, the result of which we believe is they will create traffic of their own.

That traffic of their own will in [in your] to ask.com in a couple of ways.

First of all, of course, will add queries to the pile.

Second thing it will do, it will get people to experience the new Ask and get them to experience it without having to pay for it, without having to acquire those consumers either through general marketing or search engine marketing.

We are also increasing the development of our tool bar businesses, increasing the development of anything and every place where we can so to speak indirectly, meaning get queries for services that we offer, the natural result of which is that they ad queries to Ask.com and they also get people into the Ask.com experience.

We are going to hit that from as many different sides as we can.

We've already proven in our dictionary.com, which we bought rationally and which from the first hour of the first day has not only exceeded every projection we have in terms of the number of queries that it will produce, but in addition to that, because of what we've done to the site itself, it's also brought in close to I think 700.000 or 800,000 specific additional queries a day to Ask.com's network.

And then it has the residual benefit of getting people experience with the site.

So for us, it's going to be, you can call it a thousand points of light or a hundred points of light or a hundred different ways to cut the skin, but that really is our strategy for growing Ask every month that we go.

Thank you.

Our next question comes from the line of Jeetil Patel.

Your line is open.

Thanks.

Three questions.

First of all, you highlighted local search and subscriptions.

One of the things that you didn't do on previous IAC was to integrate some of the acquisitions or businesses in closely.

Are you looking at more cohesive strategy this time around those three areas, especially since local and search have some overlap and obviously subscriptions and ad revenue have some overlap, I would assume subscriptions and playing that off search would make a lot of sense?

And then second question.

If you look at your emerging businesses segment it's getting to be fairly significant.

Just trying to understand what is the plan for all these different smaller business lines there.

When do you say you want out of certain businesses because they are losing too much money.

I guess just some thoughts on the emerging businesses and I have a last question follow up.

First question that deals with the integration of our sites or the integration of our businesses the truth is what we are doing is obviously given now we have so much more focus given the nature of our business versus the nature of the business when we were in all of these other sectors, ticketing, home shopping, so we have greater focus.

What that does is makes the integration within each areas much more fulsome.

It makes the ability to follow best practices functionally much tighter.

As it relates to relating local and search and match, which I take it was the direction of your question, there are some touch points but, in effect, they are really separate worlds.

Of course, our Citysearch business and our Service Match business you can call them search business because they all deal with people want to go find an activity, but in the terms of the way they function, the local world which is one we've been longer than anyone else and we are and everybody else is basically gone, we are still standing and we are now standing in a place where linking advertisers of which we have more I think than anyone else have other than the historical yellow books, yellow pages, but linking advertisers to audience has now become an absolutely efficient circle of commerce.

Dealing with local advertisers is completely different than the ad words business, search businesses we know it that is called global search basis.

So I don't think there is that much relationship between the two.

Do you have anything else to add to that Tom or anyone else on this room?

No.

I think you addressed well which is within search within local they are very cohesive coals and across they are less so.

And certainly match doesn't have anything to do with any of them in terms of business organization or efficiencies.

As it relates to emerging businesses, we don't have any specifically very large investments here, and there are no businesses that we have in the emerging sector that are, let's call it, big carry losses.

There's not very big investments there.

Nevertheless, we do have a number of all of them are startups of one kind or the other.

It is an area that we are not going to particularly emphasize in the future as we did in the past.

We think that is a bit defocusing.

What we are going to do is when a really great idea comes in, we are certainly going to, we have the funds obviously and they are not particularly capital intensive, we will pursue it but it's not going to be an area we are we are going to operate our business on the basis that emerging businesses are the tomorrow of the Company.

We don't really think that's probably true.

So I think you'll probably see somewhat less activity in emerging businesses or certainly less things that are additive.

Some of the things inside emerging businesses we are going to shut down, close out, sell off.

We have already made that decision.

We will be doing that next month.

But other than that, that's about all I can say generically about emerging businesses.

You said you had a follow-up?

Yes.

There's been a lot of talk obviously of AOL, Yahoo combining and then spinning out search to Microsoft, Microsoft sitting here on the outside looking in on search.

Would you ever look at parting with these search businesses broadly that is under your control to Microsoft given that you are a fairly interesting and strategic piece of the industry right now?

Well, we are always hope in anybody's discuss.

We have no desire, though, to sell off our search business.

We think that we've got a good position, a good strategy.

It is going to take pretty good long time to develop it, but as you've heard before we are developing it from many different points of sale and we think we can make progress.

So far nobody has made us an offer.

I wouldn't really contemplate our being interested in selling it.

Next question please.

Our next question comes from the line of Mark Mahaney with Citi.

Your line is open.

Thank you.

I want to ask two questions.

First, in terms of just the margin at the different segments, is there anything one time in the margin for example a year ago you talk about pushing some marketing expenses for Match that contributed to high margins.

Was there anything like that this quarter either dilutive to margins or accretive to margins?

And, second, could you help us a think through a little bit more the Search query growth and how to think about it going forward?

Marketing is one of the levers here but organically it seems like, especially if you adjust for dictionary.com, queries decline year-over-year for Ask.

How much of that, if you look at the mix, the core user base and the non-core user base, is there anything in particular that gives you confidence that you can get to double digit, low double digit growth for queries for ask.com going forward?

Thank you.

Mark, let me start with the first.

There was nothing unusual, so there was no big call out, benefits or the like reverse reversals, things like that in the margins.

I do think Q3 is a pretty robust margin quarter for us given the natural timing of marketing expense.

For example, I think Match will spend more in Q4, a couple of our other businesses.

So I think given this scale and nature of some of these businesses, I will not get into that the game of looking at kind of sequential margin improvement.

We are not at that stage either in scale or anything elsewhere we are looking for sequential margin improvement across all of these businesses.

So I take your three as it's indicative of the margin potential of these businesses when conditions are right.

That's not to say that we grow ever more off of there.

Sorry.

Were you going to go on Tom?

Either way.

I don't mean to interrupt you.

So go.

On the query trends, first of all just one thing, which is one of the things we learned being in this business across all of our search properties of over three years is it very easy to drive queries doing a variety of different things distribution and otherwise, and the key thing is to get queries obviously from the right people at the right time that ultimately turn into revenue.

So in all of our search businesses we have seen query trends all over the place.

That doesn't always equate directly to the kind of business results you want.

Within Ask specifically, as we have completely pulled out certain market activities, certainly we have been online.

We pulled back on other marketing activities and as we were focused over the course of this year on kind of rebuilding that product that launched in early October, we certainly did not, we are not as aggressive as we could have been attracting those occasional infrequent users that are a big piece of the business or a big piece of any business.

What we have seen when you pull apart the data is the core group, the people that are using it multiple times per month are still with us.

They are still growing.

They like the product and we have seen attrition in queries which just reflects the underlying usage patterns in that more occasional group.

And what we need to do is build the product that we launched and build off of the marketing side.

And as we look at the growth of the business, we see the same statistics as everybody else does, so we certainly believe in our long-term ability to grow that but it's not going to be a straight line and you can't point to this quarter or that quarter or exactly when it's going to happen.

One year ago we bought, we paid almost $100 million.

We bought a ton of queries.

As Tom said, it's not hard to do.

Our problem in doing it -- in doing that was that we lost them soon after we bought them because we think we didn't have the optimum product.

The strategy this year is not going to be -- next year is not going to be "buy queries." It doesn't matter whether they come from dictionary.com, from our vertical, some of our vertical search sites like our embryonic new rushmore drive or through tool bars where queries have grown enormously or through distribution deals or through anything.

Again, we are not going to approach Google or anybody else, but let's just say Google, in a frontal way.

We are going to do it all around sides where we think vorality will help us in the key, key area, which is how many do we retain, how many users do we retain and what their frequency of search is.

Those are the two things that are important to us and we are going to go at it from all sorts of points of sale.

Thank you Barry.

Thank you Tom.

Our next question comes from the line of Jennifer Watson with Goldman Sachs.

Your line is open.

Great.

Thank you.

We were surprised to see the sequential increase in the network revenue associated with media and advertising.

Can you discuss a little bit the difference in your new network strategy versus the strategy you guys carried out previously and if we should expect this line to continue to be an increasing contributor to the media ad segment?

Sure.

First of all, Jennifer, we see big shifts year-over-year.

So we now have a business that is substantially as you see from the release, substantially stilted towards the proprietary side.

I think the sequential movement your pointing to is a couple percentage points.

That kind of a few million dollars.

There is nothing dramatic going on here.

The network businesses are in multiple directions.

Certainly, we are in our own sponsor's listings product now, Ask Sponsored listings, which is doing quite well, signing up third party advertisers well over a 100,000 as well as third party publishers.

As Barry, said we have a variety of distribution businesses on the tool bar side and the business that we got out of was something that was less strategic to us longer term which is why we were happy to do that as part of the revamped Google arrangement.

We have good businesses.

They are growing and a mix shift of a couple of points is just a few million dollars.

We have a big proprietary business now which we like.

I do think it's important for you all to realize that we are again, we are hitting this in several different ways.

We are not just in the ask.com business.

Our Ask sponsored listings, which is stand alone sponsor listing business, which over the last couple of years has grown enormously.

One of the -- did we break the statistics out on that Tom?

We don't financially, but it's a very nice profit driver to us with very, very strong double digit profit growth.

As I said, I think it's 160,000 advertisers.

A very, very large number of queries and publishers and it's a very attractive business.

Look, that is the entire, should we say, revenue stream of Google the Ask sponsored -- the Google sponsored listing business.

We think we are on the way to building up a significant business in this area without an enormous amount of capital that's been applied against it, but simply because advertisers and publishers like the concept of other alternative systems where the service level and the service requirements and the service level and the service benefits are pretty high.

And when you look at the IAC company, you should think of us being in these multiple areas around search, not just simply having a search engine.

Next question please.

Our next question comes from the line of Brian Pitz from Banc of America Securities.

Your line is open.

Thank you.

This is (inaudible) in for Brian Pitz.

One question.

Could you talk about the price sensitivity of a mass subscriber?

I was wondering how much room do you have to raise prices in the current economic environment?

Go ahead, Tom.

I don't think price increases are a big piece of the strategy at this point.

It's always a very tactical thing.

Obviously we can price differentially by market.

We're 30% international business and certain international market prices are still under where they may have the potential to be.

Domestically, again, we do it by region.

We test everything and so what we report and what you see is kind of the weighted average of all of that.

Obviously that was a nice driver of top-line growth for the last couple of years.

Certainly in this economic climate it's not something we are counting on.

We will focus on growing subs and profits.

Next question please.

Our next question comes from the line of Doug Anmuth from Barclays.

Your line is open.

Thanks.

A couple of different questions.

First, I want to follow up on the network business.

Should we be thinking about that business as having stabilized and sort of based out now in terms of removing the lower quality partners there, you are going to be on a more normalized growth rate or trajectory, whatever that is, and can you help us break out a little bit better in the network between ad sponsored listings, Google and then also tool bar related revenues, if you could give us a sense of sort of the range percentage wise between those three?

And on Service Magic can you talk about the acquisition in Europe and what your view is there in terms of how attractive the market is over there for this type of business?

And I have one more bigger picture question as well on advertising.

Thanks.

Okay.

Let me see if I can get all of these.

First of all on the transition as a result of the contract, basically we have one more quarter which will impact our results because obviously the new contract went into effect on January 1.

So in Q4 we will still see in our overall media advertising reported unit the effect of phasing out of those businesses that we deemphasize as part of the new contract.

That said, most of that has taken effect already.

So if you think about it sequentially or kind of as of now, as we got through June most of what needed to phase out, there's still a little bit that will happen but I hope and expect it will be offset by growth on the other side.

As that goes away, we are not going to provide specifics, but I'll say that the Ask sponsored listing business and the tool bar distribution businesses are each very meaningful components of that network business.

No one dominates the other.

Did you say you have a follow-up?

I do.

What is it?

I was hoping that you can give your opinion on what is the current downturn whether you think it's actually accelerating a share shift of ad dollars online as marketers are looking for more efficient measurable media or if you think it's hampering it as they pull back on budgets and stick with what is tried and true?

Thanks.

I don't think there's anyway that you are going to stop the transition from let's call it offline media to much more attractable, much more performance base online media.

I do think you probably have a lot of people frozen in their tracks right now, and I think that the again these issues of the economy and of what's going to happen to advertising over the next year or so are just unknown really at this moment though the only thing we can say is that if you look at it and if you look at it objectively or if you look at it inside with the figures, it's going to be affected, but I don't think it's in the relationship between the percentage that is going online and offline.

One fact and you all know this but just to hit it.

Pronto, for example, which is our biggest buyer of search engine marking, they are adjusting their bidding multiple times a day.

So this is a very automated, very dynamic situation.

You couldn't have something more different than setting offline ad budgets either in an upfront market or a spot market three, six months out.

So a lot of this is not by in a sense by conscious decision.

It's a bit by formula and ultimately it will be driven by consumer behavior.

If consumers continue spending in certain categories, the sponsored listings business and the display business will remain strong in those categories.

In other cases it may hit and this will play out.

And I think it will be very fluid because, again, you can adjust these things pretty instantly and I think we are going to see that.

Next question please.

Our next question comes from the line of Alan Gould with Natixis.

Your line is open.

Yes.

Thank you.

Question for Mr.

Diller on capital.

You said that you are not going to spend a great percentage of your cash on acquisitions and you said you are going to be opportunistic.

I want to get your sense of opportunistic.

The stock was recently under two times EBITDA.

Dr.

[Malone] called it one of the cheapest stocks he has ever seen.

It is just too tempting to have $1.5 billion of cash and declining valuations to pull the trigger and buy stock now?

I'm wondering how you define opportunistic.

First of all, what I said was not a great percentage.

I said not the greater percentage.

I don't think it's going to be more than 50%.

I can't really predict it, that's what we think at the moment.

Obviously, we are opportunistic in all of these areas relative to capital.

We are very conservative.

Obviously, we've always been conservative.

That's why we are in an extremely good position we are in now given all the external life that whirls around us and all of its unknowns.

So the opportunistic part, though, is both opportunistic in terms of acquisitions and we do believe that acquisitions are going to be the purchase price of things is going to come down.

That is obvious.

It's going to happen.

It has happened to some degree, but we do not see any individual large things that are on the horizon.

We do see fill-ins.

We do see opportunities in areas where we can so to speak purchase sites that have traffic and that can help our strategy relative to Ask, which I talked about earlier.

So that's our attitude about acquisitions and we are going to continue to be very discipline in that.

As it relates to buy back on stocks, there's nothing really we can say about it specifically.

The only thing we can do is say that we are certainly not going to sit on this cash, meaning just sit, so to speak, square assed on the cash for some long period of time.

We do think it's more healthy now to have it than to not have it, but one way or the other, I don't think it it's all going to be in acquisitions.

We will repatriate it to our shareholders one way or the other.

If I can follow up, last quarter you said Silicon Valley still hadn't adjusted to new valuations.

You said they coming down a little, but do you think there's a long way for them to come down?

Have they adjusted to the current realities?

I think there's a very long way to come down.

All these valuations are made up in a room between like-minded people that have utterly nothing to do with the actual value of the business or anybody actually valuing it.

It's a closed room where one guy says to the other, okay, next time let's step it up by 40% or 80%.

We have no revenue but let's say we're worth $100 million.

Why not.

You can buy in for this amount and that's what we'll call it at.

It's all a made up process and it going to face current reality and I think it is beginning to do it.

I think it's going to increasingly do it, which I do think is going to provide us particularly with opportunities.

Thank you.

Let's go back to I think we missed Doug's question Servicemagic international, which we should hit on because that's a nice development.

Go ahead.

I just realized we skipped it.

What we did there, Doug, is we bought a company as well as some other assets and ended up with the majority control of the company called [Conig].

It operates in the France and the UK.

It's got a great entrepreneurial founder, CEO who we are excited to align with and the Servicemagic cofounders will be working very closely with him to look to essentially replicate in Europe what we did in the US.

We think all the dynamics that has made this great business in the US are present there as well.

The business had a little bit of revenue, not much, and is basically operating at break even and the hope and goal is to expand it first in those markets as well obviously pan Europe over time.

Right now we don't expect it to be a net user of significant amounts of capital but we'll evaluate those plans as we go.

It's very early stages but we like what we bought.

We have the right people that know how to build that business, focused in terms of the US team, and we think it should be a great international opportunity for us longer term.

Let's face it, Servicemagic is one of our great success stories.

It was an impossible thing to organize, but it was perfectly organized and executed over the last year.

It's now become a significant business.

We are all of the belief that it can become a very large business all over the world and we are certainly going to go after it.

Next question.

Our next question comes from the line of Ross Sandler with RBC.

Your line is open.

Thanks.

I have a couple of questions.

First on the media advertising segment, what do you guys think of the long-term margin goal for media and advertising and outside of the mix shift from network to higher margin propriety revenue, is there anything else that is like low-hanging fruit that you can enact to drive that margin up and then I have a couple of follow-ups.

Ross, on the margin question, again we are in an $11 billion market growing very rapidly.

As Barry said, we are coming at this from all angles, and it's really impossible to say because it will very much depend on what the composition of that growth is, how much comes from Ask.com versus other tool bar brands versus the other initiatives Barry outlined.

One could construct scenarios where you have a very attractive growing profitable cash flow, all the good thing in life business over multiple years that operate at different margin rates.

It's just impossible to know.

All I can tell you is we bought the business at 20%.

We invested.

It went down.

Its come back up.

There's nothing in the collection of businesses really that we would say longer term it can be an attractive margin business for us.

We've learned to operate it quite leanly.

You heard the capital numbers I mentioned earlier that we see coming down, so we think it can have attractive margins.

What that number is and what that composition is will very much be left to play out.

Do you have a follow-up?

Yes.

Just two quick follow-ups.

So prior question about Ask query growth.

I want, for all the queries whether it's on Ask or on Ask tool bars, or on (inaudible) product tool bars, for all the queries that are associated with Google revenue that IAC receives, what would be the aggregate kind of query volume growth across all those different businesses and given the agreement anniversary in Q1 '09, what kind of growth rate do you expect to see across all the Google monetized businesses next year?

And then the last question just a housekeeping.

Display advertising has been one of the weaker areas in the marketplace.

Can you remind us of the overall exposure across all of IAC to display?

Thanks.

I will do the last.

It's 4% of our business.

Not to worry about display.

Tom, do you want to talk about --

Yes.

On the query side, we saw notwithstanding those comments that we disclosed in terms of specifically Ask, on our proprietary businesses we saw a double digit year-over-year query increases.

So, again, we have a very balanced business in a number of areas and there was query growth as well on the nonproprietary side.

Okay.

Thank you.

Next question.

Our next question comes from the line of Jeffrey Lindsay with Sanford Bernstein.

Your line is open.

Thank you.

If you are rationalizing your emerging business portfolio, as seems to be the case, and there are a fairly eclectic set of web properties, a mixture of commerce and content, what is the theme that connects the pieces that you want to keep?

What would be the strategy that you are hoping to achieve with these emerging businesses?

And then the follow-up is would you have an opportunity to really rationalize these businesses significantly, especially technologically?

I'm not so sure I understand the latter part but I'll try the first part.

There has been no great theme other than we have been open to stimulated by individual ideas to start Internet businesses across the spectrum of the Internet.

And we've had certainly things that have been very successful.

Pronto is a good example of a small investment that will develop into a very valuable business.

We have some other examples.

We have examples where we started something and shut it down.

All I'm saying is the rationalization for it is frankly to concentrate less on it and focus the majority, not all, but the majority of our time, resources on the businesses that we have.

If we decide that there's another business sector for us to get into, we'll tell you all about it and we'll tell you the capital we are applying against it.

But to have a large number of eclectic small startup businesses is not our -- anything to be called our main majority strategy, and we do want to thin it out, meaning we want to prune it which, we think, the sensible thing to do so there will be less of them, and I think there will be somewhat less focus on starting new ones, although we certainly are open to any good idea that is coming down the pipe.

I don't think it's -- what I'm really saying in aggregate is it not a material part of our either business structure, of our capital we devote to it, or time we devote to it and it will be somewhat less.

As it relates to the last part, technologically, I just didn't understand the question.

Just in that case, to say that you can consolidate them -- combine technologically and combine the management teams for example.

We do consolidate a lot of technology and services for these emerging businesses.

We don't staff them obviously as start ups.

We have the ability to render group services.

We keep our costs down.

But there's no grouping together of these businesses.

They are all essentially one shot ideas.

Thank you.

Next question please.

Our next question comes from the line of Imran Khan with J.P.

Morgan.

Your line is open.

Hi.

This is (inaudible) in for Imran Khan.

Could you please discuss the international exposure, relative international exposure of each segment and provide a constant currency adjusted growth rate, and also could you discuss your hedging strategy?

Yes.

I think this one I will turn over to McInerney particularly in the mark-to-market currency adjustments.

First of all, in the quarter given the strength of the dollar for the first time in a while this hurt us marginally.

So it's 30 basis points negative FX impact to our top line.

International is about 19% of our total business, and it's meaningful, along the line of those percentages.

Match is 30% of their business and then the balance of the business is in the media and advertising side.

These are profitable businesses to us, and so if the dollar is fortunate or unfortunate enough depending on your perspective, you'll see that come through.

But that's the rough magnitude.

We do no FX hedging.

We'll take one more question.

Our last question comes from the line of Scott Kessler from Standard & Poor's.

Your line is open.

Hi.

Thanks a lot.

Two quick questions.

One I guess was touched upon before, but clearly because of some of the efforts you undertook earlier this year there is now a pretty significant disparity in terms of your proprietary and network revenue mix pertaining to Ask.

I wonder to what extend do you expect this break out two-thirds, one-third, something along those lines to be consistent going forward?

The second question I have is about one of the acquisitions you made which is dictionary.com.

I'm wondering if you can talk about some of the things that you have done and maybe some of your plans for the property into the future.

Thanks a lot.

I spoke earlier about dictionary.com, I'm happy to give you more details.

As far as the first part of your question which dealt with --

The mix of proprietary.

I don't think we can make any predictions about this.

I think the different pieces of this are going to accelerate, relationship of growth to each other.

I think you'll see it jump around just given the nature of not huge numbers in some respects and so I do expect to see changes, but there's not one driving force at this point that I can say this is how it's going to change and over what period of time.

On dictionary, a couple more details.

On the property we've seen greater, as Barry alluded to, greater organic traffic than we even expected to.

We've seen very effective modernization of their display inventory as well as the aforementioned driving of queries to Ask and we are still in the process of integrating the products from a look and feel perspective.

So dictionary will remain a separate product but over time it will take on certain elements.

It has and that will continue.

So really the thesis behind the deal which is that it helped fundamental positioning, presented a large point of organic traffic that we could monetize better on day one have all come through.

Most significant thing is if you look at the site itself it's the change that was made was you see now in addition to of course the definition you requested, you see on the left side, left rail of the page, you see a number of other related topics.

That's what is delivering this bounce to Ask.com in terms of direct queries to Ask and getting people familiar with the Ask product itself.

Thank you all very much.

I much more enjoy, I hope you do, the less than formal remarks and the dialogue hopefully nature of this and hopefully in ensuing conference calls we'll get off of narrow quarterly issues and on to really the issues that are, the topics of our day which is how to build from the assets that we have and the capital base that we have a really great and enduring company.

And that's certainly what we are about and that does not relate, again I emphasize, to quarters.

It relates to an everlastingly long term, but a good and balanced and I think disciplined process to build a company that is just going to have increasing value.

So thank you all for coming today to the call, and we'll see you again some time next year, I guess in February of next year.

So happy new year.

Thank you.

Thank you so much, sir.

We appreciate your participation today.

This concludes our conference call for today.

You may now disconnect your line.