Match Group Inc (MTCH) 2009 Q2 法說會逐字稿

Good morning.

I will be your conference operator today.

At this time, I would like to welcome everyone to the IAC Q2 2009 earnings conference call.

(Operator Instructions) Mr.

Thomas McInerney, you may begin the conference.

Thank you, operator, and everyone for joining us this morning for our second quarter 2009 earnings call.

Barry will make some brief remarks after which I will come back to quickly highlight some issues.

First, I will remind you that 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 Q2 2009 press release and our periodic reports filed with the SEC.

We'll also discuss certain non-GAAP measures and I refer to you our press release and the investor relation section of our website for all comparable GAAP measures and full reconciliations.

With that, I will turn it over to Barry.

Thanks, Tom.

Good morning to all.

It's almost a year since the spinoff and I think we're beginning to hit some operational stride.

Since that spinoff, we have just in terms of top-count items, we have sold our stake in Jupiter Shop.

We contributed Match to match Europe to Meetic.

We sold or closed five emerging businesses and will probably do more in the next few months.

We spent about $100 million or a little over actually, $100 million in acquisitions and we spent $300 million on share repurchases as well as generating $85 million of cash flow so far.

So, we have been now hitting it on a good many of our initiatives and I think we have accomplished a lot in this last year setting up the three principle areas of our activities in ways that I think that they can continue to be competitive.

I am not going to go into any more detail at this point because I think the purpose of these calls is really to get to your questions and get to your questions as quickly as we can.

With that, Tom, why don't you do the bit of an overview, which you're going to do, I guess, and that then we'll go quickly to questions.

Thank you, I just have a couple of quick things.

I'm not going reiterate the results in the release which are clearly laid out.

I wanted to give you some supplemental information as it relates to the quarter just ended as well as going forward.

In the media and advertising segment, the reported revenue decline, although better than Q1 trends, reflects continued weakness in cost per click rates due to the economy as well as the product changes we made to Ask.com on October 1 of last year that have caused users to click on sponsor's listings at a reduced rate.

Query trends were sequentially better than in Q1, particularly in our tool bar businesses where we're continuing product innovations and good distribution relationships are paying off.

On the profit side, as was the case in Q1, revenue declines flowed through to OIBA as we generally sustained investment levels including marketing expenditures in the business.

Broadly speaking, we continue to see much of the same in July in the segment, albeit with reduced Ask.com marketing expense and we expect to see moderately improved profits sequentially in Q3 versus Q2.

We'll do our best to answer any further metric-based questions in Q&A, which traditionally has been a better form for that.

Turning to personals.

Match exhibited strong revenue, profit and subscriber growth during the quarter, excluding the European business which was sold to Meetic in June.

By the way, our stake in Meetic is currently worth approximately $200 million.

The domestic business is the is currently strong.

Q3 results will include a number of anomalies which we will belie the strengths.

Let me go through them.

First, we'll be watch Match Europe for the full quarter but its results will remain in the year-ago numbers and skew the comps.

In Q3, 2008 Match Europe contributed roughly $23 million of revenue and $4 million of OIBA.

Second, the required People Media revenue will be in the numbers starting in Q3 but because of purchase accounting rules which require eliminating deferred revenue on the books at the time of the deal, we'll see little revenue and no profit from the business in the quarter.

This is a pure accounting effect and will largely be eliminated by Q4.

Third, Q3 will have more marketing expense this year at Match than last just due to various tactical decisions made.

There is not a change in long-term trend as we saw marketing expense relative to revenue down in the first half.

This is just a particular quarterly effect and I will remind you we have seen this type of thing where plenty of times where averages go to one quarter or the other in this business through the last decade.

We expect the net of these three factors to be declined can and reported sequential in year-over-year OIBA in Q3 in this business with margins still very strong in the upper 20% region.

Again, this is not fundamentals, fundamentals are strong.

ServiceMagic had a solid second quarter in light of the environment and profits declined year-over-year, the decline was a fraction of Q1's decline and trends exiting the quarter suggests continued sequential momentum.

Key metrics on the consumer and service provider side remain solid in this business, as does ServiceMagic competitive position and long-term opportunity.

Final, to capitalization.

The press release has the share repurchase added since our last earnings report as well as the current share counts, I won't repeat all of that.

Given the acquisition of People Media and the significant repurchase activity since the June 30 balance sheet which is included in the release, I just wanted to give you our current cash position which is slightly above $1.6 billion.

With that, Operator, why don't we get questions.

(Operator Instructions) Your first question comes from the line of Ross Sandler from RBC Capital Markets.

Your line is now open.

Thanks.

First off, just congratulations, guys, for negotiating a well-timed search deal under better terms than someone four or five times your market share at the beginning of the year.

On to questions.

You stated in the release that proprietary queries are flattening out at Ask and Fun Web and that is up slightly from the decline, I guess, you saw last quarter.

So what is driving that trend in particular and then a followup, a second question on Match.

The performance in Match has been outstanding.

Can you talk about where you think margins could go longer-term at Match and some of the things that you're doing to continue to drive the acceleration in sub growth.

That is it.

Thanks.

Okay, why don't I start off and Barry can add in.

In terms of the query trends, they were better in Q1 -- I'm sorry, in Q2 than Q1.

And it's really a confluence of a bunch of different factors.

The Ask.com business, certainly the NASCAR relationship and all of the product improvements done there targeting that vertical segment with the marketing, which we think was part of that, a series of other product changes we think helped that.

In our toolbar businesses, expansion of distribution relationships, product innovation and our proprietary tool bar and the proprietary tool bar businesses all contributed as well as just improvement to core search functionality, so our search business, as we said, kind of, I think, repeatedly in these calls is very broad-based.

It's expanded a number of brands, a number of properties and a number of different distribution channels and those are some of the drivers that led to that performance.

On Match.com, I think your question was what is driving the strength of that.

Is it sustainable?

This is a business we just, I think, hit the 10-year anniversary of owning this business.

We bought it at $6 million of revenue and I think it was break even at the time and we said, I've been saying the same thing for many years which is this category is still, after all of this time and all of this progress, is still quite underpenetrated.

There are 80 million plus probably approaching 100 million people just in the US alone who are in the target market and the category penetration is well, well less than half of that across the board, and because of our particular position as the leader, it's not so much always a share gain as it is driving the category growth.

It tends to come in fits and starts, but we think that opportunity is there.

We made a number of initiatives in the marketing area across all the various distribution channels, number of product initiatives and in this particular quarter we got good growth, and we think the fundamentals are sound.

I think, as we said before, we don't manage the business on a straight percentage margin business.

We don't have a margin objective.

Our objective is OIBA growth over multiple years and free cash flow over multiple years.

It is a business that has natural margin opportunities, and I think you see that.

It was 23% in 2007, 25% in 2008 trending good this year and I think if we do the right things on the marketing side and the product side drive that category and drive share, there will be margin opportunities but it's not a strategy.

Because some of the things I mentioned in my scripted remarks, Q2 was particularly abberational on the margin side just due to some timing issues.

On the margin questions, any impact, I know you're not going see much in 3Q.

People Media once rolled in, will that be added to the overall margin match?

That depends on specific plans we make which we're working through.

It's a good margin business.

It's probably slightly higher than the Match European business.

If you think about it, we kind of swapped, not strategically thinking of it this way, just kind of an after-the-fact financially swapped out the Match European business for this business.

This has good margins so it certainly won't hurt, and whether it helps I think will be a function of what we -- the decisions we make as part of the planning process going into next year as part of the planning process going into next year in terms of driving that business which I think has a lot of potential long-term which is obviously why we bought it.

Great.

Thanks, guys.

Next question, please.

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

Your line is now open.

Great.

Thank you.

I was wondering actually if you could talk a little bit more about the recently announced deal with Ben Silverman, whether productions will be funded in full by advertisers and if you think that over time actually that users are going to pay for that content as opposed to seeing that advertising model?

Yes.

This has not, the proposed arrangement we have not yet concluded.

It will take probably a month to put it together, but it is not seen as something where the entity will deficit financing programming.

The programming will either be paid for by advertisers and more than likely we are in the next several years in -- more than likely one revenue stream from advertisers that will be coming the way of productions.

I do believe, and as I have said over time, that I think that programming content, particularly content that is not assembled by typing 140 characters and tweeting, but content that is made by professionals and has expenditures next to it, again shooting the cat, doing God knows what to the grandmother, there will be a pay system that will develop over time for such programming.

Okay.

Thank you.

You're welcome.

Next question, please.

Your next question comes from the line of Jeetil Patel from Deutsche Bank Securities.

Your line is now open.

Thank you, two questions.

First of all I guess in the vertical search space, just curious are there still opportunities or interests out there to look at vertical search plays that really help you kind of dig deeper on a category-by-category vertical basis and, second, it seems like you're starting to see some stability or maybe some improvement in -- on the pure display ad side of the business online.

Talking to different companies in the industry, I guess in light of these improving trends, is there any interest to try to build out that capacity even more so at IAC given that seems to be showing some signs of promise, especially given the weakness on the traditional media front?

Thanks.

I will take the first part.

As far as verticals are concerned, the answer is definitely yes.

Ask is going to roll out coupons and deals which will take place, I think, some time next month and will continue to roll out areas that we think that we can offer the consumer a much richer search experience than our competitors.

It was, something said today, we're now number three in search by virtue of Microsoft/Yahoo!

arrangement and while that may not be saying very much, it certainly says that there are not a huge number of players in search.

Search is going to continue to evolve.

It's going to continue to grow, it's going to continue to be the way that people find things and people's general experience on the internet is going to expand in search, and I think we can compete.

Not compete head on against Google in a macrosense, although our general search is as good as anybody's, but we will compete in different areas and we'll certainly, I mean, different virtual areas where our rich content is going to provide a much better experience and we'll also compete because we over index for answers, meaning people who ask questions, the genesis, really of Ask.

You ask a question, we are going to be able to give you a response and a response that is not just from, let's call it dry search, the one that has got user-generated responses, that has got community, that has all sorts of other ways for you to get a nuanced and balanced answer to queries, and we think that is going to be a particular competitive thrust of ours that the competition, either Microsoft Bing nor Google are going to offer.

After all, if you look at Bing, which I think is definitely an improvement from the previous efforts of Microsoft, I mean a great deal of Bing is based upon the innovations of Ask.

I always said I think our little band smaller, definitely, band of scientists and technologists are capable of competing in terms of innovation, and I think the example at Bing is I good example of that.

Anyway, I riffed on a bit beyond that.

Tom, do you want to take the second part of this?

I think display is 3% to 4% of our revenue right now and you think about our opportunities in search advertising revenue broadly defined across all the things we do in local ServiceMagic and CitySearch local performance products and then obviously the subscription side at Match.

We think we have real scale there, so on display we want to -- it's an important revenue stream for a couple of our businesses but it's small relative to overall IAC.

We want to be good at it.

It certainly has an important role, but we're not going to compete on any kind of scale basis given the scale of others and given we have so much opportunity in runway in the other areas of online advertising.

I think the one thing we will do is we will innovate in terms of how we do display, which we're going to do with our daily beast, and you will see more of that innovation.

To be in just general banner display by 300 boxes and the tonnage, tonnage of inventory that grows every day and further discounts the value of any given ad is not a particularly thrilling business to be involved in.

Barry, just a quick followup.

You talked about, you were able to serve answers and contents into Ask.com quite well.

I guess what do you think of the concepts that are out there like about.com or Demand Media which are much more freelance kind of content being created?

Is that an area that seems interesting in terms of incorporating into Ask as a vertical effort?

Sorry.

Yes, we're definitely going to do that.

That is going to be a part of the ask and answer system is going to be answers that are generated by the community as well as answers that come from all of the mosaic search activities.

Definitely.

It's part of the plot.

Next question, please.

Your next question comes from the line of Mark Mahaney from Citi.

Your line is now open.

Thank you very much.

Great.

Thank you very much.

Barry, given the results in the buyback, stocks should be up more than it is.

It looks like there is obviously an overhang this year because of the Bing/Yahoo!

deal.

Do you want to comment on that?

Do you think Yahoo!

and Bing can have a material shift in terms of overall market share?

Secondly, can you briefly talk about the CPC trends in the quarter and what you saw with CPC trends in July, and if I could get a third one in.

ServiceMagic business seems to be doing very nicely.

Anything in particular you would call out there the reason for the real nice outperformance in what should be a cyclically depressed segment?

Thank you.

Tom, why don't you start with the latter two and I will come in at the end on the questions relative to Bing.

Sure, in backyard order.

In terms of ServiceMagic, it's one of these things, obviously, when the environment is difficult and consumer demand is down, that is not a good thing for the business.

The flip side is to get consumer leads, the service providers are paying customers.

It's even more critical that they get consumer leads and they get them in the right place at the right time for the right job.

What ServiceMagic is excellent at is that very complicated system of signing up a national network 50 states across hundreds of types of jobs to match them up with consumers who want something very specific.

It's a very specialized, very vertical approach generating high-quality leads and so when you do that, you're -- we're exposed to the environment for sure and we have seen that certainly in the first couple of quarters of this year but the secular forces are pretty darn strong and they have done a whole variety of things to broaden out their marketing efforts, [SEM], [SEO] side.

They have integrated distribution deals.

They just announced a big distribution deal with Meredith for some of their website properties that are targeting homeowners.

We're testing some offline which has been successful.

So as those marketing channels broaden out, as the service providers, we become more and more important to the service provider network, we're just able to fight through some of that and we still have a 1% share of the spend in those categories and the long-term opportunity is great.

On CPC trends, we do not see much improvement on those in Q2 relative to Q1.

I think if you look at what Google reported, for example, I think our data would suggest roughly comparable and slightly better on a year over year basis.

My figures show down 8% across all of our properties on a straight CPC basis.

Again, our overall monetization is affected by some of those product improvements until we calendar those product changes at Ask in October.

It's kind of similar to Q1 and I would say in July also similar.

No discernible properties that are doing better, some that are doing worse and the general trend continues.

So, not terrible, no real uptick either.

Relative to Yahoo!

, Microsoft I think one significant thing that happened is we're not going have to talk about whether or not it's going to happen anymore.

Look.

What's happened.

What's happened is that Microsoft will now be able to report a greater share in terms of search and get in at least some minds of all of the talkers into at least being up there in competing terms with Google and Yahoo!

doesn't have to spend any more money on search.

As far as being able to execute much is a complicated, very complicated, where one party's doing the tech and the other party is doing the sales, that is a challenge for sure.

I'm sure they'll figure it out.

Look, for us I think the significance is we want, need, must have, business must have at least two competitive forces, big competitive forces, and the reason for that for us, obviously, is they we have a very good relationship with Google and it's possible the relationship will go on for 100 years.

It's also possible that in the 3-1/2 years when it's up and by then I believe we'll have more queries, I think we'll grow which is certainly our plot and I think it's a rationable, reasonable plot and I want to have two players out there wanting to get our incremental business which is, of course, of real value to these companies, particularly if it's a tipping scale in terms of greater competition from one or switch to the other.

So, I think it's good for all parties.

Good that the best is that the will they/won't they is over.

And it's clear now what Yahoo!

's going to pursue and it's very clear that Microsoft is going to continue to put -- to invest, put care and all sorts of other things into their search efforts.

That is a good thing for us.

The industry, I think.

Next

Your next question comes from the line of Jim Friedland from Cowen and Company.

Your line is now open.

Thanks.

One question on Match and one on the emerging segment.

The People Media business had I think about $12 million in EBITDA and as we think of the growth, can you give us color in terms of on a year-over-year basis.

Is that business growing faster than Match, roughly in line with it?

And how should we think about how much incrementally that we can see added in EBITDA or just what we should think about EBITDA when we're doing our projections.

And then on the emerging space you said that given -- the last quarter or quarter before, just given the weak economy, that it's unlikely you would be able to have the losses, which was the initial goal in that space.

Based on what you're doing in terms of rationalization and as you look out a little bit further in 2010, is that the goal.

Should we expect to see the losses go down there?

Thanks.

On Match, Jim, you know, again, we'll work through this specific plan but obviously it's got a good growth.

That's why we bought it.

We wouldn't have if it didn't.

I think it shouldn't be detrimental to Match's growth.

I think it should grow at least equal to it.

It will depend.

Match has had pretty remarkable growth over the last several years, so to the extent that Match continues to do well, that is a high hurdle, but People Media has a good wind in its back and has performed very well.

I think both assets will do well in absolute terms and we're excited about that combination.

We see lots of opportunity there.

Your second question was on emerging businesses?

Yes, on how we should be thinking about the losses there as you rationalize the portfolio.

Yes, a couple of things.

One is if you look at, I think, if you look at the results, we were down a little bit sequentially and we also had probably $4 million of loss in the second quarter in either shutdown costs or operating costs for businesses we exited or sold in that line.

So that Q2 reflects some of that activity Barry referred to in his comments about rationalizing that down.

I think we will continue to see sequential progress over the course of this year.

Obviously, we'll go through our planning process for next year and we'll figure out where we think the opportunities are and whether that continues to come down.

I think sequentially, which kind of over next six months, I think I will continue to see that progression.

And just a small followup which is the activities are going to continue to be narrowed.

The areas that we're in were -- that were deficit or building, one is in the gaming area which we think has tremendous potential and not great investment needs and the same is true for Daily Beast which is certainly far better in terms of establishing itself at such an early date than we thought it would happen, but whatever we do here is going -- is not going to be wide and numerous.

We're not going to make lots of bets in these areas.

It's going to be controlled, in other words.

Okay, great.

Thank you.

Next question.

Your next question comes from the line of Colin Gillis from Brigantine Advisors.

Your line is now open.

Good morning, everybody.

Good morning.

Can you just talk a little bit about how the low cost of media is impacting your strategy across each business segment, search local and personals?

Sure.

We're not a -- it's funny because, A, we're not a huge buyer of display.

Our biggest online buying is in straight CPA type networks where you're paying for performance, and I think the types of people we compete against in those channels have not been the ones most affected by some of the things going on, so I'm not sure we have seen the pricing pressure there.

Certainly we buy a lot of search, we've seen pricing pressure there and we do buy a little bit of display.

The prices in these kind of -- all of it is ultimately performance.

The prices in these performance channels ultimately reflects obviously what is going on in the other side of that click or that purchase of an eyeball and often the conversions are down.

So what we're typically seeing, if you think about local, for example, ServiceMagic is a good example, the CPCs may be down but the conversion rates on the other side, getting someone to fill out their form and submit a service request may also be down and so you're not necessarily getting someone into your funnel of activity net-net at a cheaper rate because the conversion offsets the buying.

I think the opportunity for us is that as we work with partners, distribution partners on more integrated distribution and value-added-type distribution arrangements, then the bogy for them, they're more desperate for revenue.

So without getting into anyone specific, and I'm not saying that is the case here, but the ServiceMagic Meredith arrangement just announced, that is a perfect situation where ServiceMagic can bring the great monetization machine to a party that presumably wants revenue coming off of that site and it is more difficult to get it from traditional channels now.

Match has seen some of the same things where people are open and creative to working with us because we have in all of our, you think about Match, ServiceMagic, our other local businesses, Ask, the tool bars, we're very effective at monetization.

We monetize traffic assuming it's hand and glove type fit we can monetize that well.

That is the opportunity opposed to a straight buy that automatically drops the bottom line.

Okay, thank you.

Next question.

Your next question comes from the line of [John] (inaudible) from Credit Suisse.

Your line is now open.

Thank you.

Just a question on ServiceMagic.

OpEx was up 30% year-over-year.

I was just wondering what the drivers were and can we expect that type of cost growth in the second half of the 2009.

And then secondly with AOL being spun out by the time we're in the fourth quarter, just wondering, Barry, what your view would be on that business and what interactive would be interested in depending on what AOL does.

Thank you.

I'll take the first one.

The OpEx really the biggest thing is marketing.

This is a business where you go out and market through the distribution channels I have already talked about and obviously they are getting good top-line growth.

The second place where we're spending is in growing the sales force and that is what obviously leads to a higher active service provider network.

I think we're now under 60,000 active paying local subscribers.

That is a huge asset and as local advertisers continue to come online in a sense of forever asset, as some leave and some new ones come on but that is what gives us so much confidence about the long-term opportunity.

So, beyond marketing and kind of sales and sales-related expense, there is a very kind of strict hard ROI type model on -- OpEx growth is very low.

There is probably some international in there because we're comping against periods that did not have the international businesses.

Those are the three things, it's all good stuff, if you will.

All right.

On AOL, I have a lot of confidence in Tim Armstrong.

I think he's coming there as a great whoosh of energy and real change I think for the first time, my God, in I don't know how long.

Probably the first time since the company became part of Time Warner.

So I have high expectations for what he's going to be able to do certainly with the content side of AOL and the strategies he's laid out.

As far as strategies with the spinoff company or the company in its configuration in the future, we're talking with them about ideas about commercial relationships in both the local area and search area and we'll see what happens.

There is no possibility of really speculating beyond the fact that it seems obvious that there are interesting relationships between what AOL does and what aspects of IAC does.

We'll have to see.

Thank you.

You're welcome.

Next question, please.

Your next question comes from the line of Jason Helfstein from Oppenheimer.

Your line is now open.

Thanks.

Questions on the M&A side.

Barry, can you provide an update on private company valuations.

You were able to do People Media for an attractive valuation.

Are you seeing similar opportunities in core verticals and then separately, and I probably know the answer to this, any progress for the personals or would it be fair to say that Yahoo!

management has been a bit distracted?

Thanks.

As far as valuations, no, I have not seen any real changes.

There are situations that come up every once in awhile where we can make an acquisition that is attractive to us.

But, no, I don't see any, I certainly don't see any material change.

I think, again, generally unrealistic prices to come out of DC's or private partnerships or the like.

What was the second question?

Yahoo!

personals.

Oh, Yahoo!

personals.

I think they have been talking forever.

I don't know, I think the conversation is Yahoo!

personals go back forever but they may go on forever.

Certainly I think probably Yahoo!

has been distracted but there is nothing to say about it at this stage and may be nothing to say since we have been engaged so long with them in terms of trying to align the interests.

If I could ask one followup.

Sure.

On the financial side.

What happens when the Time Warner credits expire next year?

Will you guys have to increase your cash marketing expenditures?

You mean the universal?

Yes, the universal.

No, I don't think so at all.

We always viewed these as an add-on elective and we never really thought of these as replacing our own hard coffin.

We have been saying for some time that with very few exceptions and they're really very few exceptions, we're not in the offline advertising business and I don't really believe we're going to get heavily into it.

As Tom said earlier, our expenditures are in the online area, which is extremely trafficable and we're not -- and there are great values to be gotten if you're going to be a big network or big video, let's call it, whether it's cable or broadcast, big spender or if you're going to be a big spender in print advertising, neither of which we really are nor do we contemplate being.

Thank you.

Next question, please.

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

Your line is open.

Thank you.

Barry, I have got a question about the timing of your share buybacks.

In public form you, along with maybe Mr.

[Murdoch] and [Malone] have been some of the most negative people I have heard talking about the economy.

I wonder why you chose to start buying back stock now?

I'm sorry.

I'm multi-tasking as they say.

Well, first of all, I don't believe -- I don't think you can precisely time these things in terms of trying to, let's say, out time the market in terms of purchases.

We're a net purchaser of our stock when, in fact, we have excess cash that we don't have any other purpose for and, as you know, we have a lot of that.

I don't think that -- I think what we have done is buy the stock back attractively and I think that is what we'll continue to do when and if we think that it's opportunistic to do so and I am opportunistic about the market, I mean opportunistic about stock price, our own, in relation to what we think the values really are.

Okay.

Thank you.

You're welcome.

Next question.

Your next question comes from the line of Imran Khan from JPMorgan.

Your line is open.

Hi, this is [Bridgette] (inaudible) speaking for Imran.

Quick question on Match.com.

It looks like most of your revenue gains there were due to subscriber growth.

Can you provide us a bit of detail on what you're seeing in terms of pricing power and consumer sensitivity to prices?

Yes, we -- in prior periods, I think pricing was often a driver and I think we repeatedly cautioned that that was not something to bank on longer term.

Kind of like the margin point.

We'll take it when we can get it and we're not building our strategy or business around it, and I think this quarter is a good example of that.

We're constantly testing and optimizing pricing across markets nationally and across package mixes one month, three months, six months, so there is not one price but dozens of prices and that is scientific algorithmic constantly testing and adjusting things and in this particular quarter obviously you can see there was really no net pricing, no net softness, no net positive.

Is that the economy or is it just that it caught up with us for a while and there is a bit of a pause and maybe in the future there will be opportunity.

Hard to say.

Again, we're bubbling up the data all the time and we just make choices on what we see.

Wonderful, thanks.

You're welcome.

Next question, please.

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

Your line is now open.

Thank you.

A quick couple of questions on the emerging businesses and first wondered with Pronto.com, are you seeing the same kind of impact that other shopping engines are seeing from the search engines where basically tending to sort of squeeze them harder and drive down their opportunities because we see them largely as kind of arbitrage.

So if you can give us a sense of that.

And a sense of the overall strategic objectives for the emerging businesses unit.

How do you see it going, is it just the (inaudible) businesses you are intending to manage down in to sort of a decline or is it that you have a future aspiration or it's going to provide an incubator going forward.

Give a sense which of way that is going to go.

Thank you.

Let me put the first part of it.

Not a unit or activity of ours, "emerging businesses." We, as I think you all know, we felt for some time that we don't want to be in the multiple development business.

Certainly if there is great idea or there is an opportunity and we think that we can add something to it and make a go of it, we'll invest in it.

It's not like that is what we're doing every day and if why you have all seen that we have narrowed this down, we will continue to do so and, as I said, we only have really a couple of activities.

Really, probably, 2 1/2 and that are going to -- we're going to continue with.

So, it's not a business line nor should any of you think of it as a business line.

Tom?

Yes on the first question in terms of Pronto.

I don't know if it's so much as being squeezed, but it's certainly materially being impacted by macro conditions.

In terms of -- we're still growing there because of the business again still in the earliest stages.

Certainly at a much reduced rate than what we saw before kind of current conditions set in and we're seeing more significant CPC, net CPC impact than the types of figures I mentioned before from most of our other broad based search, so shopping search is not the place to be in this particular market.

That said, we feel like the business has great technology.

They do a great job.

It's still profitable and we think that it's a longer-term opportunity and certainly traditions are tough.

Okay, thank you.

Next question.

I think we'll do one or two more.

The next question comes from the line of Aaron Kessler from Kaufman, your line is now open.

You're in silence.

Why don't we go on.

Your next question comes from the line of Scott Kessler from Standard & Poor's Equities, your line is now open.

Thanks a lot.

I had a quick question about what you guys see in terms of the opportunities for video?

Barry, obviously, in the news over the last week is two in a moment announcements that you guys made with respect to merging businesses but, nonetheless, what you guys have been doing in terms of positioning your portfolio over the last couple of years, it seems to be more obvious that you're focused increasingly on content and video content.

I wondered how do you expect to pursue those opportunities?

Thanks a lot.

Well, I think it's, I mean this is not something that is going to generate in the next probably couple of years significant revenue and I don't anticipate it generating significant expense either, certainly not anything that we would call material.

The first part, which is out of connect adventures and CollegeHumor and the recent acquisition of a group of entrepreneurs who have just joined us is that I think most people know we now produce about 10 videos a week, short-form video, and we absolutely believe that that is going to morph itself over time into longer-form programming and other kinds of programming that I will -- the series we did with MTV.

The group that we acquired is extremely active in selling to over 70 networks, cable networks primarily, all different kinds of programming, profitably, not on a deficit.

I think this is just going to be an evolutionary, it's going to be an evolutionary area of interest for us.

There is no question that the digital approach to video vastly different from the "Hollywood" approach to video or making video, professional video productions is a much, much more creative, I think, much, much more effervescent and exuberant process because it really is the creativity of the idea and the ability that for very little capital you can get that idea up and out.

I do think that video is just beginning to find a way to get itself supported.

We're just probably a year into video, putting commercial insertions in to video, a la broadcasting cable.

I think that is going to evolve and continue.

I do believe that over time there is going to be a dual revenue stream, at the very least I think there is probably going to be three revenue streams and I think that they will come from transactions, they will come from pure advertising and I think they will come from pay.

I think this is a very sweet early area and we have a very interesting position in it relative to what we've been able to do inside the CollegeHumor production entity and what we just added to it.

As far as the Ben Silverman perspective venture, that is one that we don't yet know the architecture of it.

As we said, we think it will take some investment of ours and, again, I don't think they're a big material sense.

It will take -- and I think we'll take investment of others and more than likely, it probably won't be inside emerging businesses.

It probably will not be consolidated, at least that is our intent.

We'll see as we go.

It's all very perspective right now.

Essentially the release that was made was a statement of intent and we're hopeful that in the next month it will resolve in a completely work-through transaction or completely work-through agreement.

Sorry, I went on a bit but that is where it is.

I think that is the last question.

So, thank you for your participation and look forward to you all having a nice rest of the summer and we'll see you in a few months, three to be exact.

Tom?

Thank you, everyone, and have a good day.

This concludes today's conference call.

You may now disconnect.