Match Group Inc (MTCH) 2010 Q2 法說會逐字稿

Good morning, ladies and gentlemen.

(Operator Instructions) At this time, I would like to welcome everyone to the IAC second quarter 2010 earnings call.

After the speaker's remarks, there will be a question-and-answer session.

(Operator Instructions)

I now turn the call over to Mr.

Tom McInerney, Chief Financial Officer.

Mr.

McInerney, you may begin.

Thank you, Operator, and everyone for joining us this morning for our Q2 earnings call.

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

We also have Greg Blatt, the CEO of Match.com, with us in New York today, so he'll join us in Q&A as well.

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

These forward-looking statements typically are preceded 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 2010 press release, and our periodic reports filed with the SEC.

We'll also discuss certain non-GAAP measures.

I refer you to our press release and Investor Relations section of our website for all comparable GAAP measures and full reconciliations.

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

Thank you.

Good morning.

I'm just going to talk for a couple of minutes, and then Mr.

McInerney will go into brief details, and then we'll do what we should really do, which is spend the majority of our time on questions that you all have about the Company.

As Tom said, we have Greg Blatt with us, who runs Match.com, and so we certainly invite any questions you might have on that topic that he can answer more expansively or more directly, although that is something of a challenge with Tom sitting here, but he will be able to do whatever in responding to you all.

I know there is always questions about our repurchase activity and our capitalization.

We purchased 7 million shares of stock in the last quarter; since the spinoff we've spent close to $1 billion, and we've purchased 30 -- about 36% of the outstanding shares.

And since the spin, we've purchased 50 million shares.

So while we have no absolute program, so to speak, other than what we've said for some time, which is we want to invest further in the Company itself, we've got plenty of resources to do so and will continue to do so opportunistically.

Other than that, we don't talk about it until after the quarter in which we purchased the stock.

So -- and we have currently close to a $1 billion, $1.47 billion -- $1.5 billion actually, of cash.

So we started the spin with about $2 billion, so we purchased $1 billion, and we've only depleted our cash by 25%, which still leaves us overcapitalized, which we'll deal with as time goes on.

And with that, I think we should -- Tom, you want to do your remarks and then we'll do Q&A?

Yes, just a couple things, just some supplemental information.

The search results were obviously very good overall, and they were also fairly balanced.

We had revenue and improved profitability in all of our principal business lines, Ask, Dictionary, both proprietary and distributed toolbars, and CityGrid, all saw a nice revenue growth.

Margins were up substantially year-over-year as a result of this revenue growth, as well as comping against a period a year ago where we had some inefficient marketing.

The Q3 fundamentals continue to feel reasonably solid, but I will remind you that Q3 is our seasonaly slowest period in this business, and the comps get materially tougher, as by Q3 last year we had cut out a lot of that inefficient marketing.

This, plus some RPQ pressure we're seeing, and some modest marketing investment in connection with various new product efforts, are likely to cause margins in this segment to be down a bit sequentially.

Turning to Match, the fundamentals are very strong.

We saw 8% subscriber growth excluding the net effect of acquisitions and divestitures, and in fact, our core domestic business grew in the low double digits.

Our new arrangement with Yahoo contributed a few points to this, but growth was very strong without this deal, as our marketing messages and the quality of our service have been breaking through.

As discussed in our last call, reported margins in the quarter reflect acquisition effects, including purchase accounting, and we continue to expect a strong full year top and bottom line, which is always the preferred tracking period for all of our businesses.

ServiceMagic's quarter reflects a continuation of the trends we have seen in the last few.

Macro conditions and competition for online leads in the home services space have pressured our margins, and we've exacerbated this in a sense by choosing to continue to grow our salesforce and invest internationally, and in other product areas.

Obviously, this reflects our continued belief in the long-term attractiveness of the business, but we do not expect near-term trends to improve materially.

Finally, media and other, we obviously have a number of initiatives, so I'll say only that with the respect to the financial aggregation, we look for continued strong revenue growth and modest losses next quarter.

We had a few things go our way in Q2, so we don't currently forecast this loss level to continue sequentially, but it should be somewhere between where we were last year Q3 and the quarter just ended, so we're still dealing with net modest numbers.

Finally, I'll just call out yet another very strong quarter for cash generation, bringing year-to-date free cash flow to $105 million, and we currently expect cash flow for the remainder of the year to be strong.

Despite our sizable share repurchases, which Barry mentioned, over the last several quarters, our balance sheet and financial flexibility remain quite robust.

So with that, Operator, let's take questions.

(Operator Instructions)

Your first question comes from the line of Ross Sandler from RBC.

Your line is now open.

Thanks, guys.

Just two quick questions.

First on Match, Greg, can you walk us through the economics of the Yahoo partnership?

And now that you've locked in this deal, are there anymore large possibilities in front of Match, or is it all about execution from here?

And then, second, on Search, Barry, you've mentioned before that the toolbar business is a higher margin business within Search; can you remind us how much more profitable it is versus core web Search.

And then I know, Tom, you just mentioned that margins were down quarter-to-quarter, but when we look over the long term, do you expect margins in Search to slowly ramp as toolbar becomes a greater part of the mix?

Any more color there?

Thanks.

On Match, I can't go into the specifics of the economics of the Yahoo deal, but I will say that over time we don't expect it to change in any meaningful way, the general margin or acquisition dynamics or economics of the business.

I think to put it in perspective, it's a deal that, other than the one-time migration, which is effectively over, it's a deal not unlike the MSN-AOL portal deals that we've traditionally had; and that collectively, even with the Yahoo deal, these are a much smaller portion of our business than they've historically been.

So I think we view this as an important deal, an important source of traffic, but sort of one among many going forward, and we're very happy with how it's going, and don't expect it to really shift the fundamental economics of the business.

In terms of strategic possibilities and execution, it's always about execution, and we're very focused on that every day, as Tom said.

The fundamentals of the business are going really well.

There are also always strategic possibilities.

This is -- viewed expansively, this is a space where there's a lot of things going on and new things happening every day, and we're obviously looking at everything.

But there is no -- there is no gaping hole or glaring hole that we have that we're trying to fill.

On toolbars, I don't think I ever really referred directly to margins.

It's -- toolbars is a good business, and it's a better business as a business than Ask.

But I don't think, Tom, we disclose margins on segment breakouts, do we?

No, no.

So we'll probably maintain that policy, I presume?

We will.

But as Barry said, it's a good business.

I think we've said we think there are margin opportunities in the Search segment overall compared to where we were last year, for example; I think we were just under 12%.

You see that when the volume is there this quarter, with the figures this quarter, we have some timing issues and comp issues and things like that in Q3, it will bounce around as the volume moves around, as the marketing mix moves around.

But to your general question, the most important question, do we think there is margin opportunity in Search longer term as we move through this year and into next year and beyond, the answer is yes.

And that will come from the good toolbar business, and it will come from lots of other initiatives as well.

But there is no reason the business can't, properly executed, operate closer to where it once was, and whether we get exactly there and over what time period we'll see, but it is an opportunity for us.

Next question?

Your next question or comment comes from the line of John Blackledge from Credit Suisse.

Your line is now open.

Thanks.

Two questions.

Firstly, given that you continued to buy back shares in the second quarter, and finished the quarter with $1.4 billion in net cash, I'm just wondering if you can talk about use of cash in the back half of the year, thoughts on further share back?

And then also on the M&A environment, is there anything interesting to fill around existing assets, and what types of deals are you looking at?

And then other question would be on Search revenue, would you expect it to accelerate in the third quarter from second quarter levels, and then was tax the biggest driver in cost of goods sold growth in the second quarter?

Thanks.

A tongue twister.

Tom, why don't you handle the second part of that?

Okay.

I'll talk about what I talked about at the beginning.

Yes.

Look, I think -- Search was up 18% revenue growth in Q2.

So I don't -- I'm not sure I'll ever predict acceleration under any circumstance off of those levels.

Obviously, those are quite robust.

And the fundamentals of top line growth in the Search segment are good.

There are various pluses and minuses as there always are, and we have lots of different efforts and things like that.

So over the balance of year, as we currently see it, we see good revenue growth, but acceleration from 18% would be a tall order.

I think your last question was on [tax].

I think we have a couple questions in terms of that.

In the cost of goods line in the consolidated P&L, we do book traffic acquisition costs against the distributed toolbar business, and certain direct online marketing expenses in other parts of the Search business.

And in the given quarter, as you see in the figures, we had a big jump on that on a percentage basis.

It was completely offset, kind of almost dollar for dollar, on the marketing expense side.

So there's is a bit -- accounting dictates kind of what goes into that line versus the marketing line further down the P&L, those roughly offset.

On a combined basis in the Search segment and overall, it was roughly flat, and you have kind of mixed issue on spend in there.

On stock purchases, we report that after the quarter in which we purchased stock, I don't think shareholders can have any expectations; we may not buy stock for quarter after quarter after quarter, and then we'll come in and buy stock.

We think that it's an opportunistic process for us.

And as far as acquisitions, nothing has changed for us.

We don't see any acquisitions out there of any size.

We do tuck-ins for our own businesses, or buy small little things that we think are interesting, but nothing has happened that has either -- gotten our appetite enlarged.

Next question, please.

Your next question or comment comes from the line of Jason Helfstein from Oppenheimer & Co.

Your line is now open.

Thanks.

Two questions, and then just -- I may have one question.

Barry, why do you think Ask has managed to hold its share of paid clicks, even as we're seeing Bing aggressively attack Yahoo and AOL?

It's pretty obvious in the numbers.

And then on Rezbook, maybe any comments on the strategy there.

I assume you're not going to install terminals, like OpenTable; so how do you plan to attract restaurant partners, given the complication of using multiple reservation systems?

And then just lastly, if you guys could comment on the 88 million toolbar downloads, if you can comment on what percent of that comes from US users?

Thanks.

On Ask, the reason I think Ask has been able to maintain to some degree is because it's always been willing to make changes, do things, act in very responsive and quick ways to changes and other kinds of things; it's been alert.

But what I think all of our investors should understand is Ask itself, the Ask network is a significant part, but Ask itself is not a large segment in the Company.

And I had hoped that it would become one, but I was wrong about that; wrong about the competitive situation with Google.

I think we've been more inventive than anyone else, but all that's succeeded in doing is making Google's site better, and our other competitor's site better.

They look much like what Ask began to look like when it introduced -- its new features have been copied almost instantly by the competition.

So that's not an excuse or a rationalization, but competition was harder.

In any event, it's not a big segment for us.

The other parts of the Ask network that we bought, toolbar parts and other parts, are significant for us.

But Search itself, direct Search is not a critical part of the Company.

And Rezbook, Rezbook I saw -- no, we're not installing anything of any toolmaking or machinery or anything else inside restaurants.

What Rezbook is, and the new product just came out, which is kind of an iPad product, it is an iPad product, which is a great form factor for restaurants, it's a great system; and there is a big install base, of course, with OpenTable, but there is plenty of room there, with lots of other restaurants that are not part of the OpenTable process.

And I think it's a -- much lighter for a restaurant, meaning lighter in the sense that it doesn't have all of the entrenched machinery, so to speak, that OpenTable has.

So it's not a big effort for us, but it's a nice idea out of Urbanspoon.

Urbanspoon grows like crazy in terms of its appeal on the iPhone, and we think this is a nice little addition to it.

Do you have anything else to add about Rezbook?

The only thing else I'd add is obviously we have a couple of things to also bring to it, which is the CityGrid network, both in terms of resellers, people we're working to sell performance advertising product into the CityGrid network, as well as publishers where we distribute that advertising.

So those are two big assets that we will bring to the Rezbook effort to drive bookers, as well as potentially to help us resell and distribute the product.

But I would also say we're very much in kind of the formative stages of developing the strategy here, so I think more to come.

It's premature; we're testing it in basically two or three markets with very small investment at this step, and we're not -- we're certainly cognizant of the large player out there, and we're going to come up with a sensible strategy, and more to come.

On the last part of your question, in terms of the active toolbar mix, it's roughly two-thirds international, of the installed base, but probably less than a quarter of our revenue comes from that international side.

So the revenue monetization skews much more heavily domestic than international.

Thank you.

Next question, please.

Your next question or comment comes from the line of Kerry Rice from Wedbush.

Your line is now open.

Thanks a lot.

We've obviously been talking a lot about Search, and sorry, I'm going to keep going down this road here.

But based on what you, Barry, discussed in the last question, so should we think Search or maybe Ask, or maybe not Ask, maybe Search in general, as really you guys are developing a really strong proprietary toolbar business, and if that is in case the way we should think about Search for Interactive Corp, how do you see the competitive landscape?

Do you think that the competition has been very tough there, and do you expect it to increase?

And then as a corollary to that, you guys are launching at least a beta with kind of this community search that you guys announced, I believe, yesterday, and how does that fit into the strategy of Search for Interactive Corp?

And then I just have one follow-up on Match, in that how does -- when did we start -- when did you guys start to see the impact from Yahoo?

I know they turned off the personals here late in July.

But it seems like you benefited early or mid-Q2 from that agreement with Yahoo?

First On Ask, it's true.

Competition there is -- I think you can't even define it as tough.

There is a majority player who has close to 70% of the market.

I mean, that's almost a closeout.

But nevertheless, Ask has been has been able to maintain to a degree its share.

And the introduction of Q&A, Ask Q&A, is a furtherance to that.

That's what I was talking about earlier in terms of Ask being willing to keep turning on its own dime with relatively little investment, but very good technology, very good smarts inside the Company, to make something of itself that it can compete in.

We think Q&A is an area where we over-index anyway, given the obviousness of Ask as a brand, and in natural language queries, and community is another avenue for us to get the right answers on qualitative subjects, so that -- that are posed.

We think over time we can build a real brand in that area, and no one else is really concentrating on it the way we are planning to do so, and we think it would be a good product.

But, again, yes, as far as Search is concerned, the business there is -- the substantial business there is the toolbar business, and the toolbar business does well.

Yes.

And I think just to add to that, the toolbar business is intensely competitive, but perhaps even more open than kind of Search proper, if you will, to innovation, creativity, different forms of go-to-market, when you look at the shares, when you look at the number of players.

We think we only have about a 10% domestic share in the toolbar business, despite having a very substantial business.

And when you look at the market receptivity to new products we've come out with, whether on the proprietary side or on the distribution side working with partners, there is a lot of receptivity there.

There is a lot of way to drive distribution.

So it's intensely competitive.

Obviously, everybody wants to be on the desktop, but it's a category that in our four years in the business has always responded to -- has responded to innovation and good execution.

On the Match/Yahoo piece, I think it's helpful to think about the deal in two pieces.

There is the migration, which is the attempt to get their pre-existing user base over to Match, and then there is the ongoing sort of advertising and other placements designed to get people to come over time.

The migration was a one-time thing.

It started in mid-May, it ended in mid-July; and that gave their existing user base an opportunity to come over to Match.

That's effectively over, and the ongoing traffic goes on through the term of the deal.

So those are the two components.

We started seeing the first impact of the deal in mid-May, and it continues to grow.

Great.

Thank you.

Next question, please.

Your next question or comment comes from the line of Ingrid Chung from Goldman Sachs.

Your line is now open.

Thanks.

Good morning.

So on a neglected segment here, for ServiceMagic, I was wondering if you could talk about why customer request growth slowed from 40% in 1Q to 20% in 2Q?

And I was wondering if you could also speak to when we'll see margin expansion on a year-over-year basis again?

Yes, sure.

Obviously it's slowed sequentially, still up 21%.

So on an absolute basis, Service request growth was still pretty strong.

I think there is a couple of factors.

One is we do think there is some macro forces that play in there.

I know there were a number of homeowner incentives that expired, either before or in the quarter.

I think that's part of it.

Also, as we manage our online marketing mix, which is the predominant marketing channel, and the way we generate these service requests, we were implementing a number new tactical approaches designed at improving the contribution margin piece of it.

Some of those hurt volume, but helped on the margin side.

So the way we focus on the business, if we have an eye on that line, but really what we care about is what's going on at kind of the gross contribution level after those marketing costs, and what we're bringing to the bottom line.

And on a contribution basis, the results is Q2 were -- contribution per [SR] after marketing costs were actually better than Q1.

So we saw a little bit of sequential improvement in that metric, and gross margin dollar growth, again, after marketing costs or gross contribution dollar growth, was very close to what we saw in Q1.

So Q2 was -- again, there were some pluses and some minuses, but some things were better than Q1 actually, some things were a little bit worse, but it was not a big slowing.

On the other hand, it still, as I said in my remarks, reflects the overall sluggishness of that sector, and competition for leads in the context of that sluggishness.

I think in terms of when it reverses itself, don't know yet.

It's not -- we don't feel it, and so therefore you start prognosticating what happens in macro markets and the online kind of bidding and stuff that relates to those markets, and we would be just guessing.

I think some of the investment will start to even out and not grow, and so you'll be spreading that investment over a higher revenue base as we get into next year, so I don't currently see any worsening, but I'm not yet ready to call a turn.

Okay.

Great, thank you.

Thank you.

Next question.

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

Your line is now open.

Thanks.

Three questions, please.

First, Tom, you said you expected cash flow to be strong in the second half of the year.

Versus that $105 million in the first half of the year, is there something about the seasonality in the second half of the year that would make that contribution materially greater or less than that $105 million?

I know you won't answer whether you can do $200 million in free cash flow, but just if we think through the seasonal factors behind that cash flow, what does "strong" in the second half of the year mean?

Sorry.

Sorry, the first part of my remarks got cut off.

I meant in an absolute sense and relative to OIBA, so I don't think there are any big -- there's always seasonal effects and things can move around month to month, but there is nothing in terms of free cash flow that I would point out that is materially better or worse in the back half relative to the front half.

And the way I always start by looking at it is, how much of our OIBA are we turning into after tax free cash, and it's been a very, very high percentage over the last two years, really, and I would expect that to continue in the second half.

And then in the Ask business, I think when you talked about Q3 guidance, you mentioned a couple reasons why margins would be down sequentially.

I think you mentioned something about marketing spend; could you just elaborate on that a little bit, if I got that right?

Is there something new you plan to do there?

Not really.

Not really.

The thing with margins, obviously another focal point, but kind of a few million dollars, $2 million, $3 million, $4 million of online marketing spend that can be up or down in a given quarter behind certain initiatives can make a meaningful difference.

And so that's one of the components; it's not the only component.

We have a much tougher comp.

If you look at the Q2 to Q3 performance last year, obviously we pulled out a lot of marketing after Q2, so Q3 is a much tougher comp, and I think just that factor plus a couple things we're doing, and I mentioned we're not seeing very robust revenue per queries right now, and that is a factor as well.

And then the final question on gross margins, I know this is more of an output of the model than anything else, but would you just talk through the gross margin trend through the Company overall?

It's been trending down, I guess, over the last year and a half, and I assume that's just a revenue mix shift, or is there anything else we should think about in that?

It's a pure revenue mix shift as we've moved.

In fact, in some ways it's a good thing, because as we've move the business to revenue streams with higher percentages, where they're driven by kind of direct return marketing spend, if you will, more of that gets booked into that line than the marketing expense line.

So if you looked at kind of total cost of customer acquisition, and put those two together, then it's flat to down over that same period.

So we may work on some additional metrics there, because I think as things get booked in one line or the other per the accounting literature, you have very similar types of spend, and sometimes it goes in one bucket and sometimes in the other, and you really have to think about them on a combined basis; and there, the trends are favorable, both this quarter and really over the course of this entire year.

Thank you, Tom.

Thank you, Barry.

Thank you.

Next question.

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

Your line is now open.

Hey, guys.

I have 25 questions.

Just kidding.

A couple questions.

I guess you guys have put up mid -- kind of mid double-digit growth now for -- mid-teens growth now for a couple quarters now.

Not that it's trend but obviously it looks to be, but can you talk through maybe the sustainability of growth over the next several years.

What do you think, kind of roughly?

Do you think this is more bouncing off the bottom in terms of the downturn of last year?

Do you think this type of kind of qualitative growth rate is attainable as we look ahead over the next couple years, and given some of the businesses that you're in?

And then second on Match.com, you had 8% sub growth, 4% revenue growth organic, and double digits in the US.

So obviously, you had quite a few subs at the end of the quarter.

Is it safe to assume that the growth rate in Match.com looks actually even stronger as the comps get easier, in addition to just kind of that sub-growth at the tail end of the quarter?

And then also just curious what's happened since --

You really do have 25 questions.

I'll shut up.

I tried 20.

I got to about four.

We're going to make you repeat your third, but why don't we answer the first two first, because there was some cross-chatter.

Look, I guess I would answer -- the first one is tough, obviously.

The nature of the businesses we're in, things are pretty dynamic; they move around.

Let me answer in, in a sense, the absence of a negative.

I do not think the revenue growth you're seeing this year is only a reflection of bounce off the bottom.

We don't have -- display is a tiny percentage of our business, the Search business was impacted by macro conditions last year, but not kind of terribly whacked.

And so when you think through the businesses, we've been talking about some of them today, we've been not talking about some of them today like CityGrid and some of our newer efforts, we certainly aspire to -- and we wouldn't aspire to it if we didn't think it was achievable -- a double-digit revenue growth over an extended period of time.

You can tick through the businesses, Match, ServiceMagic, CityGrid, Search led by toolbars, but the broad efforts, and then some of the newer stuff.

So there is no reason you can't do that.

On the other hand, as I've said countless times, these are not markets that are growing at those rates and all you do is kind of come and punch the clock and maintain share, and go home at 5:00 and you're done.

All of our operating executives kind of zig and zag every day.

There's constant challenges, and it is a competitive space; it's the nature of the consumer Internet.

But certainly, that would be the aspiration.

Greg, do you want to take the second one?

Yes, on Match, obviously there is some complications in the figures there; the 8% upgrowth reflects the existing US businesses that we had going up, as Tom said, in the low double digits.

But our existing international businesses were declining, so that led to the 8%.

Obviously, the sub-growth is a forward indicator of revenue.

So as you grow through the quarter, you recognize most of the revenue in future quarters, and that sub-growth happened over the course of the quarter and is continuing.

So I think it's strong in that way.

I'm not sure exactly what more --

Asked and answered.

What was your third one?

Sorry, we did miss it.

July 21st, Yahoo did the drop -- that was the drop date for all their personals altogether.

Just curious what you've seen in the past week?

Have you seen maybe an up tick or acceleration in just Match, so that as those that did not transition over to Match already are make the move now?

No, I think nothing meaningful.

I think the users who wanted to migrate over migrated over.

The ones who didn't I think were either done with the service for a while, or just weren't interested in doing it.

We didn't see any noticeable jump after the end of the migration period.

Thank you.

Next question.

Your next question or comment comes from the line of Brian Pitz from UBS.

Your line is now open.

Thanks, guys.

A quick one on the Ask, maybe what kind of investment in marketing we should expect around the Q&A platform?

And then on InstantAction, which relaunched this quarter, any early metrics there, and maybe your view on the competitive space?

We've seen Yahoo bolster their offering with Zynga, and Google getting into it, and recent M&A activity with Disney and [Platum], so any color on the competitive space there would be nice, too.

What was the first question?

On Ask.

Oh, on Ask.

Very little.

We're going to launch this product.

How is that?

And only if it returns.

Yes.

We're not anymore in -- we've learned.

I mean, we've spent a good amount of money learning that marketing doesn't get you very far in Search, and we're not going to spend much.

I think that's an answer.

Okay.

InstantAction, we've launched our platform.

I think it's early to judge, and we're working on InstantJam, which is a new guitar game that we'll launch later this quarter.

Obviously -- look, it's an intensely competitive space.

We have technology in terms of browser-based gaming that we still think provides us some advantage.

But at the end of the day, this is a business where kind of platform and technology can help, but you've got to produce high-quality games.

And we're anxious to see how the next game that we're about to launch -- really the first game that we're about to launch, which is also the next game we're about to launch, does; and if that is well received, then there is always going to be plenty of room in this space, notwithstanding Zynga and everything else, who are obviously very large competitors.

But consumers will find hit games, and from there leads to other opportunities, other games, growth of our platform, further alliances, et cetera.

But it's step at a time, and we're still in the throes of it.

Great.

Thanks, Barry, thanks, Tom.

Next question.

Your next question or comment comes from the line of Doug Anmuth from Barclays Capital.

Your line is now open.

Hi.

This is Ron Josey calling in for Doug.

Thanks for taking our question.

Back on Ask, real quick on revenue per query, I think with revenues growing 18% in Search, but revenue per query declined although active toolbars grew 51%, what do you think is needed before it begins to start growing again overall, or does it need to?

Can you quantify how much RPQ declined in the quarter?

Thank you.

RPQ -- first of all, let's break it apart.

Proprietary -- if you think about RPQ on proprietary products, whether it's Ask proper or our proprietary toolbars, was flat to up slightly, low single digits.

So we're not -- we weren't getting the help there that we've got at various points in time, but it certainly wasn't hurting us as well.

The overall RPQ was down meaningfully, higher single digits, because of mix issues.

As the distributed toolbar business grows very quickly, that just has a lower RPQ; still quite a good monetization rate, still plenty good to make plenty of money and a good business, and all those things.

It just happens to have a lower monetization rate than some of the other properties.

So that is purely a function of mix, and we're going to take that growth all day long, and if it happens to outgrow the proprietary side and RPQ results -- or declines as a result of that mix, who cares?

We're looking at it property by property.

And when we look at it property by property, I would say right now, as I mentioned kind of late in Q2, early in July, it moved from up to flat slightly to flat to down slightly; so it's not helping us right now, but it's also not hurting us materially, and the big effects are mix.

Great.

Thank you.

If I could ask just one follow-on, just on the Media and Other segment, I know you gave a little guidance on 3Q, but given the possibility for this quarter and 3Q, do you Media and Other is close to contributing to overall profitability, perhaps in 4Q and in 2011 going forward?

I would certainly hope in 2011, but can't be sure, but there's a possibility.

I can -- look, my CFO across from me is like looking -- let me call it unpleasant, because I think if you just project it out -- first of all, I guess we don't do that, but if you just project it out, there's still a lot of investment left to be made; but I'm very optimistic about what we're doing in that area, so I'm hopeful.

So do you want to --

No.

I'm hopeful, too.

Okay.

Good.

Great.

Thank you very much, guys.

Next question.

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

Your line is now open.

Great.

Question on some of the corporate level expenses, corporate overhead has been coming down year-over-year, and you've said you've been right-sizing it; given that the business is growing, at what point do you think you kind of reach a steady state, and where it starts to grow again?

And then the second part of that is on CapEx, first half CapEx has been running at about $13 million a quarter.

Last year it was running $10 million a quarter; are there any projects going on, or should we look at the current CapEx spend as just what the business demands?

Thanks.

Yes, I think the rate of decline on the corporate expense will -- we're probably starting to approach the -- kind of the limit on that, so I don't expect big material further declines, that will flatten out.

But I do not expect, even if the Company grows, any material increases as well.

So as best we can see right now -- we'll judge it as we go, but as best we can see right now, I would think about it as flattish.

And the same is true for CapEx.

The majority of our CapEx is actually capitalized wages, not actual hard goods.

And that can -- how much you capitalize versus you -- in-period expense is a function of lots of accounting mechanics, in terms of what the engineers are working on and the like.

There are no major projects.

There are lots of projects, but there's nothing of major capital consuming projects, and again, I don't expect material change in either direction on that line from the current run rate.

Okay.

That's great.

Thanks.

Thank you.

Next question, please.

Your next question or comment comes from the line of Justin Post from BofA Merrill Lynch.

Your line is now open.

Thank you.

Just one long-term question on personals, and then, Barry, a question for you.

Personals, you've been able to consolidate the space, and a less competitive environment in the US for sure; should that show up in better longer-term margins as you look out a few years?

And then Barry, or maybe Tom, if you could talk about the ownership percentage of Liberty, currently where it stands.

And, Barry, if you have any comments on how the relationship is now versus over the last couple of years?

Thank you.

On the margin question, our margins are pretty good, and I would hate to predict them getting better.

I think the competitive environment is changing, but I don't know that it's lessening.

I think -- you read every day about new entrants in the space with this concept or that gadget or whatever, and I think it's a very evolving space.

We've consolidated a little bit, but we've sort of consolidated in sort of almost a vertical way, meaning the people media sites didn't really compete with the match sites and all that sort of thing.

So I don't -- I certainly don't view it as a less competitive space that is going to lead to margin expansion.

We're always working to be as efficient as we can, but I don't think it's an outcome of the competitive landscape.

As to Liberty, liberty owns 11--

12.8.

Sorry.

11.8%.

Percent.

Sorry.

You're correct.

It's 12.8 shares.

12.8 million shares, yes.

Right.

And it's obviously down from what they used to own, and all the shares now are essentially the "B" shares.

They've sold all of the "A" shares.

The relationship between Liberty and -- Liberty, in terms of John Malone, is excellent.

It has been quite good since the unfortunate period; shortly thereafter we sat down and talked, and it's been quite fine since then.

I think John and I enjoy talking to each other, and he's on the Board of Expedia.

He's left the board of IAC simply because he does not -- he's got, as he says, just too many Board commitments, but we speak frequently and all is well.

As far as Liberty's intent, you'd best ask them as to what their intentions are for in the future in terms of their holdings of stock.

Thank you.

Next question, please.

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

Your line is now open.

Hi.

This is Bridget for Imran.

A few quick questions.

First, in the Search segment, can you tell us if there is any verticals you're seeing strength or weakness in?

And then secondly, looking at things on a broader scale, the mobile market is becoming a fast-developing space; can you tell us how the IAC products are doing in it?

Thanks.

Yes.

The short answer to your first one is, no, there is no discernible -- on any given month on any given property, various types of queries, and RPQ can be up, down, whatever.

But as we look at the data, I don't see anything I can call -- extract in terms of a trend by vertical.

In terms of mobile -- in terms of mobile we have a number of efforts.

First of all, in Match.com, Greg, why don't you speak to that, and then we can cover a couple of things?

In Match, our app is across all of the major platforms, Android and iPhone and Palm, and everything else, and it's actually one of our fastest-growing channels.

Until a month ago -- we actually used to charge it as an add-on; starting I think July 1st, we actually stopped charging for it additionally, and give it complete access to the subscription, because it's such a great tool for us.

It's becoming a big acquisition channel, and a great source of engagement.

So we're investing behind it, and it's really doing great for us.

Yes.

And literally in every business, I think, we have to varying degrees and, obviously, varying states of progress, but we have interesting activity.

We talked about Rez earlier; certainly, mobile is a critically important part of CitySearch's strategy and the CityGrid network.

We;re distributing advertising over its publisher network, and they're in good traction on adding publishers, as well as proprietary products on the Blackberry, iPad, Android.

Urbanspoon, nearly 10 million cumulative iPhone app downloads; Dictionary, over 7 million cumulative iPhone app downloads; and working on new products really in all of our businesses.

So I would say we're moving to the stage where, in a sense, it's just a deeply integrated part of each businesses' strategy.

Why don't we take one more question, please?

Your next question or comment comes from the line of Scott Kessler from Standard & Poor's.

Your line is now open.

Thank you very much.

Greg, I'm interested in Match.com's growth strategy.

Can you comment a little bit about the international efforts that were alluded to before?

Obviously, you guys have done some deals with Meetic, in terms of Europe and Latin America.

And also if you can highlight areas of focus from a growth perspective other than international and mobile, which was just referenced?

Thanks a lot.

Sure.

I think the international story is a little complex.

We obviously own a significant stake in Meetic, where we sort of have our European business.

We joined with Meetic in a joint venture that we control in Latin America, and we think Latin America is a big area of potential growth for us.

I think it's obviously a huge market, Brazil in particular, a growing economy.

Yes, the space is dramatically underpenetrated as against other comparable markets.

We're also in Japan, we're in Australia, we're in Canada.

We're working at all of those businesses to grow, and I think that each one has its own prospects.

Obviously the bigger the market, the bigger the potential; and we're sort of focusing our resources accordingly.

On other areas of growth, I will tell you that the space in the United States is still dramatically underpenetrated; and we invest, I think, more than anybody else in product development, product iteration, et cetera, and that's truly starting to come through.

I mean, our conversions keep growing; people are more and more satisfied with the product.

And I think as success builds on success, and there is a viral effect of it -- I am sure somebody knows somebody now who has met on Match, and everyone's got a story, and I think growth will happen both ideally through share, but also through leading category expansion, which is very much our focus.

Well, thank you.

Hopefully, you will all have a nice balance of summer, and we will see you -- talk to you, not see you -- hopefully, but we will talk to you again in three months.

And, therefore, we're finished.

This concludes today's conference call.

You may now disconnect.