Match Group Inc (MTCH) 2011 Q1 法說會逐字稿

Good morning.

My name is Adrian.

I will be your conference Operator today.

At this time I would like to welcome everyone to the IAC first-quarter earnings call.

All lines have been placed on mute to prevent any background noise.

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

(Operator Instructions)

Tom McInerney, CFO, you may begin your conference.

Thank you, Operator, and everyone for joining us this morning for our first-quarter 2011 earnings call.

Barry and Greg will make some brief remarks, after which I will come back and then we will go to Q and A.

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 Q1 2011 press release and our periodic reports filed with the SEC.

We will also discuss certain non-GAAP measures, and I refer you to our press release in the Investor Relations section of our website for all comparable GAAP measures and full reconciliations.

With that, I will turn it to Barry.

Thank you, Tom.

Tom and our new CEO, Mr.

Blatt, are going to take you through the developments in the last quarter.

I just thought I would really do a couple of things at the beginning.

One is to just tell you all how pleased we are about our new Google extension, so to speak, for five years.

We -- it took up a good part of the quarter.

I just think it is worth pointing out that three years ago when we announced this five-year deal that started then, we said that we thought it would have a value of about $3.5 billion over the five years.

We think this deal will have a value of over $5.5 billion over the five years.

So it, it, it's obviously, significant.

It's significant to us.

It's also just tells you all in addition to what you normally know about the Internet, just the sheer size and growth of Internet and Internet related businesses.

I mean, it is hard to think about, or it's hard to grasp just the size of it.

I mean, we are the seventh largest network in the world.

342 million unique viewers a month, but 800 billion views a month.

I mean, that's just extraordinary when you think about it.

So, for us to be in these businesses that are related to what, what this Internet industry is becoming is a good indication of why we feel pretty good about things at the moment and for the future.

So, with that, as a (inaudible) begins, please do so.

Thanks, Barry.

Good morning, everybody.

A few things before turning it over to Tom and then getting to questions.

First, as Barry mentioned, the Google extension.

That really was our number 1 priority when I took over.

We felt good about our Google relationship, but knew that it would become a drag as time went on.

And we really wanted to take that off the table.

Having done that, we feel great about our product innovation in this business, our marketing expertise, and really the flexible approach that we have two working with our distribution partners and think it gives us a real advantage in, in a broad and growing area of search without having to fight up, up the guts of the bigger players.

And what we think there is a lot of room in what we do to continue to grow this business well into the future.

We also think that there are additional ways to monetize many of the products in this business beyond search.

We know that as people begin to shift to tablets, to mobile, et cetera, that the willingness to pay for digital products through virtual goods, micro transactions, et cetera, is really growing.

We think a lot of our products are really well-suited to that.

This is going to be a long process and will take some time, but we think with the search modernization sewn up, we can take what has been tinkering up to now and really put a focus on it.

We think over the medium and long-term, we think that can be a great thing for this business.

The second thing I wanted to call out is Match.

Q1 was our third, maybe fourth straight quarter of strong organic and reported growth.

We really expect that growth to continue.

The view that this is a mature category, a slow and steady grower, which I still hear from time to time, is just inconsistent with everything we know and the way we think about this business.

I think we have shown that strong growth in this business comes with good execution.

We know that younger generations are doing online everything, and not thinking twice about it, and that younger generation is now getting older.

The older demographics are catching up to the younger in terms of their willingness to use the Internet and adoption, generally.

So category penetration is still really relatively low even if the potential audience is getting larger.

One way or the other, people are going to continue to meet each other online for as far as we can see.

That is really the way we define this business.

Satisfying that need of people meeting each other online.

We used to do it just threw Match until really a couple years ago, but we realize that the category was much bigger than that.

If people wanted to meet people in different ways at different times, we now offer over 30 domestic services in this category.

Some broad-based, some narrowly tailored, but each very different in terms of the experience that it offers.

Mobile, video, other technologies, are only starting to -- what I perceive as turbo charging the effectiveness of these, these services and those technologies and that increase effectiveness will spur further category of growth.

Over the remainder of this year alone, we are planning on launching new services organically in both the mobile and social spaces, as well as continue to roll out new features and technologies across our existing businesses.

We are committed to this area.

We've got a lot of differentiating expertise, and we really feel that our clear leadership position continue to provide operational advantages as we run our existing businesses, launch new ones, and acquire targeted companies that continue to expand this portfolio.

The third thing I wanted to point out is that we just hired a new CEO for ServiceMagic.

We've been looking for some time and are pleased to welcome Chris Terrill back into the fold.

He's a Match alumni, and was most recently Chief Marketing Officer and EVP of eCommerce at NutriSystems.

We are pleased with the performance of ServiceMagic business during the period of economic headwinds an investment that we've just gone through, but I think what's going to make this business really sing is when we can create a tighter relationship with the consumer in a way that increases lifetime values and word-of-mouth marketing such that margins really start to expand, and we think Chris is going to be a real help here.

So we are looking forward to making real progress there over the next year.

Finally, the balance sheet.

As I know some of you noticed, we didn't buy stock this quarter.

Given the conversations we had ongoing with Google for the entire period, we were not able to do so.

We are not saving up to do something big and stupid, we just legally didn't feel comfortable doing it.

But nothing has changed that relates to our view of our balance sheet, buy-backs, acquisitions, et cetera.

We bought back tons of stock over the last two years, and this quarter we were not able to buy any.

Simple as that.

Tom?

Thanks.

I will spend just a couple seconds on some supplemental information and then we will go to Q and A.

In Search, we -- as you see the figure, we continue to see very strong top and bottom-line growth across our principal activities.

So proprietary toolbars, B2B toolbars, destination sites, and CityGrid all contributed strong revenue and profit growth.

The margin performance was terrific.

So much so that at this point we are expecting margins to be sequentially down in this segment in Q2 and closer to the year ago Q2 levels.

We are still forecasting good year on year growth OIBA growth and margin growth, but the timing of certain expenses and other quarter to quarter effects will likely lead it to us not seeing the margin lift in Q2 than we saw in Q1.

But all in all, we expect continued strong results in this business.

In Match, you will note that we have disclosed additional details reflecting the many brands and activities that comprise the segment.

As discussed in the past, our core operations include Match.com US, Chemistry.com, and the People Media sites, while developing includes OkCupid, Singlesnet, certain mobile-only products, and our international operations.

We are doing this just to isolate the subscriber and revenue growth of the core operations which drives substantially all the current profit without the exacerbating or mitigating effects of earlier stage experimental, or just plain different types of activities.

With that in mind, let's turn to the results.

Which to a large degree have become repetitive.

Overall, Match had another very strong quarter, again led by the core operations.

Operationally, we continue to execute well and as a result are able to lever our cost structure while achieving very good revenue growth.

In fact, we saw our highest Q1 margins in nearly 10 years.

In part, reflecting the deferral of some marketing expense until later in the year as we roll out new products.

So for the balance of the year, we don't expect to see this type of year-over-year margin improvement.

As we have said countless times, we don't run the business for margins, especially not quarter to quarter.

Certainly, we would expect margins up for the full year assuming continued strong revenue growth, although the quarterly results will bounce around a bit as we make marketing, timing, and other decisions that are right for the business.

Finally, ServiceMagic, which despite some continued macro-economic headwinds, saw revenue grow 10% and OIBA improved 46%.

While we are not willing to call the turn just yet, our investments are bearing fruit, we are improving our marketing efficiencies, and with our new CEO in place look forward to the next Chapter.

With that, operator, let's get to questions.

(Operator Instructions) The first question comes from the line of Jason Helfstein from Oppenheimer.

Your line is open.

Thanks.

So two questions on Match.

The first fundamental question, so this quarter we saw revenue grow slower than ARPU, just looking at that core revenue number.

And that could have been driven either by lower ARPU or the timing of sub-ed's.

So can you talk about the balance between driving sub-growth and growing margins?

I think in the past you've talked about offering discounts for longer-term membership plans, which is more profitable over the long term because you save on marketing, but then may report a lower ARPU.

So, just talk about the balance there between revenue growth and profit growth.

And then second question, Barry, can you talk about how you think about maximizing the asset value of each operating business?

And in the context of Expedia announcing the spinoff of Travelocity, could we see an IPO of Match over time?

Thanks.

Yes, on the first question, sub-growth is a forward indicator of revenue growth because the sub-number that we report is a quarter-end sub-number.

So revenue in any given quarter and sub-growth in any given quarter can diverge.

So I think that if you look forward, the sub-growth number that we project tends to be a good indicator of revenue going forward.

On the ARPU side, you have a variety of businesses in there.

And they are very different price points.

The people media businesses are different price points than the Match business.

In the Chemistry business, it's a different price point than the other two.

So I think it's very hard, as mix sometimes shifts around, to really back into those ARPU numbers.

I can tell you that I don't believe that on any of our products we are sacrificing in any meaningful way, pricing for duration or growth.

Although, frankly, we would if we thought that was a good way to grow profit long-term.

We don't really think about the business that way.

But to date, we have not done that.

So I think if you look business by business, the ARPU is not coming down for mix shift.

On the general question, Expedia TripAdvisor split was a discrete transaction, and I probably am the king of spinoffs, I guess, with now 6, 7, or so rolling, but I would not anticipate the spinoff of Match.

We talked about all sorts of things, but I think that the Match is such a good asset for this Company, and growing so well, and we have lots of other businesses that also have good growth.

I just wouldn't think it would make any sense today.

Now, tomorrow, the next day, can always change.

And I'm always up for such a discussion.

But I don't know, Greg, how do you feel?

I think that's right.

I see it as this collection of assets.

We intend to always to realize value on them, and we will do it whatever way necessary over time.

Right now we would like to be realizing it within our stock, and we feel confident that we can.

And that said, we evaluate, as Barry said, everything all the time.

So, there are certainly no plans to do so that are being formulated, or that you would expect to see in the future.

Thank you.

Next question.

The next question comes from the line of Ross Sandler from RBC Capital Markets.

Your line is open.

Thanks, guys.

I have 2 quick questions on Search and ServiceMagic, and then a quick one on housekeeping for Tom.

So first, on Search, can you give us some examples of what some of these 30 new toolbar products are, and can you help us better understand the unit economics in the toolbar business?

For example, is the lifetime value and customer acquisition metrics different if a toolbar is in, say, the social media space or the sports space or another area?

And then, second, on ServiceMagic, can you just elaborate a little bit on what the new team is going to do differently, and how that is going to potentially impact the model?

And you noted lower marketing expense in domestic in the first quarter at ServiceMagic.

What was driving that trend?

Yes, on the new products in Search, just a couple examples.

One is this thing called Guffins, which effectively allows people to adopt a virtual pet and take care of the pets.

And you get this product and you download it, and with it comes the toolbar, and that is something I put in sort of the classic, mind spark product, like Zwinky, like Webfetti, that sort of animal.

We have also launched a number of sort of toolbar-specific products like Film Fanatic and Daily Bible Guide, which are toolbars that build into them functionality that allow people to quickly access certain information that is specific to a point of interest of theirs, and that also carries with it the regular search toolbar.

So we are developing things like that all the time.

They tend to be in the category of fun things that are sort of relatively lighthearted.

People take them.

They use them.

And the trick is how long do they keep them.

And that is really what we are focused on.

And on your second question in terms of unit economics, we don't disclose the details of that, I think it is kind of the essence of proprietary in that business, if you will.

But I will make kind of the following observations.

On the consumer side, obviously, given that kind of the nature of the web, how quickly hardware platforms change, people upgrade browsers, upgrade their hardware, et cetera, the lion's share of the economic value of a consumer toolbar we get on someone's desktop is in the first year, and then for a whole variety of reasons, that can be lost.

However, some can go out, the tail on that can be multiple years.

But the principal part of the economic value is in the first year.

We probably spent about one-third of the revenue expected from that toolbar to drive a download on the consumer side.

And the economics don't change that much given the nature of the product, or at least not in a predictable way.

There's some random variations, but it's not that certain types of toolbars perform so differently than others categorically.

I think marketing channels can make a difference.

Certainly, domestic are more valuable than international.

So there's a whole series of equations in there.

And I think one of our very core competencies built up over many, many years, many years, is knowing the statistics on all of this stuff.

And obviously, they're ever-changing, and using that to our advantage.

On the ServiceMagic side -- the Q1 marketing -- Q1 marketing was down for a couple of reasons.

One is we had a $3 million TV spend in the prior-year quarter, which was a bit of a test that did not repeat.

We had a little bit of radio, but less than $1 million in the current quarter.

We also were doing some SEM optimization.

I think I've talked about that before.

In this particular case, we were looking at long-tail buy, and there was some affiliate reshuffling.

So, I would call it a kind of resource allocation, a bunch of tactical, nothing strategic.

And we have long said the best way to think about kind of growth in that business is not strictly SRs, service requests, or revenue, but kind of the net contribution dollars we get from revenue less those consumer marketing.

And this quarter, that was up 14% year-over-year, which is the best quarter we have had in quite a while.

So we are not screaming up and down, jumping for joy yet, there is still some headwinds on the mix side and some other things.

But the business is better, solidly better.

And obviously, that's, as Greg alluded to, Chris Terrill, the new CEO, will be spending a lot of time on that marketing consumer side of the house when he comes in.

Okay.

Tom, the quick housekeeping question was, the Accounts Payable line was a little bit of a drag on operating cash flow in 1Q versus last year.

Can you just tell us what was going on in that line that created drag?

Well, it's business by business, but overall I'd say not that much.

I mean, free cash flow was, as you can see in the release, $46 million rounded against OIBA of $60 million.

So, obviously, free cash flow being an after-tax figure.

So we are pretty pleased with that conversion.

There may have been some timing items at some of the businesses, nothing that's systemic or we would expect to drag on free cash flow for the entirety of the year, or anything like that.

Great.

Thanks, guys.

Thanks.

Next question, please.

Next question comes from the line of Mark Mahaney from Citi.

Your line is open.

Thanks.

Two questions.

First, when you talk about the value of the Google deal being in excess of $5 billion, can you provide any of the inputs into that?

Like, how do you come up with that number?

And then secondly, on ServiceMagic and the new CEO, it's a little unclear.

Is this a signal of a major change, signal of an incremental change?

How much flexibility will the new CEO have to come in and change things as he sees fit?

Thanks.

Yes, on the Google estimate Barry mentioned, look, it's meant to be indicative of the aggregate size, not a kind of a guidance number or precise number.

The $3.5 billion we estimated when we did the last deal, we were 3 years into this deal.

And given the growth in that segment, which you see reported quarter after quarter and most recently well in excess of 20%, I think it makes sense that we are expecting a much bigger number over the next 5 years.

If you take kind of the run rate we are at now to that figure, you are going to get at some sort of double-digit growth rate, but it's not intended as a precise estimate other than it is expected to generate a lot of revenue, be very important to us, obviously, but also to Google and make us a major player in this -- continue to be a major player in this space.

And one of the reasons I mentioned it is because when we said 3 years ago, $3.5 billion, there was a lot of skepticism.

People said -- oh, come on, you are just out of the hat throwing a number out there, where do you get that this is going to generate that kind of revenue?

And we said it knowing pretty much that it was a floor, not a, by any stretch, a stretch.

And so I guess what I wanted to do partly is to say we were hardly overly exuberant about the first transaction, or the first period with Google.

And as Tom said, it is, of course, not exact.

You cannot project 5 years in advance of life.

But it just shows you, I think, everybody, that in fact this is a significant transaction for the Company, a significant relationship.

Both I think it's significant for Google, as Tom said, and insignificant for us.

With respect to ServiceMagic, I mean, Chris is coming in.

He's the CEO, so he has lots of latitude to figure out where the business ought to go.

That said, I don't see it as call for revolution.

The business is solid, they've done a really good job doing lots of things.

I think we all went out to get Chris because we thought there were areas that could be improved.

A business like that can always continue to be optimized.

I think that's an area they've done very well.

As I mentioned, I think his consumer sensibilities and product sensibilities are going to be a big lift to the business.

And so I don't expect revolution, but he certainly has latitude to take this business where it ought to go, both directly and adjacently, and we are excited to see as he gets into it, how his plans develop.

Thank you, Greg.

And the counterpoint is so much bigger than -- essentially than we have really been able to master.

And ServiceMagic has established itself, and yet has no -- particularly no brand name.

It's a great concept.

It has been able to put a lot of [moat] between itself and anyone else who wants to take that concept, so there's a great building block there.

We think that with some consumer juice and some other optimization, we think that it has the ability to really break through.

Yes, to be a big, big business.

That's right.

That's our hope, and as Barry said, there's also with that comes adjacencies in other areas that we haven't gone after.

So we know it's a big space, we think we have a good foundation, and we will see.

Next question, please.

Next question comes from the line of Jeetiil Patel from Deutsche Bank Securities.

Your line is open.

Thanks a lot.

Great quarter, guys.

Two questions.

One, going back to the Search relationship that, at $5.5 billion over 5 years.

I guess when you kind of look broadly at that relationship, does that also encompass mobile and other initiatives that you are not currently kind of executing upon today incrementally, and maybe some ideas of where that would maybe perhaps lead you in terms of incremental opportunity on the $5.5 billion that you are looking at over the next couple years?

Second, you've had quite a bit of success and quite a bit of great consistency in executing in the subscription-based business and personals.

I guess, is there an opportunity to expand on this in terms of creating new subscription offers outside of personals, or maybe making some small inroads through acquisitions or partnerships that really leverages your core understanding of that marketplace?

On the $5.5 billion, that is the Google relationship, and that is a search-based business only.

And we don't currently, in any meaningful way I think monetize the Google relationship through search.

So when I mentioned the ability to sort of get into mobile and other areas and other revenue streams, those other revenue streams would not be through the Google contract.

The Google contract is search-based advertising.

And I was highlighting the fact that there are other opportunities beyond that.

With respect to subscriptions -- .

By the way, one thing on that.

I just noticed in looking at stats, that in the short -- like in this year, in the past year, we have had 49 million, I think, close to 50 million apps downloaded across all of the IAC properties downloaded in terms of the apps have been downloaded onto various mobile devices.

That's pretty substantial.

Absolutely.

On the subscription side, the short answer is yes, absolutely.

We do feel that we have a real core competency in online subscription-based businesses.

It's an area that we tend to, or that we intend to evaluate further in terms of ways to expand that as an adjacency to the personals business, although not in that category necessarily.

Additionally, we do have other subscription businesses.

We have Vimeo, for instance, which is a great business.

It's a business in the media and other category that we think has real potential to become a real valuable asset for IAC.

That is a subscription-based business.

We are starting to share more competence and expertise from the Match businesses into that area, and I think the subscription-based businesses are going to continue to expand online, and we think that we have a good template for driving them.

So I think that could be an area of expansion for us going forward.

Would you say that mobile and social right now are in kind of distribution build-out mode of adding more users, more downloads, and then eventually it will become much more of a cross marketing and monetization potential, maybe sometime in 2012, or do you think it is later on this year?

Well, I think it is very business-by-business.

So, do you mean in the personal space in particular, or in the search space, or what -- ?

Obviously, you have stuff like Dictionary from a download standpoint.

So probably more search right now.

Well, I would say that in some of our businesses, adoption of mobile is outpacing monetization.

I would say that is certainly true in Dictionary and some of our personals businesses, et cetera.

I think in some of our businesses, like Match, it is actually great monetization.

And we get full subscription, and conversion is great and everything else.

So I think it is a wide spectrum.

Different products have to pursue different types of monetization on mobile.

I think mobile is, obviously, years behind the Internet in terms of figuring out the best way to monetize certain experiences.

But I think Barry's point is, we are getting out there.

We are making head-roads, even if monetization has not caught up yet.

And it will.

And we are not waiting for it to.

That's an area of investment for us across the business.

Just one addition.

One place where we are getting both good adoption and good monetization albeit still below web levels, is on CityGrid.

Where, both on our proprietary site, our proprietary business, Urban Spoon, which is obviously great proprietary mobile audience, as well as via the CityGrid publisher network, the mobile publishers are a big piece of what CityGrid is offering to its own advertisers and its resellers' advertisers.

So, again, not quite at web levels pound for pound, but meaningful and becoming increasingly meaningful.

Yes, and just back to Match for a second, because I think it is a good example is, we have, I think the number in Q1 was approximately 30% of all of our paying subscribers are accessing the service off of mobile.

That is huge.

And in terms of new customer acquisition, I think we are acquiring about 10%-plus of new customers through mobile channels.

And these are full paying customers.

These are full subscriptions.

So, we know it's coming.

We're developing products in front of monetization, but the monetization will come.

Next question, please.

The next question comes from the line of Brian Fitzgerald from UBS.

Your line is open.

Thanks, guys.

A quick question with respect to the Newsweek JV.

Have you been able to gain any leverage in terms of operational dynamics maybe driving better traffic to your other properties off of there?

Or many ancillary benefits, better monetization, ability to cross-sell advertising within and without the JV?

And then following up on this apps kind of thread we are moving down, do you have any further traffic details out on those apps?

And then maybe to what extent do you leverage Google and AdMob into those apps?

Or is it more proprietary-type of stuff?

Thanks.

On Newsweek, we have really just begun.

We are in our, probably sixth issue, weekly issue.

But it's interesting, apropos the last comments.

One of the things that clearly we have -- we now have the benefit of, and it is a clear benefit, is we are using the Daily Beast Internet property to sell subscriptions to the hard book, Newsweek magazine.

And as we go, I think there are lots of things that can develop out of this.

The strategy, of course, is, whereas first we are integrating 2 completely disparate organizations into one journalistic enterprise, The Beast Newsweek, that has essentially probably the only place where, in journalism, where it has an original -- probably, certainly the first, original news site, being The Beast, which was not an aggregator but predominantly original journalism, which is the first time anybody did that on the Internet as a pure standalone product.

So we have that real experience, and then we have this old revered book in Newsweek that we are going to infuse with this sensibility, but it's really just beginning.

There's nothing much to report there, won't be for probably 6 to 9 months.

Yes, and on the app side -- I'm not sure exactly what you are referring to.

Barry gave you some statistics earlier, a couple other data points.

Dictionary has had 29 million, I think, cumulative downloads on its site, Urban Spoon has 14 million uniques, I think, was the latest statistic I saw.

So, Greg mentioned the Match statistics.

So it's really across the businesses where we are starting to get some substantial audience.

Also, in terms of Google, I mean AdMob is a great network.

I know some of our services monetize through AdMob.

Others acquire customers through AdMob, but there's no master agreement with Google that centralizes our mobile monetization or customer acquisition.

I think right now, again, because these businesses -- these mobile products are generally such extensions of their core products, that each business is sort of finding its own way and different things are working for different businesses.

Thanks, guys.

Appreciate it.

Thanks.

Next question please.

Next question comes from the line of John Blackledge from Credit Suisse.

Your line is open.

Thanks for taking the questions.

Two things.

First on Match, you mentioned potential acquisitions.

Just wondering where you think we are at in terms of consolidation and the online personal space domestically and globally in your view of the current asset mix in online personals for IAC.

And then secondly, on the Google deal, just a couple follow-ups.

Did IAC have the option to renegotiate the deal, or were both parties interested in renegotiating the deal sooner rather than later?

Thanks.

On Match, when I hear the word consolidation, I cringe because consolidation has a connotation.

I think the only deal domestically that we have done that I would call consolidation was maybe Singlesnet.

Everything else you are getting a different product that appeals to different people.

And I view it more as expansion than consolidation.

I think, is consolidation possible?

Yes.

But it's certainly not a focus of ours.

I think there continue to be new products that are rolling out that offer new things that I think are expanding the category, and expanding the audience domestically.

And I don't have anything particular in mind, but I am sure things will come.

It's been a great space for us in that area.

Internationally, you have to go market by market.

There are markets like Latin America where we have a JV, but that was -- again, I don't think of it as consolidation.

It was a strategic partnership to try and tackle the space.

I think right there you're so nascent that I don't see much M&A activity there.

Internationally, maybe more in the form of investment in certain emerging markets.

So, I think there will be M&A activity in the form of investments and acquisition, but nothing that I would call consolidation in the near term.

Just to echo that, everything is in a sense offensive, right?

We don't -- .

That's right.

We don't feel there is any must do, need to do, protect to do transactions.

So we have the luxury, if it makes sense we will do it, and if not we won't.

Yes, we have yet to do an acquisition.

I mean, look, the merger in Europe, I guess, you could call consolidation.

But in general, domestically, we have not been going after costs or synergies or anything.

We have been finding businesses that we think have real growth potential, and we've been getting them.

In terms of Google, it was just a negotiation.

It made sense for us.

We wanted to negotiate early and take this off the path and they were happy to accept.

That's great.

Thanks.

Great quarter.

Thanks.

Next question, please.

Next question comes from the line of Justin Post from Merrill Lynch.

Your line is open.

Thanks.

Just a few questions.

Greg, can you talk about just Match?

I mean, do you see this as a real interesting social play?

And are you seeing the engagement and activity on this site really increase?

I don't know if you measure that internally.

And maybe your thoughts on the market opportunity for Match subscribers, if you have any thoughts there.

Yes, I think -- I don't know if engagement -- each site is different.

In general, I think new technologies are coming, new features, that are going to increase engagement.

I really think there's a wave coming in the next sort of 6 to 12 months that will start to change that.

I think the category is broad, so I think a Match.com subscriber acts very differently than an OkCupid subscriber, and very differently than a, I don't know, Chemistry.com subscriber.

They're different products, they're different experiences.

They involve different engagement.

I think mobile is driving increased engagement.

So people who are using their mobile device are coming back more, and it's facilitating a different type of behavior.

I think technology will continue to change that.

So I think it's more about growing audience in the near term, and then I think technology will change engagement over the longer term.

I'm sorry, what was the -- ?

Market opportunity.

Market opportunity.

I mean, you look at this, and again, I touched on it in my initial remarks.

People are more and more doing this.

As you look at the older demographic is absolutely -- .

What is it that they're more and more doing?

More and more meeting people online.

I thought you were talking about people's interrelations with each other.

No.

People's willingness -- people's ability and willingness to meet online is changing fundamentally.

Just, again, 5 years ago putting up a profile was a real bar to online dating, but with the ubiquity of social networks, that's gone.

So everybody is used to putting up profiles.

The ability to suck in all the data from Facebook and otherwise, and just pre-populate profiles is just eliminating the barriers to entry.

And as, again, the younger demographic who grew up doing everything online, I mean, they don't even know what a CD is, you know?

They don't buy CDs, they download.

Everything that one used to do offline they now do online.

And meeting is very much a part of that.

Conversely, on the other side of the funnel, you have the more -- the older demographic very much doing it, often being driven by their children to engage in this, and our growth in that category has been huge.

And I just don't see it changing.

I think people more and more are doing it, doing it more and more often, and all the stats bear that out.

Unless people stop doing it.

People could stop doing it, but -- .

I'm clearly joking.

Right.

I forget what the final question was.

That's it.

A question for Tom, follow-up.

You said organic growth in Match was 17%, I believe, in Q4.

And you said core was 22% this quarter.

Are those comparable numbers?

Very close.

The only piece that's in the organic figure that is not in the core figure are some of our smaller international markets.

So I think the figures are generally comparable.

But the reason we broke it out this way is because they are generally comparable right now, but somewhat by accident.

Which is, the developing category has certain businesses, certain markets, for instance, that we service just to the MSN deal that are on decline and we don't put money into them.

And we will acquire and develop new businesses that will fall into the developing category.

What we want to do is try and keep the core separate, where, almost by definition, that can't change unless we change it to show real comparability and growth in the business that is driving the core economics of the business.

And core subs were up 21% in Q1, to the 22% in Q2.

So basically very consistent quarter-to-quarter.

Strong numbers in both quarters.

Okay.

And then one question for, I don't know, maybe Tom or Greg.

But organic search really accelerated -- or search really accelerated in the first half of last year.

And I think you were adding partners.

Should we worry at all that you are going to comp one of these big partner adds, and the growth rate could slow down?

Is there any comp issues we should think about as you go forward this year?

Thanks.

Well, I'd say it this way.

There's no big partner, there's no lump, there's no one thing, or obviously we would call it out for you.

Obviously, we have had a string of kind of 20%-plus top line growth quarter-after-quarter.

We have never tried to say we think that is sustainable indefinitely.

So the comps get harder.

The longer you do that, the comps get harder by definition.

And when you think about our strategy in search, which is really kind of multiple oars in the water, the consumer side, the B2B side, the destination sites, to grow off of that you obviously have lots of activity across lots of marketing channels, product development, et cetera.

So, I think in general the comps get harder, but there's no one big lump sum.

And traction right now, and momentum is good.

Great.

Appreciate it.

Thank you.

Thank you.

Next question, please.

Next question comes from the line of Clay Moran from Benchmark Company.

Your line is open.

Good morning.

A question on search, and then on Match.

In search, can you give us a sense of the percentage of search revenue from destination sites versus toolbars?

And then, along the lines of that last question, can you give us a sense of the concentration of the toolbar revenues with the top products?

And then over on Match, I am not sure I got what the organic subscriber growth was year-over-year.

Can you give us that?

And are you including Yahoo personals in that?

And if so, could you sort of break out the effect of Yahoo personals?

Sure.

On the first question, just directionally, the toolbar side is probably roughly half of revenue.

You have CityGrid in that segment, which is roughly 10%, and the rest is a combination of destination search sites, which would include things like Dictionary, Ask, and then a couple of smaller nascent efforts we have going.

Do you want to take the Match question?

Yes, organic sub-growth, I think this quarter was 21% versus core is 22%.

So they are very similar.

Although, again, that may be as much accidental as anything else.

So I am not sure that they will track going forward.

In terms of Yahoo, Yahoo is included in organic.

We are not going to continue to break it out.

It's comparable to what it's been in the prior quarters.

But again, it's really not an acquisition.

It's just a source of traffic.

We pay for it like we do everything else.

I will tell you that, today, the aggregate subs that we get from Yahoo, MSN, and AOL is a lot less than what we used to get from MSN and AOL years ago.

We have sources of traffic that come and they go.

And we have a long-term deal with Yahoo, but we are paying for every sub that we get.

If Yahoo somehow went away, we would put that money somewhere else.

So, I don't think it makes sense for us to continue to break that out.

But again, it's generally comparable to what it's been in the past.

Okay.

And any commentary around the concentration of the toolbar revenues within the top products?

Yes, it's reasonably balanced because we have the B2C side and the B2B side, as well as the destination sites, which we already talked about.

So there are, certainly, on the B2B side there is more concentration, and certainly there is a handful that if we lost, they would impact results.

But there is absolutely nothing that would kind of devastate results, or be huge.

You are talking about kind of single-digit numbers, mid-single-digit numbers, at the largest as a percentage of the overall segment.

By the way, that's on the revenue side, because we share a very healthy cut of that revenue with those partners; it's probably an even lower percentage on the profit side.

So we work hard to keep them, but there is no single big risk.

Okay.

Thank you.

Thank you.

Next question, please.

Next question comes from the line of Kerry Rice from Wedbush.

Your line is open.

Thanks.

Two quick questions.

One on CityGrid.

Can you talk a little bit more about that business?

It seems like it's really starting to gain some traction there, and obviously there's a lot of popularity in the local area these days, and was curious what you guys are doing there beyond mobile, which you mentioned earlier.

And then the second question is related to OkCupid.

More of an advertising model versus a subscription.

So as we think about the developing revenue, can you talk at all about that business and kind of the impact on that, or maybe what you think about OkCupid as future growth there?

Tom and I will tag-team on CityGrid, and then I'll take Match.

I think from a step-back perspective, what CityGrid has become is a network, and its primary objective is to effectively deliver better content in the local space to publishers, and effectively have the content act as advertising, even though -- it acts as advertising economically, but as content from a consumer perspective.

And we are doing a lot on the technology side, a lot on the partnership side.

And our goal is to have the best product out there at delivering premium local content that acts better for the merchants than the advertising itself.

In that, you have the network, so you have to be constantly calibrating the ins and outs on both sides, viewers, advertising dollars, et cetera.

And that's sort of the nuts and bolts of it, but it's a heavy technology play.

We are working on it hard, and we are really excited about its ability to do something fundamentally different.

In terms of the progress we made this quarter and sort of what to expect near-term, Tom?

Yes, I think economically it's playing out the way we'd hoped.

We knew this was never a kind of easy proposition, which would just kind of soar without tons of work.

But we are kind of laying the bricks, brick by brick.

So on the reseller side, these tend to be relationships with major sellers of local advertising, the IYPs, the SEM, and other local marketing agencies, such as a ReachLocal and a Yodel, as well as anybody else that is selling local advertising.

I know we announced a partnership with CBS, for example.

And we bring those on kind of one by one.

They are complicated, technical integrations making their feeds talk to our system, making the APIs connect, cleansing data, matching them, and the whole goal is to match their thousands of advertisers in each case with our content and then push it out to our 100-plus publisher networks.

So it's tough, complicated work that kind of requires each quarter a lot of heavy lifting, but it's working.

It's working economically.

And we have a material number of resellers that now are contributing.

I think we paid over 125 publishers at least something in the quarter, which is a sign of the breadth of the distribution.

And we expect continued progress.

The effort is indicative, we think, at the end of the day of something that will be very good and very defensible as well.

So it won't go in a straight line, but we are on schedule with where we'd hoped to be.

In terms of OkCupid, it's a great, great site, but a very small contributor at the moment to developing.

Ad-revenue driven, it is low revenue but high margin, and I think, hopefully in the quarters to come will start to contribute and probably more to the bottom line of developing than the top line.

But in first quarter, I think, we only even included it for 2 months, so it's really not noticeable in the current numbers.

And hopefully, it will become more so over the quarters to come.

Next question, please.

Next question comes from the line of Ingrid Chung from Goldman Sachs.

Your line is open.

Thanks.

Good morning.

So I have 2 questions.

The first one is on Match.

Greg, you've highlighted the mobile opportunity and the huge growth for Match on the mobile platform.

Can you talk about the use case for Match on mobile?

Is it about location or time of day, et cetera.

And then are there certain Match properties that do better on mobile than others?

My second question is on search, the toolbars business.

What proportion of your toolbars business is outside the US?

And if the majority is in the US, is it correct to assume that a material number of the homes in the US have multiple toolbars?

I think on the Match side, the use case is, it's pretty compelling when you are on an online dating service to check your matches, to check your emails, to check, et cetera, just like in many other things.

And the mobile adoption and the fact that we have pushed out a high-quality mobile product to all of the, basically on all of the major platforms for the Match.com US business, just enables subscribers to go there more often.

So in general, it's a higher engagement, you go back and you look at it.

At the same time, it's harder to write your essay on your mobile phone or to do some other things.

So the use switches a little bit.

On the Match product, it's not heavily local based at the moment.

Meaning we have certain location-based features.

We've enabled some.

We haven't others.

We are sort of plodding our way through to see sort of what works for that business.

I can tell you that some other much more heavily focused location-based products are on their way out the door.

And we will see what kind of adoption location-based drives.

I think it's going to tend to be a younger demographic.

It's going to be a different use case than the classic sort of Match.com subscriber, but that's what we are going for.

So, I think different products will highlight different things.

Also, we have simply invested far more on the Match side.

So Match has complete coverage, the other businesses are somewhat behind.

It takes some real investment to develop these mobile products platform-by-platform, and that's under way.

Tom, on -- .

Yes, on the (inaudible) side, Ingrid, the majority -- a big majority of the toolbars themselves are international, but when it comes to revenue, it's flipped.

So, when you hear kind of the statistics we've quoted before, I think roughly 100 million [acts] of toolbars, the substantial majority of those are overseas, but the domestic count on that is a minority of that even though that is where most of the revenue and profit comes.

It's just big differences in the monetization rates.

And so I don't have the exact statistic handy on what percentage have more than one, but when we looked at the statistics, you still have a substantial percentage of people that either have none, or only one, and there is demonstrated use of multiple toolbars, and they are also, as I said earlier, always cycling.

So it's kind of periodic consumption.

Just because somebody has the Google toolbar, or a Yahoo toolbar, or one of our toolbars for that matter, doesn't mean they are not in the market for either a second toolbar, third toolbar, or a first toolbar because they made some change to their system, or change in their hardware, or whatever it may be.

Okay, great.

Thanks, Tom and Greg.

Thank you.

I think why don't we do a couple more.

Yes, I think that's enough.

We've been on -- I mean not, if you want to go on forever, keep going.

But -- .

The next question, please.

Go ahead, Tom.

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

Your line is open.

On the media and other category, the revenues came in higher than we would have expected given that you de-consolidated Daily Beast, and just what seasonal trends have been.

Is there anything that stood out particularly in the quarter?

You called out a number of different assets.

Was it driven by the better economy, or is a specific asset starting to ramp?

And then on the [law office] side, do you think that for the remainder of the year, on an OIBA basis, you will be roughly at break even, or are you still net investing money in these businesses?

On the revenue side, there's a handful of pieces.

But honestly, nothing I would call out.

I don't think it is telling.

We have nascent stuff in there, and I don't think there's anything telling in there that is kind of indicative of a breakout overall of either that business or the collection of businesses in that segment.

I think the loss for the quarter, which was 3.4, we had one month of The Daily Beast consolidated in there, so that helps in the future, but there may be some other puts and takes.

So, I think you'll see us kind of net investing in that segment along the magnitude of where we are for quarters 2 and 3, and then there is some seasonal uplift just like we saw last year in Q4.

I think there were some charges which offset that, in last year, but there's a little bit of seasonal uplift in Q4.

This will be kind of a series of discrete decisions.

I don't expect any major changes up or down at this point.

Great.

Thank you.

Thank you.

Thank you for joining us, everybody, today.

We appreciate your time.

We look forward to speaking with you next quarter.

This concludes today's conference call.

You may now disconnect.