Match Group Inc (MTCH) 2011 Q2 法說會逐字稿

Good morning.

My name is Steve and I will be your conference operator today.

At this time, I would like to welcome everyone to the IAC second quarters 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)

Thank you.

I'll now turn the call over to Tom McInerney, Chief Financial Officer.

Please go ahead.

Thank you, operator, and thank you everyone for joining us this morning for our Q2 2011 earnings call.

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

But first I'll 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 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 and the investor relations section of our website for all comparable GAAP measures and full reconciliation.

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

Thank you, Tom.

Good morning, everybody.

I think that the -- the real significance to me today, quarter is certainly is good but I think you all kind of know that over the last two years really, the last at least eight quarters, I mean, we've been growing in the -- averagely about 40% a year, 40% a quarter would be right.

I think that.

High 30%s.

Yes.

I think for the last eight quarters -- bottom line, average growth.

All right.

So I think that -- that if -- if there is significance, it's the significance that a few years ago we said that we were really going to manage our businesses -- we thought we had in our hand, we thought we had some good businesses, we thought that with real concentration they could be developed, and that they would start producing real results.

That has been happening.

Not for a month, not for a quarter but for now a couple of years.

We see that continuing.

I don't know that I would make any projections towards -- to future years of high 30%s growth, but we see a tremendous amount of runway ahead.

We've done all of this, as I think you all know, with very little investment.

It has not cost us very much capital to grow these businesses.

Our probably CapEx for the businesses themselves are by the nature of these businesses quite low.

We, as you know today, we authorized an additional 15 million shares for potential purchase.

We'll follow our historical strategy of being opportunistic about buying the stock.

But we've certainly over the years been consistent in -- in doing so and certainly in this last quarter we have.

So it's a -- it's a good summary of -- of not only the growth to date but -- the last couple years but with the change in management, with Mr.

Blatt becoming CEO.

And with I think a further concentration and focus on the businesses we have and the opportunities within those businesses.

I think we're -- I think we're in the best shape we've ever been.

That's a big statement for me.

So with that, Mr.

Blatt, why don't you talk?

Thanks, Barry.

Talk to the folks?

Thanks, Barry.

I guess the biggest development since the last call was our announcement of the Meetic transaction.

This is a case, I think, of being both opportunistic and strategic.

Meetic's business is about as core to our business scales and focuses as really anything.

But we only decided to act when we saw the opportunity for real long-term value creation.

The competitive situation is pretty intense in Europe right now, so the price really had to come down a lot from its highs in order for us to be interested in increasing our stake.

At EUR15 per share, we're confident we can get rewarded for the hard work we'll do to get Meetic's core business going in the right direction again.

We'll also increasing the global footprint across which we can leverage initiatives in the dating space in the years to come.

On capital allocation, as Barry referenced, I think what you've seen in this quarter is representative of our general philosophy and outlook.

Bottom line is we like our businesses a lot.

So we've been buying back stock and we're making investments in our core areas.

Meetic is obviously a big example.

We've also begun committing dollars to develop new dating and similar products through a new group formed by OkCupid's founders, putting small dollars into certain search initiatives and generally scouring our four principal business areas -- media, search, local and -- and dating for profitable ways to invest.

I think when you couple this with the healthy dose we plowed back into our shares themselves, demonstrates confidence in what we're doing and a belief there's real room for expansion, both organically and to a lesser extent, through acquisitions, within and around our current businesses.

One final footnote, Chris Terrill, our new ServiceMagic CEO will hit his 90 day mark this month, so I'll have a little more to say about what we're seeing for that business next quarter.

For now I'd say simply that he has brought a lot of energy and a new perspective to a business that had been very ably run by its founders for ten years and we're feeling really good about where that fresh look will take us.

Tom?

Thanks, Greg.

Just before we jump into Q&A, I just wanted to spend a couple moments on some supplemental information as it relates to the second quarter and going forward.

Search had a second strong quarter and fundamentals remain positive.

We saw generally balanced revenue growth across our principal activities -- B2B and B2C toolbars, destination websites, and CityGrid all saw double digit revenue growth in the quarter.

The growth in OIBA outpaced revenue due to operating leverage, in part due to good expense control and in part due to the benefits of the late 2010 restructuring action we took at Ask.

Match had another very good quarter with strong top and bottom line results led by the core operations which saw 17% growth in subscribers and 22% growth in revenue.

Going forward, we feel extremely good about business fundamentals but want to point out a few things that will affect Q3, both top and bottom line.

First on the top line, we will anniversary the first full quarter of the Yahoo distribution arrangement and as we've said on previous calls, this has been worth a few points of top line growth to us in the last few quarters.

So from a comp perspective, it gets a little bit tougher.

Second, earlier in the year we made a strategic decision to reduce marketing against our Singlesnet brand which is one of the developing businesses and you'll recall this was a quasi-experimental, very small acquisition we made.

And the reduction in marketing actually helps profitability but hurts revenue.

Specifically in the developing group and the cumulative effect of this reduction will now impact the reported top line growth rate to a greater degree in Q3 in that developing category.

And then on the bottom line, for tactical reasons we expect materially higher offline marketing spend in the third quarter against at least two of our core brands, including Match.

This increase year-on-year is a function of both comp issues -- spend was unusually low in the prior year period -- and tactical issues in connection with new product launches and other timing considerations.

We've said countless times that we do not run this business or any of our businesses for consistent quarter-to-quarter financial results.

We've had huge OIBA growth in the business year-to-date and while we could have spent more on the first two quarters instead of Q3, we decided for tactical reasons to spend more in Q3.

So as a result, margins are more likely to be flattish year-on-year overall in the segment before we get into all the Meetic effects.

And as it relates to the Meetic transaction, we currently expected to conclude late in the third quarter.

And assuming we end up with over 50% ownership, we will consolidate the financial results of that business from the close date forward.

Because of the uncertainties of the transaction timing as well as a myriad of accounting effects, including the write-off of deferred revenue as required by purchase accounting, it's impossible to predict at this time what the impact of this will be on our results.

But we'll isolate those impacts when we report Q3 and suffice it to say and Greg alluded to this -- we're more excited than ever about the acquisition as we go forward and we'll just call out those effects in Q3 when we report.

Finally, cash generation continues to remain very strong.

And as you see, we made a major commitment over the last three months to buying back our stock to the tune of 7.2 million shares and $263 million.

While we've made a dent in our overcapitalization over the last 2.5 years, with nearly $1.6 billion in cumulative cash repatriated and more than $200 million in investments and acquisitions, we still have substantial resources to pursue both growth and additional repatriation.

At quarter end, we had $912 million in cash and equivalents plus $361 million set aside for the maximum we could spend on Meetic if we got 100% of the Company.

As is our practice, we'll not provide further prognostication about the mix or timing of capital deployment other than to say we're philosophically committed to both.

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

(Operator Instructions)

And your first question comes from the line of John Blackledge with Credit Suisse.

Your line is now open.

That's great.

Thank you.

Fantastic quarter.

I have a question on the search business.

So the overall search results were excellent with search margins being much better than we had expected.

Maybe if you can provide a little bit more detail on the drivers of upside, margin upside in 2Q, and then if you could just give us a sense of margin expectations for 3Q in the back half of the year.

And then also from a longer-term perspective, how should we think about search margins in 2012 and going out?

Thank you.

Sure.

You know, it's like our other businesses and I think I've said this on search for a number of quarters running, when we're able to get the type of top line growth we did in the quarter, which is very strong at 28%, then just the natural physics of the business are going to lead to operating leverage.

While we're making kind of incremental and tactical investments in rolling out new products and things all the time, 28% revenue growth is a lot to -- a lot to play with in terms of incremental profitability.

So we had good and efficient marketing.

We were able to increase marketing which as -- we look to increase marketing to help drive that top line.

Marketing expenditures overall were up slightly actually as a percentage of revenue, as I think we've called out in the release.

But the fact of the matter is, off of the OpEx expense base or just when we get that kind of revenue growth, we're going to bring more of it to the bottom line absent something special going on.

I think there was a little bit of some benefit from some expenses in the prior year quarter, but most of it was just good old fashion kind of operating leverage on that revenue growth.

For the back half of the year, I don't want to make specific kind of forecasts, as is our custom.

I would say the general trends in terms of year-over-year improvement and the -- and the forces that have given rise to it largely remain in place, so I don't see -- I'll do it with kind of the absence of the negative.

I don't see something right now that would fundamentally change what have been good momentum in the business.

And we'll see how it shakes out.

I mean, obviously they're dynamic markets, dynamic businesses and we're kind of competing every day across the businesses.

And longer term I would say the same thing, which is when we're -- when we're able to get the good revenue growth we've now gotten a number of quarters running, the margin will be there.

And right now we don't see something changing and we'll see how it plays out over time.

Thank you.

Thank you, John.

Next question, please.

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

Your line is now open.

Thanks, guys.

Good quarter.

Just a -- a couple questions on the personals business.

Greg, first question is more strategic.

Do you have any color yet on what the tendering process looks like at this point?

Like, any sense of how many shares you guys may end up getting?

And if we step back for a second, assuming you do control over 50% of the Company, how does this change the longer term strategic picture for Match and Meetic as a combined worldwide personals business?

Do there -- are there synergies that exist?

And then given your early traction that Expedia has seen from its spin announcement, has IAC or has your view of keeping Match and the other businesses combined under one roof changed at all?

And then I have one follow-up question.

Sure.

I think I won't predict exactly what we'll end up with, but I will say I will be shocked if we don't end up with over 50%.

So we fully expect to control the Company, and that's a important part of our planning there.

I think depends what you mean by synergy.

I think a big reason for our making this offer was when we really looked at the situation, it reminded us a lot of the US situation in 2008.

There was a lot of dollars being spent in the area.

There was a lot of competition.

Growth had stalled.

You actually plot the Match sort of subscriber and revenue lines against -- from sort of '06, '07, '08 -- against Meetic's over the last three years and they're very, very similar.

And, you know, we realized we had to be able to increase the amount we spent on marketing while decreasing the cost per subscriber, which is not really an easy thing to do and we were able to do it, and we did it through really a combination of product improvements and real systematic improvements and analytics.

And as we've worked with Meetic, we think there is a huge operation -- huge opportunity to bring those learnings to Europe.

And we think we're absolutely going to be able to restart that growth, the top line growth, in a profitable way that Meetic has really lost its way on.

And I think people look at these businesses and there are a lot of competition out there.

But there are better and less good ways to do certain things.

And I think we've gotten really good at this and I think, so while it's not cost synergies in the sense of centralizations and other things, our teams are already engaged forcefully together in bringing those learnings to Europe.

I think it will be -- it will take a little while to see the results, but we expect to get them.

And I think beyond sort of what I'll call the blocking and tackling operational benefits we see there, I really do think as we look ahead in this area, I think technology and product innovation is going to continue to change this category.

Probably more than it has over the last 15 years.

I really do think there will be changes.

I think those changes are leverageable on a global basis.

And already we're starting, I mentioned earlier we're starting to develop a bunch of new products.

We're developing those products with global distribution in mind.

And the ability to do that with existing communities on a global basis really makes it a much more efficient and effective program.

So I think there are medium term benefits from operational learnings and I think mid to long-term benefits from the strategic opportunities.

In terms of spin-off, I think the answer is no, we're certainly not thinking about that right now.

Obviously, we do think about the existential questions from time-to-time and we look at our portfolio and we decide what we ought to have and what we shouldn't.

But I will say that the longer I sit in this chair, the more I see sort of the interrelationship between the various businesses we have.

And I really like what we have right now.

There is a lot of cross-learning, cross sort of work together in key areas.

And while these are different businesses, we use a lot of the same languages and a lot of the same tools and the -- the people who run these businesses are working together and learning together.

And I think that my rule has always been keep the businesses if they are doing better for being part of IAC than they would be alone and I really think that is the case right now.

I mean, from the ability to go out and do the Meetic tender offer, which is certainly made much easier by being part of IAC to the -- again, the cross-pollination in learnings about how to leverage Facebook and Google and all of the various things that these businesses do, I really don't see any reason to break up the portfolio in a significant way right now.

We feel really good about it.

Yes.

I would only add that I -- with Expedia spinning itself, with TripAdvisor spinning out of Expedia, I'm kind of sated for spin-offs for the -- I think, foreseeable time.

This is number eight.

So I think I probably hold the record for spinning things off.

But I think we have a good hand.

I don't -- I don't think we should even get up to the brink of considering splitting apart or spinning out any of the IAC assets.

Great.

And, Tom, real quick on the follow-up on your comments on Match margins, you said flattish year-on-year in the third quarter.

You also call out better efficiency in customer acquisition in the -- in the press release.

So can you just reconcile, I guess, are you spending more but spending more at more efficient levels?

Or why -- why--?

Yes.

Yes, I mean, there's a -- largely the effect in Q3 which you're -- you're repeating from what I said is -- is largely timing related.

We -- we sit, Greg and team sit at the beginning of the year and they plot out marketing plans online, offline campaigns, it's against new products, it's against what is going on in the business.

And the -- the first, second and third priorities at staging that -- that marketing is against what is right for the business as opposed to what it does to quarterly results.

We just do not put -- and I -- we've been very consistent on this.

I've said it for years.

We don't put a big value in saying we'll have two quarters of 17% growth each as opposed to one of 30% and one of 10%.

Or whatever it may be.

And we -- we tend to think more year-over-year.

We tend to think what is going to be right for the business longer term.

And as a result of that, we're ending up with more marketing in Q3 this year relative to the prior year than we did in Q2 relative to the prior year.

Also I think it's important to remember that in the Match business, marketing is done in a way where you market against a lifetime value.

So even the most efficient marketing spend is negative to profit in the quarter that it's spent.

Period.

So you can have the best marketing in the world.

If you increase marketing, you are going to lose margin in that quarter.

That's not the way we plan our marketing.

We measure ROI and -- and marketing margin on a lifetime basis.

So any time you increase marketing, you are going to hurt margin in that period.

That's the nature of the business.

But in general the efficiencies have been good--

Yes.

And we expect them to -- to continue to be over that lifetime value, as Greg said.

Yes.

Let's have the next question, please.

Your next question comes from the line of Brian Fitzgerald with UBS.

Your line is now open.

Thanks, guys.

I wanted your eval on search a bit.

Can -- can you give us some color about what drove the higher tack as a percentage of revenue, maybe perhaps differentiating between the different businesses there as CityGrid, Mindspark, et cetera.

Yes -- there was no, first of all, it's not a big move.

I know we called it out in the release.

I think it was somewhere between 1 point and 2 points as a percentage of revenue up over the prior period.

As we dissect it, is really two effects.

One is -- is mix and just some nuances in terms of where we're spending and where we're getting the return and things like that.

But I think the second point, which is probably the more important point, is -- and, we -- again we said this before, we -- we look to increase marketing as long as it's returning well more than what we're -- what we're spending.

One -- one of our big goals in all our businesses, certainly all the search businesses, be true of Match as well, is to be spend more in marketing without regard to whether that next dollar of spend is at the same exact rate of efficiency as everything we've been spending before as long as it's returning well in excess of what -- of what we're spending.

So we consider it a good thing.

It's -- and that revenue growth is highly correlated to that increase in marketing.

We wouldn't just wake up and see 28% revenue growth if we weren't driving that -- that marketing line.

And I think the -- the nice part about the business is the marketing spend is across the businesses.

The destination sites, the -- the toolbar and software downloads.

As -- and it's across channel, too.

It's -- it's display, it's search, it's CPA, it's through affiliates.

It's -- it's a broad range of stuff which leads to a bit of diversification in the business which is -- is nice longer term.

And also, just again, the same match phenomenon exists in some of the search businesses where they spend against lifetime value.

So you spend profitable basis, but it brings down the -- the quarter, so.

Thanks, guys.

Maybe a quick follow-up.

Could -- could you tell us, while on the search, can you tell us what you're seeing in terms of CPCs, in term of the different industry verticals?

Yes.

In general a slight -- a slight positive but most of the revenue gains in the -- in the quarter were volume driven.

And, again, related -- related to the marketing and other activities.

So I would say overall revenue per query, which I'm counting CPCs plus coverage, click-through rates, everything that drives that revenue per query, netted out when you look at all the mix stuff and everything else to a slight single digit year-over-year positive for us, which helped a little bit but it wasn't the big driver of the revenue growth, which was volume related.

Great.

Thanks.

Thank you.

Next question, please.

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

Your line is open.

Thank you very much.

Two questions, please.

On ServiceMagic, I know you want to hold off a little bit before going into that in detail.

But how about this, what sort of goals are you setting out there that are going to tell you that Chris and his team are -- are successful with that -- with that asset in improving that asset?

And then secondly, you just comment on the -- the Google terms and conditions or the -- the changes that you've had?

I assume from the search results the first half of the year that things have gone pretty well.

But do you think we're seeing the full impact of the improvements that you were able to negotiate out of that Google deal or is there more on the come?

Thanks a lot.

Well, ServiceMagic is a -- is a network business, so you've got to take care of sort of both sides of the network.

I think on the consumer side, I -- I think we're very much focused on getting better at really reducing the cost of customer acquisitions through better word of mouth and through better repeat usage.

And that's a combination of branding, product experience and I won't get into specific metrics we're -- we're setting but certainly those two areas are something that we're very focused on.

And then on the provider side, we need to continuously make sure we're -- we're providing enough value to the providers that we keep that network robust and growing.

And so I think you've -- you've got a set of metrics on both sides.

If -- if they hit those metrics the -- the output is great results.

And it's a complex business and he is incredibly immersed in it.

And ideas are developing.

And tactics developing.

But I think premature to really talk about what those are at this point.

On the Google deal, I think, yes, this is a full quarter of the Google deal.

Won't speak to the specific terms and conditions.

But obviously the terms that we agreed to are not adversely impacting our business in any meaningful way.

I think there are -- there are certain things that develop over time, but we think that the -- the Google agreement is, that -- that this quarter's performance is representative fully of the -- the terms that we agreed to for the next five years.

Thank you, Greg.

Next question.

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

Your line is open.

Great, thanks.

I think if you look at the industry or kind of on the broader landscape you're seeing an uptick in kind of local media, local advertising, you're obviously sitting on CityGrid and ServiceMagic.

I'm curious, are you seeing the same type of underlying lift or what kind of interesting trend that online media at least small businesses looking to spend online and leverage the online channel as a way to generate business activity, are you seeing that among your -- among those assets there?

And then second, curious as to do you need to kind of create additional products around the local media effort internally or do you potentially look at externally at acquisitions as small opportunities to really beef up your presence even more so in that category?

Thank you.

Jeetil, on the first part, I think I would say the following.

We're -- we're such a small percentage of local advertising spend in total and even really of online when you combine the CityGrid and ServiceMagic businesses that we -- we feel the opportunity to drive a lot of growth.

We saw some this quarter.

It -- it contributed to our results but it was hardly a big driver of our results.

And as Greg said, it's -- it's not yet at aspirational levels in -- in either of those businesses.

What we're getting is a function, and I think what we will get over the near future, very much from execution.

From improving our products, improving our services, being of better service to our partners and consumers in -- in both of those businesses.

So I don't think we're getting any uplift.

I think that's in a sense is a good -- a good thing in that it's all there for us to take as we continue to execute better against both of those opportunities.

On the -- on the second question, I think we look at it two ways.

There are the two businesses we have in this area, which are both at stages where I think we're not yet looking to put meaningful acquisition dollars into growing them.

I think we may be close.

It depends how things go.

But there is still a number of things to be proven out in -- in both of them before you would expect that kind of activity.

In the local area generally, which is one of the four areas that we know and that we're in and that we spend lots of time thinking about and looking at, obviously if there were good opportunities that we saw and we wanted to go after them that -- that added to that mix, it's -- it's an area that we would look at.

But I don't think that the current environment has meaningfully changed our view.

We've obviously been in this area for a while and been scratching away at it for a while and I -- I think we'll continue to do so.

Did you ever look to implement subscription-based services inside initiatives such as ServiceMagic or you feel like the lead-gen model or kind of purchase-to-press model is the right approach?

Look, I -- I think we're -- we're always looking at everything.

I think it's not been a part of the business model that we have.

We think the business model we have is good.

We also love subscription businesses.

So we look at everything.

But I -- I don't think there is some toggle that we're about to pull that -- that's going to lead to a big subscription business at ServiceMagic.

And the interesting thing about IAC is, which is why the portfolio, I think, is compelling, is that we are in probably more forms of advertising, different methods of advertising on the Internet.

As Greg says, we're -- we've got as big a subscription business, maybe the biggest subscription business that exists on the Internet.

I don't know.

Well, yes, sorry, you can say Netflix is definitely a subscription business.

But -- so there is that.

But--

But we know a fair amount about it.

We -- yes.

We -- we're in these various related vineyards and at scale.

And as -- as I think Greg said and I think said well, which is that -- now, really for the first time, you can always -- companies can always talk about best practices and sharing those things and whatever.

But really for the first time with kind of Management focus that's being brought to these, there are gleanings, learnings, every day experiences that are now really coursing through all these different advertising and subscription products that we have.

And I think that's another reason why not only the current results are good but why the runway is -- in front of us, is -- is pretty long, pretty -- pretty robust, and our -- circle back to the original question, which is on the local side, we've been at -- hanging around at local, I think the most difficult area to organize on the Internet, for 10 plus years, and we've learned a lot.

I think we're at the stage where we're close to taming the process with a network concept of Citygrid that over time can really scale.

And that other component of advertising, local versus national, display versus sponsored listing, that -- that -- the number of little quills we've got in our quill bag or whatever it's called, I think, is one of the reasons why we can compete in the future really strongly.

Next question.

Your next question comes from the line of Justin Post with Merrill Lynch.

Your line is now open.

Great.

And first of all, congrats on a good accelerating revenue quarter.

First on Meetic, can you remind us of what the potential impact could be on the acquisition in 2012?

Just tell us a general framework of what it could mean to -- to growth and profits, if you can?

And then secondly, on the tax benefit, is that a -- more of a one time thing or is that something that could be sustainable if you keep -- keep increasing the mix of, say, international or other factors in the business?

Thanks.

Justin, we don't have kind of formal guidance as we work to kind of combine with the Company and take control, as Greg said, presuming we get the level of stock we think we'll get.

These plans will crystallize and we'll update you more in 90 days.

I'd say, I'd -- I'd kind of frame it this way, I think based on reasonable estimates and run rates and kind of figures that were out there, et cetera, we -- the valuation at which we're buying whatever we end up with was somewhere in the high 6s as a multiple of kind of current year EBITDA.

And so we -- we bought it at a very good price for a strategic asset that we think we can bring a lot of value to.

What that translates into in terms of actual OIBA next year and -- and the balance of short and long-term and growth rates and all of this stuff is very much TBD.

But we're going to be laying out real cash, not monstrously large but real cash, and we'll be getting real earnings returns from that per those multiples as the specifics develop.

On the -- on the tax question, the -- the Q2 thing was aberrational.

We released some reserves that had been established, back to -- to Barry's comment earlier, back to the '05 spin of Expedia where statutes had expired related to those underlying reserves so we're able to release some reserves and that was the principal benefit that flowed through the tax rate in the current quarter and generally was a one-time thing.

Next question, please.

Your next question comes from the line of Jason Helfstein from Oppenheimer & Co., your line is open.

Thanks.

Two questions.

One on Match and one on DailyBeast/Newsweek.

So, just on Match, are you guys concerned about the lack of net ad growth in the quarter and maybe talk about plans to accelerate that growth?

And I think you referred in your prepared remarks to ad spending would be picked up, so ultimately that -- to address that, and -- and do you think it's a problem or not a problem?

And then any update on the CEO search for Match?

And then, Barry, can you just comment on your -- your tolerance for losses at -- at DailyBeast/Newsweek, while it is below the line, it is kind of losing a decent amount of money.

And what do you expect to see with that asset maybe over the next 12 to 18 months?

Thanks.

On the net ad growth, I -- I guess I'm not sure exactly what you're referencing.

We break it into two groups, developing and core.

On the -- on the core side, we're -- we're quite happy with it.

Again, we've -- we've had some anniversarying because the Yahoo deal started during Q2 of last year.

So part of the anniversarying is hitting Q2 and -- and part of it will hit Q3.

But, look, in the -- in the core business which is organic, year-over-year, untainted by acquisition effects, we expect this business to be a double-digit subscriber growth business year-on-year for the foreseeable future.

We feel really good about it.

It's been very high.

It's now a little bit lower.

We don't expect it to go lower than -- than Tom indicated and -- and we expect it to bounce around as we toggle the advertising spend based on a variety of things.

So I'm not worried about that in -- in any way.

On the developing side, which is maybe what you're talking about -- developing maybe a -- maybe other is a -- is a better choice for the -- for the term.

But it's sort of a grab bag of a bunch of things.

And it's got a bunch of territories in there that are growing -- Canada, Australia, Latin America, that we feel really good about.

It's got something like Singlesnet that we paid very little for and is absolutely declining, which nets out against that, it's got subscriber $5 Match mobile-only subscriptions that we don't really market anymore and that have been declining and it's got OkCupid which doesn't really even have subscribers in the numbers.

So I think looking at developing for a sense of directional foreshadowing is -- is not right.

And that's sort of why we broke it apart to begin with.

Yes.

We broke out developing so that core would be clean and a good thing to look at more so than for what was in developing.

Right.

And just although there are allocations involved, so we don't break this out specifically, the vast, vast majority of our profit contribution in this segment comes from core.

You've got lots and lots of -- of other things in -- in developing and they contribute very, very little.

So I don't worry about the -- the subscriber growth trends.

Sometimes they'll be a little higher, sometimes they'll be lower, but those are -- are by our hand and we expect the double digits to -- to continue.

On the Match CEO search, wasn't really aware that one was underway.

But -- but--

I think I'm staring at the Match CEO.

Yes, look, I think the way we -- we used--

He's not looking at me.

We use the term Match to describe a segment but really there are a few principle businesses in that segment.

They each have a leader.

Those leaders reported to me at Match and they continue to report to me now.

I have a handful of -- of direct reports who run various businesses and -- and Match has a few of those but -- but not looking to centralize the segment under a single leadership.

Barry on the other?

On, Yes, Newsweek and The Beast.

I think that those of you who, I don't know, if you're subscribers of Newsweek, but if you look at the issue that came out on Monday basically which was really Newsweek's first scoop, so to speak, an exclusive story with Dominique Strauss-Kahn, New York scandal, whatever you want to call it, which was really solid reporting, if you look at that book that -- that issue, you see a totally different Newsweek than you saw three, four, six, nine, 12, 18 months ago.

I can even go back a little further than that.

We bought Newsweek for $1, essentially.

And the merger of Newsweek and Beast and the leadership of Tina Brown as the editor and Steve Colvin as the publisher, we're starting to get advertising back in its rhythm.

It takes -- listen, Newsweek was nearly dead and we have stabilized and beginning to grow subscription.

The losses are -- are not really high.

If in a year -- year and a half or so, and I think it's probably somewhere between a year or so, year, year and a half, I think we'll have no losses and be on the positive side.

And I think for a pretty small investment we're going to build a serious long-term asset in new publishing.

And by new publishing, I mean the fusion of offline, so to speak, the book Newsweek and online -- book, magazine refer to it as a book -- and offline magazine and online publishing in a totally new concept.

We are literally the only people who have -- who have taken a sure online original product in The Beast, which has grown phenomenally at really relatively low cost over the last -- I think it's almost two years that it's been in existence -- and fusing it with Newsweek in one newsroom.

And if we do pull this off, and I think you know, you just -- those of you who are interested in -- in any form of publishing, on, offline, whatever and if you just -- you just look at the progress we've made, we now have 10 million uniques in -- on the online business, which is very -- which is really quite strong readership.

So I think -- I go on a bit about it, but I -- I think that's -- that that work is going to result in those reasonable losses.

Probably from inception to conclusion of loss there will be $50 million, something like that, total, for the entire period.

Total investment.

Most of that -- much of which has already be spent.

Yes.

Yes, I think that's from this point--

Oh, yes, yes.

So, and -- and then to build these assets.

I mean, that -- that's what this Company is all about.

That's what we're doing in new media with Electus and CollegeHumor and Notional, where at very low investment we're building a new media company.

We don't talk about it very much in these calls.

It doesn't have numerical results and it doesn't have a big drag on us.

But if we are successful in our approach to new media, in three, five years, it's an asset you're going to be hearing about.

You're going to be hearing about the numbers because there will be numbers.

And I think that they can be -- speculative, of course -- but they can be, if we realize the strategy that we have.

They'll be quite substantial.

So I've gone on a bit, but we don't -- we don't talk about it very much here because there's -- because there is no metrics really attached to it of -- of materiality.

So with that, let's take the next question.

Thanks.

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

Your line is now open.

Thanks.

Good morning.

So a couple of questions.

First, on Match ARPU, it looks like you showed the first quarter of material ARPU growth in more than two years.

I was wondering what drove this and should we expect ARPU to grow at a similar rate going forward?

And then secondly, I was wondering if you think that increasing Google Chrome penetration has any impact on your search toolbar business?

Thanks.

Hello.

On -- on the Match ARPU, I mean, I -- I think we manage ARPU on a variety of way across a number of businesses.

There is no concerted effort to increase it or not.

It's a mixture of package mix, it's a mixture of product mix.

I mean, we -- we, again, we -- we disclose Match on a -- on a monolithic basis.

But each of the products have different price points and -- and so there's a lot of things driving that.

I don't expect ARPU to move meaningfully in either direction.

So I -- I don't think that that's -- it is certainly not a long-term initiative or -- or part of a concerted effort.

On Google Chrome, I think, look, the -- the reality is that x years ago, Internet Explorer was the vast majority of -- of browsers.

I think now there has gotten to be more diversity.

Chrome is among them.

I think they each present different product design and -- and different approaches, but we've geared up to do it and are starting to make progress in those areas, so I think it's -- it's both an opportunity and a challenge as we sort of -- the bigger they get, the more focus we get on tackling them.

And so far so good.

Okay.

Great.

That's one of the core competencies of our business that we're able to deal with all of these browser -- browser platforms.

Next question, please.

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

Your line is now open.

Thanks.

Just wanted to check on the media and other category.

The -- was there -- was there -- were there any particular drivers in the -- the accelerating revenues year-over-year in the June quarter and the revenue -- you've been generating about a $3 million OIBA loss per quarter in the first half.

Is -- should we expect that loss to continue through -- in the back half in -- in '12 just as you invest in these younger businesses?

Thanks.

Yes, to the -- to the latter, I would say generally, yes.

I mean, there's historically been a little possible seasonal upside is possible in Q4.

But we've been in this range -- $2 million, $3 million, plus or minus for awhile.

And as -- there is On the -- on the revenue side, I -- I don't think there was anything -- a couple of the businesses have some lumpiness to them.

Some of the new media stuff we're doing that Barry spoke about has kind of deal elements in terms of when we recognize things, so that can move the number around again.

I wouldn't read anything overly positive or -- or negative for that matter into it.

I think for the moment it's the building of the businesses that Barry spoke to with the financial results largely small and largely will be affected by random kind of discreet things at -- at very modest levels of continuing investment.

And -- and maybe a quick follow-up on corporate overhead.

It's been about $15 million OIBA, negative OIBA a quarter, excluding it looks like a Q4 one time bump last year.

Is that -- has it bottomed and should we expect it to start climbing again next year or is there any more that could come out?

Look, I think it -- it -- there's always -- there's elements of must do and there's always elements of strategic investment, even though it sounds a bit funny through that line where we invest in certain things to grow our business.

And so I would say for the moment it feels like the run rate certainly for the rest of this year, we'll -- we'll look at it again, we're always looking at it and we'll think about it again in terms of the '12 planning process.

For the moment, I don't expect any material moves in that, but that will be a decision we make as we go.

Did you want to say something else on this (inaudible)?

I just think on the media, again, the net metrics are not -- are not the material at all, but -- and I think Newsweek in the context of this is -- is a startup from a -- it is a -- I think of it that way.

But if you -- if you look at the revenues from purely start-up businesses, all of these businesses, our media and other, we're up to a few hundred million dollars in revenue.

Probably something between $200 million and $300 million in -- in revenue.

And for starting up media businesses, and these -- this is within the last couple of years, the build-up to a couple hundred million dollars plus of revenue, we are on the way.

That's that, If we keep going at anything like that velocity, for sure we're going to turn profitable in media.

And we're already at, again, pure start up some scale.

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

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

Your line is now open.

Thanks.

A lot has been asked about Match, and I just wanted to focus on -- on international if I could.

It's obviously been a major focus over the last year or so and I'm wondering if you could frame the related opportunities, especially pertaining to Meetic.

Why is that so critical?

Is it just about Europe?

Obviously you have a joint venture in Latin America.

Maybe if you could talk more specifically about international.

Thanks.

Look, this is a -- this is a business where there -- there are a lot of similarities across markets, but there are also a number of cultural differences.

So we're in Japan.

We're in Canada.

We're in Latin America.

We're about to get back into Europe.

These areas have various degrees of similarity to what we do at our core in the US.

I think there are differences in monetization and payment methods and -- and everything else.

You go to Latin America, we have a huge number of users and not a huge number of payers.

I think our approach is we think that -- that meeting people online is something that people do.

And it's natural and people are going to continue to do it and they're going to increasingly do it in places where they're not going it a lot now.

Some markets will do it very similarly to the way they do it in the United States and -- and some will be more different.

And if you look at Latin America, we're certainly experimenting with a variety of ways, different business models, different products, et cetera, than what we have in the United States.

Japan similar, you know.

A great need for their cultural differences that make growth much slower, even though the opportunity is -- is very large.

Europe is critical because it's probably the most similar to the United States.

It's the one where our know-how and our knowledge of what has worked here is the most leverageable there, which is why I think the -- the operational opportunity to improve that business is so big.

But also as we roll out other technologies and -- and other -- be it on social networks or -- or video and the whole host of things that we're frankly working on, those things are going to be more globally leverageable just because of where the world is now versus where it was 10 years ago when these businesses started or 15 years ago.

You had to go market-by-market.

Now you can -- you can launch things globally.

And the ability to launch products off of existing communities of people, both active and inactive, is huge.

And so we -- we really do look at the world as sort of a series of -- of independent but related opportunities in what we think is a very big market.

And we're tackling it every way we can think of as opposed to one monolithic approach.

Well, thank you all very much.

We hope you have a good summer, good rest of summer.

We will talk with you again I think in November.

And meanwhile, everybody have a safe and pleasant rest of summer season.

Thank you.

Thanks.

Ladies and gentlemen, this concludes today's conference call.

You may now disconnect.