Match Group Inc (MTCH) 2011 Q3 法說會逐字稿

Good morning.

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

At this time I would like to welcome everyone to the IAC third quarter earnings conference call.

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

After the speakers remarks there will be a question-and-answer session.

(Operator Instructions) Thank you.

Tom McInerney, you may begin your conference.

Thank you, operator, and everyone for joining us this morning for our Q3 2011 earnings call.

Barry and Greg will make some brief remarks after which I will briefly 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's performance.

These forward-looking statements are typically 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 Q3 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 reconciliations.

With that I'll turn it over to Barry.

Thank you, Tom, morning, everybody.

We're going to get to questions as quickly as possible but just before it maybe an additional comment or two on our instituting a dividend.

We have all the characteristics I think of a Company that should be paying dividends, so I'm glad we're starting and we hope as quarters go on and years go on that we will increase this in line with the increase in our various metrics.

The reason I think that we are -- we more than qualify is because we have strong cash flow.

We have little CapEx.

Our businesses don't really require much capital and we have had consistency.

We're not a young Company any longer.

I mean going back to beginning this Company that the Genesis of which is 17 years now.

So it's not like we're a start-up, but for those people who think that companies signal that they're no longer growing and that's why they institute dividends, I mean I think that's ridiculous.

I think we have an obligation.

If the money is not ours, we have an obligation to -- if we have -- if we feel that we have a strong balance sheet, consistency in earnings, consistency in cash flow, as well as for this particular Company a continued strong growth which we've been demonstrating now quarter after quarter for 7, 8 quarters?

Yes.

That anyone who thinks that this is not a growth Company and is not one simply because we declare a dividend I think is awfully foolish.

I can't understand why companies in similar positions to ours don't repatriate both in terms of buying stock back, which we've been doing, bought 40% plus of our stock back which is a remarkable amount, the last 3 years.

So consistent with buying stock back is repatriating cash to shareholders.

It seems like the thing -- if I owned a stock, it is the characteristics that I would want.

So I've gone on a bit about it, but I do want to give you all a bit of background on it and now I think it will be Mr Blatt who will make some remarks and then you will make some remarks, Mr McInerney and then hopefully in a short order we'll get to questions.

Yes.

I'll be brief.

It's been about a year since I started as CEO and a lot of that time has been spent learning our businesses.

I think I've got a pretty good handle on them now and I have to say we really like our hand.

I look at each of our 3 principle operating segments, Search, ServiceMagic and Match and we've got momentum, strength and opportunity in every one, I think short, mid and long term.

2011 will obviously end up being an outstanding year and I don't think that kind of growth can be our hurdle going forward, but we fully expect continued strong performance in each of them next year and beyond.

Couple that with the opportunities presented by the Meetic transaction and our Media & Other segment, certain discrete equity investments plus the cash on hand and it will be generating going forward and I think we're really poised for a period of sustained growth.

I know we'll get into those individual aspects in the Q&A.

With that, Tom.

Thanks, Greg.

Just before we jump into Q&A let me spend a few minutes on supplemental information as it relates to the quarter and looking forward.

Overall it was an outstanding quarter.

Consolidated revenue increased 25%.

Reported OIBA was impacted by $10.4 million in discrete items, $5.5 million related to the Meetic acquisition and $4.9 million related to the exit of a small direct sponsored listings business and I'll explain each of these further in a minute but excluding these 2 items OIBA $84.6 million.

We're 48% above the prior year and reflecting an increase in margin on the same basis of 290 basis points year over year.

In the Search business first let me just clarify what it is the businesses that we're exiting that's giving rise to this $4.9 million charge I just mentioned and this is being booked -- the charge is being booked in those Search segment results.

The business operates a small sponsored listings network that is non-core and unrelated to the rest of our Search business.

The charge is a non-cash write-down of assets in connection with a planned sale for a small sum.

There will be no ongoing earnings impact from this.

The business was approximately break-even and we'll now be out of it.

Now to the core Search business, we continue to see strong top and bottom line growth and balanced contribution from our key activities.

Destination sites, B2B and B2C downloadable applications and CityGrid all saw strong double-digit top line growth and we saw a great earnings flow-through as OIBA growth was 73% excluding the aforementioned $4.9 million charge.

This year on year margin expansion was a function of the prior year restructuring at Ask.

General operating leverage across the Search businesses and a somewhat easy margin comp as we had some investments in Search in Q3 a year ago.

Going forward current business fundamentals are good.

We've seen no discernible negative macro impacts and key growth drivers remain intact.

That said in Q4 the top line comps begin to get tougher.

Q4 a year ago revenue growth was 29% versus about 20% to 21% for the first 3 quarters of last year.

So the bar is clearly getting raised a bit and 33% revenue growth is not sustainable, but we're still feeling quite positive.

Match.

Match had another very good quarter.

Although it was noisy from a numbers perspective due to the closing of the Meetic transaction, so first let me just explain the transaction effects.

We consolidated Meetic for one month in the quarter.

So we picked up one month of Meetic's revenue and earnings with both being materially impacted by purchase accounting convention which requires you to write off all deferred revenue on the balance sheet.

This is not economic.

It doesn't affect cash.

It just means that until a deferred revenue account is built back up book revenues and profits are understated.

For the one month we owned it, this reduced revenue in OIBA by $9.6 million and swung the net impact of Meetic on our books to the negative.

We also had transaction effects and expenses in connection with the purchase.

The combined effect of all Meetic-related items of negative $5.5 million on OIBA.

So the Match segment would have reported $45.7 million in OIBA excluding those effects.

So excluding those effects core revenue grew 15%, total segment revenue grew 14% and margins were up modestly year over year albeit with less operating leverage than we usually see which was totally in line with our indications at the end of last quarter on this call.

While cost of acquisition relative to revenue was down slightly the variance was less than in earlier quarters as we increased offline spend this quarter as planned and we made certain discrete investments principally staff in new products and businesses as we position ourselves for sustained long term growth, but whether you look at it year to date or just Q3, Match is having a great year.

Q4 fundamentals for the business remain very good, excluding Meetic effects we're looking at double-digit top line growth with good operating leverage and expanding margins.

Layering in Meetic for the first full quarter will add materially to revenue and probably about 15% to earnings after the ongoing effect of deferred revenue write-off.

This purchase accounting effect will affect us until Q2 of next year.

It impacts both revenue and earnings, but because in essence it falls straight through to the bottom line it has a more profound effect on earnings, again completely standard for any acquisition of a subscription business, non-cash, non-economic.

Each quarter our results without Meetic will be totally clear and Meetic stand alone results without those effects will also be clear, so there will be total transparency on our progress and momentum.

Finally on the cash flow and balance sheet side we had another very strong quarter of cash generation.

$74 million of OIBA which is obviously a pretax number translated into $104 million of after tax free cash flow bringing to us $242 million free cash flow for the 9 months.

While this ratio of earnings to free cash flow can't be sustained the fundamentally attractive nature of our businesses from a cash flow perspective remains intact and this reality obviously underlies our share repurchase activity in the quarter as well as our initiation of a dividend.

So with that let's get to questions.

(Operator Instructions) Mark Mahaney, Citi.

A comment and a question.

I think the initiation of a cash dividend is great move.

I think more companies in the sector should do it.

Second, in terms of the Search business and you talked a little bit more about the sustainability of the very impressive growth you've got maybe in terms of volume and pricing and AOL yesterday made a comment about how they'd seen some sort of shortfalls in terms of sort of the CPC not guarantees, but performance from Google.

Anything that you've seen that's been sub par in terms of the relationship with Google in Search?

Thank you.

Yes, Mark, on the sustainability of the Search growth I think again as Tom said 33% revenue growth is a very high bar.

So I think we're pleased with the quarter but we're certainly not setting that as the standard.

That said across all of our businesses, which is the B2B Toolbar, the B2C Toolbar and the proprietary sites.

We're seeing real growth opportunities and continued momentum.

So while we may not hit that bar we don't see head winds that are meaningfully impacting the growth drivers that we have and we think Q4 and into next year through next year and beyond we should see continued double-digit solid growth.

Margins are good, sustainable.

We don't season pricing impact.

We don't see any reason to think that the margins won't be in the range of margins that we've been seeing.

They're seasonal variations.

We don't run the business for margins, so they're an output and not an input and sometimes we'll invest into them, some of our businesses like B2C Toolbars in particular you invest in product in advance of revenue.

You expense marketing in advance of revenue.

So that margin will jump around a little bit, but in general we think the operating leverage is there and the opportunity is there and we feel good about it.

And the CPCs from Google we have not seen -- we're in a lot of businesses, so we cover a wide swath and you've got your puts and your takes, but overall we've not seen negative impact on the CPC side and it remains steady to strong.

Ross Sandler, RBC Capital.

Just two questions on Meetic.

Greg, first just what's the overall plan for turning things around?

What kind of growth in margins do you think we can do at Meetic in 2012 and can the best practices that you've been using in the domestic business be applied to Meetic and then kind of what's the overall strategy?

And then, Tom on that front can you be a little more specific and help us with modeling of Meetic for the next few quarters?

How do we specifically handle deferred revenue impact through this transition period through 2Q?

Thanks.

On Meetic just stepping back for a second, we bought 54% of this business at less than a 7 multiple and we bought the first 27% at by any measurable standard even less than that.

So we were not buying a business that was fast growing and on a skyrocket.

It had its challenges and headwinds.

That said we bought it because we were highly confident that we could turn that around and we remain so.

There are certain key underlying metrics that drive the financials but aren't directly in them and there are things like conversion, marketing efficiency, renewal rates, re-sub rates, et cetera that we think we can absolutely turn around and both Meetic and Match are fully organized and incredibly active at the moment in implementing that.

So our strategy really over the next 5 quarters is primarily to accomplish this reversal in the drivers.

The goal is to absolutely have them accomplished by the end of 2012 and to have real momentum in those areas and to the extent we do the acquisition will have been a success and we'll get good growth out of this business into the future.

I can't tell you whether we're going to nail it in Q1, Q2, or Q3.

But I'm highly confident that we're going to nail it in 2012.

I also think we execute this while staying flattish on EBITDA year over year in 2012 versus 2011.

Deferred accounting or purchase accounting issue aside, I'll leave that to Tom.

We don't think about the business that way.

So on an actual cash basis we have see it being able to be done flattish.

I don't know about the quarterly variations as we haven't finalized our marketing plans and everything else, but for the year we absolutely are confident we can do that.

Whether we can grow revenue in [PMC] at the same time I think remains to be seen.

It's a secondary objective to the others and it really depends on how quickly we implement or we get the benefit of the changes that we're implementing.

So overall that's our view.

Obviously this is all local currency and predicting Europe is well beyond my ability.

The only thing I'll say is that in 2009 Match was really our one business that grew throughout that period.

It was a tough economic time here and Match was able to grow.

So in general at least on a relative basis we feel the Meetic business is pretty insulated from whatever happens over there just by its nature.

The more people that are distressed for economic reasons means they'll want relationships more.

Love knows no recession.

Right?

Ross, just a couple of words maybe to help you out in terms of translate that to your model, in -- the deferred revenue impact is -- let me just read you 3 numbers because it's kind of set so we'll give them to you -- in Q4 $16 million, in Q1 $9.5 million in Q2, $2.9 million.

Those are dollars.

So that's what will come out of whatever Meetic books for revenue and profit.

100% of it falls straight through over the next 3 quarters and then we'll be done with that effect.

So as you think about modeling the business for the next few quarters for Q4 in my remarks I said I thought the, kind of the net impacts of what they earn less that deferred revenue that I just gave you would add about 15%.

It's a high seasonal earnings quarter, so it still should be a net positive to our results in Q4, about 15% to what Match would have been otherwise which you can model and then when you think about next year I think it's premature to talk about quarters when you think about next year, you can I think -- the starting point is Greg's flattish comment on an earnings basis for Meetic and then you can essentially subtract those deferred revenue impacts the $9.5 million in Q1 and $2.9 million in Q2 which will just come out and then again, we'll be done with it by the end of Q2.

They'll come out of both revenue and OIBA on a dollar per dollar basis, right?

That's right.

And it's a much bigger impact on the bottom line as I said earlier.

Jason Helfstein, Oppenheimer.

Two questions.

So start again with a Match question and then a balance sheet.

So we recently have seen some data that suggests that the use of online dating kind of on desktops is up from 12% to 13% of users but on smartphones it's gone from 15% to 17%.

That's year over year, suggesting that the greater adoption of smartphones will drive more online dating and with smartphones only at 0.33 of the US population it would seem that, that's beneficial to you.

So I'm just wondering if there's anything you can talk about that you're trying to do to leverage that phenomenon.

And then secondly on the balance sheet we've historically thought about $800 million as kind of a comfortable cash cushion for the Company and can you talk about now with the Company's desire for continued buybacks and now the dividend which I also applaud what do you think is a comfortable cash cushion going forward?

Thanks.

On the Match side I've not seen those numbers.

They don't sound surprising to me, but look, I think in all these businesses, be it Search, be it Match, whatever, it's very hard to say how much of the growth in smartphones is incremental versus it's just a platform shift or a device shift.

So I think about it that overall the business is growing.

We're certainly very much out in front on the mobile side.

I think in the last sort of 1.5 years the percentage of subscriber logins on Match.com alone on mobile has gone from something like 5% to 35%.

So, it's dramatic growth.

We have I think as advanced -- more advanced than anybody in terms of our platform coverage, iPhone, Android, et cetera.

In the Match business OkCupid has got a great product out there now and we just launched a sort of mobile-only product called Crowded Room which is out there and being used and is sort of a viral growth product, but we're certainly tackling it.

We think there's huge opportunity.

How much of it sort of is leading the way or how much of it is just sort of a part of the natural growth in the category.

I don't really know.

Some ways, we don't really care.

We're there.

We're investing in it.

I think we've got it covered and we'll continue to increase as mix of usage, we're sure.

On the balance sheet as far as I'm concerned I mean if you nailed me to the wall, I probably would say that the minimum cash we would want to have is about $500 million.

We have net -- I mean we have no leverage.

So we're going to be way above that in any scenario that I can see.

I think we'll be -- our projections are that by the end of next year we'll be --

High.

(Laughter)

Everybody is looking at me as if I'm divulging something, but whatever.

They're going to be high.

So we have plenty of resources.

We have plenty of resources to continue to buy back stock.

We have resources to make any acquisition that we would think would be rational, to make any investments in our business we invest far less in our businesses than our cash flow by an enormous amount.

They just don't require it, but the resources are there and I don't think we'll ever get to what I would call a fail-safe number of net cash.

And even that fail-safe number gives us plenty of cushion, no leverage.

We're not tying ourselves up in any way.

Justin Post, Bank of America, Merrill Lynch.

It looks like you're seeing some acceleration in ServiceMagic.

If you could maybe talk about some of the drivers there and kind of what your plans are for the business next year and how strategic that business is for you going forward.

Thank you.

Thanks, Justin.

Yes, look we're seeing some good -- some good, I would say not great progress there, that clearly the profit line is impacted by reduction in international investment.

We expect that to continue.

We've had some decent service request growth.

We're -- a big key is continuing to maintain and grow the service provider network which we're very focused on, but I think overall, look we've got a new CEO in there.

They're definitely looking at this thing and feel that there's a lot of what I'll call optimizations to continue to drive the machine and improve operating metrics and profit and revenue growth.

How dramatic that will be in the near term versus sort of sustaining the current trends and trying to build on them sort of more incrementally I can't say at this point.

We're doing things.

We feel good about the business.

Whether it's strategic, how strategic it is I don't know that we necessary think about strategy on a continuum like that.

It's a business.

We have it.

We like it.

We're investing it in it, and growing it and focusing on it.

It's obviously a space that we're going to continue to grow and we have a unique proposition in it.

There are a lot of people playing in it, but we have a unique proposition to the extent we can continue to improve the way we deliver on that proposition we see lots of room for continued growth.

It's a great category and I hope that the change in Management is going to allow it to come into that great category in a way that the product is going to be is compelling and that will either come true in the next I would say 1 year, 2 years max you would say?

Absolutely.

And we're hopeful, but it certainly carries its weight and was a good acquisition.

You could only say at this point it is somewhat speculative.

Agreed.

Brian Fitzgerald, UBS.

I wanted to follow up a little bit more on ServiceMagic.

The international side was growing albeit off a lower base.

Can you give us some color on how you think about that internationally?

Can that be as big as US ServiceMagic?

And then, Tom, you said you weren't seeing any real macro headwinds, but have you noticed any shift in terms of service requests towards maybe smaller projects or anything that would indicate a softening in the environment?

Thanks.

Yes.

On the international piece look, I think it can be as big as domestic.

Whether or not we go after it aggressively, so sufficiently aggressively to make it so I think are decisions we'll be making along the way.

ServiceMagic had many, many years of negative investment in the business to grow.

We sort of bought it at the tail end of that.

We've just done some period of negative investment in the international piece and we're sort coming out of that and we have decisions all the time about growing it organically.

There are always acquisition opportunities we're balancing those things on a quarter to quarter basis.

We've got new Management in, we've got very big focus on the domestic business making sure we're sort of set there on what the path is and then we'll evaluate as we go, how aggressively to push both in Europe and other markets which we've explored, but the opportunity is there.

We're in two countries in Europe right now, France and the UK, and further expansion will be a function of kind of the factors Greg referred to.

To your other question the answer is yes.

We have had what I'll call mix issues there towards lower consideration jobs really.

It feels forever.

I guess it's been a couple of years and it's absolutely a function of weakness in the housing sector, which translates through to the higher margin jobs.

So you still need a plumber or a locksmith when -- regardless of what's going on in the world but you may not do the big kitchen remodel.

When macro conditions are tough it just makes the fundamental essence of what ServiceMagic does matching consumer requests to be matched with service providers who want that type of job in that type of location that much harder and so you're just running harder and working harder and to make that machine hum and that's been a drag.

And so we're not running the business for the turnaround in that because nobody knows when that will come, but when it does come, it will provide some tailwind we hope.

Mark May, Barclays.

Had a couple.

I know you mentioned early, rightly, so that margins are an output, not an input, but the Search OIBA margins in the quarter were a little bit below our estimate, although the total result was quite good.

I'm just wondering was there some sort of mix reason for that or any other factor and any thing along those lines, anything that we should be considering as we model going forward, particularly for Q4 as it relates to segment margins?

And then secondly, I was pleased to see that the developing segment of personals was flat.

Is that a reasonable expectation going forward or might there be some continued pressure on revenues there?

And then lastly, any update on the CFO search?

Thanks.

Let's see.

On the Search margins I'll let Tom color Q4 to the extent he desires to do so, but with respect to Q3 I think first there are some seasonal aspects.

So year over year I think we had pretty good margin improvements in the Search segment and while there is a sequential decline I think that there is some seasonality in that.

I also think there's definitely mix issues, too which is when we -- as I said, when we have sort of good profit growth like we had, we will invest into it and in particular in the B2C business where we're developing product and we're marketing product in advance, we stepped on the gas a little bit in that area and you've got CityGrid sort of coming in which has its own margin characteristics and other things.

So I think it is mix.

It is seasonal.

I don't think there's anything -- Tom will help you with the modeling, but we don't see there as being any margin pressure, this being an indicator of what's to come one way or the other.

Yes, if you back out the $4.9 million charge which again is booked in that segment, margins were up year over year.

They were down 180 basis point sequentially.

I just did the math.

That's like $4 million on a $200 million business.

It's just not a lot of money.

It translates to percentage and people track these things and everything else.

There were 12 things that gave rise to it, none of which we consider indicative of trend.

They're just indicative of what happened in the quarter and decisions we made.

I think a year ago your margins from Q3 to Q4 in this segment were roughly flat.

Is there any reason not to believe that, that wouldn't be the case again this year?

I think with the same caveat, that we're going to make a series of decisions looking to grow dollar OIBA, position the business both in the quarter and for the next year and all of that.

So our usual caveat on how we run the business, I don't think we see any big changes sequentially.

With respect to developing in Match, there a couple things going on there.

You've got Singlesnet which we simply decreased the marketing which is creating contribution, but it's declining subs and declining revenue.

At the same time you've got OkCupid which is now in there which is growing.

Much of its growth is not in subs.

It's in other.

So if you look at the revenue line, there will come a point and whether it's Q4 or Q1, I don't know exactly, but where sort of the downward trend will reverse and the decline in Singlesnet and certain very small international markets will be outweighed by the growth in OkCupid and certain other international markets.

So I don't expect meaningful more declines.

It may be down a little bit in Q4 and maybe flattish in Q1.

I don't predict it out that far, but it's not going to be meaningful.

The sub line will be a little bit different.

There will be some more pressure on the sub line probably before it reverses just because OkCupid's growth is not on the sub side.

That's helpful.

Thanks.

Then I forget --

CFO.

CFO search, Tom is sitting here right now and nobody else is.

So that's the report on the search.

We're obviously in it.

We've met people and Tom has set a very high bar, so it's a process, but we're fully confident that we'll find somebody great and Tom will be here for at least a little while longer.

Should our expectation be is that by this time next quarter you may be introducing us to someone new or what's --

We hope so, but we're not going to make predictions.

The other thing -- it's Tom now.

The other thing to add is, this Company has is blessed with an outstanding team which I represent on these calls and so there is bench depth and strength in volume.

So the Company is well positioned in that regard as well.

Ingrid Chung, Goldman Sachs.

So, Greg, you mentioned in our conference a month ago that you'd consider some bundling across personal sites.

I was wondering if you're still considering this and what that would potentially look like.

And then secondly on personals, I know you have a big job in front of you in terms of integrating Meetic.

What's your appetite in terms of acquiring other dating properties both in the markets that you're currently in and also other markets?

And then just really quickly for Tom, I was wondering if I missed this.

What was query and RPQ growth in the quarter?

Okay.

On bundling yes, look, we've got a portfolio of products and we are always looking at a variety of ways to market them.

Right now we do a fair amount of cross-selling of products.

We bundle features and up-sells.

We have not bundled different dating sites, so to speak, and I think we talked about doing that.

Sometimes there's some that make sense.

There are some that don't.

I also think that one of the things that you'll see over time is effectively products that can live on top of the dating products which are effectively -- we've built tremendous scale.

When you look at our sort of singles audience in both the US market and in the European market, you've got huge scale and we'll certainly continue to build that scale and have great confidence in it, but we think there are a lot of opportunities to effectively market other products on top of it that are complementary.

So I think we're looking at all of that.

I think you'll see some combination of those things in the future.

Our growth doesn't depend on it at all, but I think it's upside to sort of the trends that you've been seeing.

In terms of acquisitions sure, I mean look, I don't know that we have our hands full.

We're busy, but we're always busy and different people do different things.

I don't think there are acquisitions that we would turn down because we are too busy.

I don't think we're there.

I think we feel we're pretty well covered right now.

When you look at the domestic market and if you sort of want to put it into various categories and you can make them up, we feel like we've got it covered.

In Europe -- Europe is a place where maybe we might be a little shier on acquisitions for a while because of what we've got going on there, but also Meetic is Number 1 in virtually all of its markets with Germany as the exception.

Then we just made an investment in China that we feel good about and to the extent there are other markets out there that there's opportunities we'd go after them.

So I certainly wouldn't say there's a no on it.

I also don't think there's any burning need to do something.

So I think it's more reactive at the moment.

On your Search question, Ingrid, because of the mix of brands and geography and everything else we have in there we've gotten away from a little bit the query and RPQ metrics because they get kind of very distorted, but I'll say this.

Kind of 85% of the revenue growth we saw in the quarter was volume-related and 15% would have been kind of monetization related.

So if you translate that, it was a few points from RPQ and all of the things we do to manage that, but the vast, vast majority was volume-related.

Okay, perfect.

Oh, go ahead.

Sorry, Barry.

I would only have one thing on acquisitions and particularly in personals which is we love the category.

I mean we think the category has -- 7 years ago people said well, it's reached its saturation point and it will never expand and Tom you kept pointing out well, there are this many people who --

And they're still are.

Yes.

They still are.

They're out there.

And they are growing and there's no question.

This is going to be a worldwide market, so to speak, which is being able to really allow relationships to happen in a more online way because everybody is online and they're more and more connected.

And the societal trends are all driving it.

All the things that have driven it are continuing, more geographic mobility, later marriage, harder work.

All that stuff this is our favor.

So we feel good about it.

It's a great category worldwide and we'll invest and stretch accordingly.

It is -- we are so far the leaders in this.

Absolutely.

And we're going to keep expanding it.

It is the best use of capital that we can put down.

John Blackledge, Credit Suisse.

Two questions.

First on the dividend, what is it going to be tagged against?

Will it be net -- income growth or EBITDA growth, if you could just give some more color on that.

And then, Barry, maybe if you could take one or two businesses out of the Media & Other segment, I know there's a lot of businesses in there that you think maybe over the next year can break out or anything that's interesting, that would be great.

Sure.

There's no absolute metric here in terms of the dividend that the dividend which we've begun at a relatively low rate, not so to speak the bottom of the bottom, which would be 1%, but we're definitely in our intention it is to start at this rate and then over time increase it.

Over time it should be increased and get up into paying a healthy and generous dividend.

It will be based on our earnings growth and our cash flow growth and that's what we'll look to and there's no predicting it.

As far as the media, we're as you know, I think we're beginning in lots of different areas and at a relatively low cost meaning we're not putting huge amounts of capital in it, but we're putting huge amounts of enterprise and enthusiasm in it and I think in additional quarters we'll have things to report that are numerical.

We've already built up considerable production activity in Electus and in Notional and CollegeHumor and its new Jest site which just started a few weeks ago is being expansive and CollegeHumor -- in that area CollegeHumor just grows very, very nicely.

The one area that I think one unit of ours which is Vimeo is one that we think can have considerable growth and it continues to grow in subscribers.

It continues to grow.

I think we're up to now -- we're up to 150,000 subscribers.

Something like that, yes.

Is it -- we don't announce our subscriber count?

We have not.

I think we're actually above that.

Now we have.

Whatever.

What I'm saying is by the way when you think of that for a subscriber business, that's not bad.

I mean that speaks to the fact that this is a service that people like and will pay for.

And there's 50 million unique users, too.

Not talking about paid subscribers, but there's just a big audience in that business.

We grow with unique users.

We grow with the fact that this is a protected, high quality service for video.

There is no other on the Internet.

YouTube does a fine job and has a huge audience but is a grab bag of a whole lot of things.

This is a place where you can protect your video, where you can expose it to either family and friends or to millions and millions of people.

It's got great opportunity and so I would kind of call that one out.

I don't know if any of my colleagues have anything else to say in this area.

I think you covered them.

These are things we're not putting a lot of money into but have lots of opportunity.

So at least one or two of them are going to hit and we'll get some real value out of them.

We're confident.

Jeetil Patel, Deutsche Bank.

It's Lloyd in for Jeetil.

Thanks for taking the question, had a couple.

First just following up on the Search margin question, but looking a little bit longer term.

You've seen a nice margin expansion over the last few years.

Do you think looking into 2012 the OIBA margins can continue to expand or a mix shift issue is going to slow that down?

And then secondly, clearly a lot of work to do with Meetic and applying knowledge from your core business at Match to their business, but I'm curious, are there any things you're finding over there that they're doing that might be able to help inform the Match business?

(technical difficulties)

Oh, I'm terribly sorry, but I don't think that we've been silent -- because I forgot to reactivate the microphone.

This is my fault.

So, Tom and Greg, forgive me.

So let me pick up with Lloyd's question.

So I think the -- it's a little difficult to obviously predict into the future.

I'd say the natural physics of the business as we're currently operating it with our multiple brands and products and go to market strategies would suggest that yes, there is margin opportunity in 2012 and beyond because as you get good revenue growth which we continue to anticipate, you just tend to get some operating leverage off of that.

I think at the same time we are very much -- we've had tremendous growth.

It's a big business and our eyes are squarely on how to create a multi-year long term growth profile and so we're constantly weighing those tradeoffs and that means continued investment in products and businesses and brand and in marketing capability.

There may be a moment where to sustain the kinds of revenue growth rates we've seen, not even just Q3 levels but earlier in the year or whatever it may be that, that margin opportunity flattens out, but right now the physics of the business would suggest yes and anything off of that will be elective in order to continue to drive revenue growth.

On the Meetic side yes, there have been a few things that we've seen that you can look at these sites and anyone can look at them, they're public, but from the outside you don't know what works.

So getting into it we've found some things that they've done that have worked really well and we're sort of testing those on Match, but I think in general those opportunities are going to come more once we've sort of fixed what's going on at Meetic.

I think, then you have huge laboratories where they'll be developing their own things and we're developing our own things and then we're cross pollinating.

Right now most of the flow is going east across the Atlantic with some coming the other way and I expect that ultimately to balance out, but in the near term that's the way it's working.

I'll try not to make that mistake again.

Jim Friedland, Cowen and Company.

I was wondering if you could dig into Mindspark and talk about the B2C business a little bit in terms of you've had some really great growth over the last several quarters.

What specific products within that bucket are performing the best?

Going forward what types of products do you think will be the key drivers of revenue growth?

Thanks.

Yes.

One of the big successes they've had is I don't remember exactly when, but sometime last -- in 2010 I think we rolled out this Affinity Toolbar business which is a business where unlike the traditional product where the Toolbar and the product were sort of distinct things, here the product is the Toolbar itself and those have proven very effective for us.

We've gotten a lot of growth.

It's really a portfolio of things, but the concept itself has been additive and high growth and really contributing.

Then we have at any given time, a bunch of things that are taking off.

I'm not going to sort of call out any particular product that's on a roll, but there are a bunch of them and as Tom says one of the big things here is that we are investing in product.

So we've had good growth, but we're also developing lots more things for the future and trying to spend some resources on taking the typical product and expanding its lifecycle, expanding its modernization and all that sort of thing where there's been a lot of progress as well.

So that's Mindspark.

Peter [Stabler], Wells Fargo Securities.

Just one more on Mindspark and Greg, I think you were at a conference about 6 weeks ago and you were asked whether any of the significant changes to consumer behavior with regard to mobile adoption tablets or phones was impacting behavior in the Search segment, particularly Toolbars, and you said that you really hadn't seen the data but you were looking for data.

So I'm wondering if you've seen anything which would lead you to believe that the behavior could be changing?

I guess at that point it was all additive according to your remarks, but it seems like consumer adoption of mobile Search could be positioned as a replacement product going forward and then just so an extension of that, in terms of your product development, how much of it now is focused on these new platforms?

Is it really important at this point?

Thanks very much.

Based on what we know today and what we're seeing, the adoption of mobile and tablets is not having a meaningful negative impact on Search activity on the desktop.

Now, is it taking away growth that would have been coming to the extent that they didn't exist?

As I said on the Match side it's always possible and at least at this point very hard to know, but the desktop Search market, it continues to be robust.

We are in on the tablets and the smartphones very much.

Monetization in those areas is different.

On the add side it's not as good.

On the direct monetization side it's better and so we are certainly looking at those opportunities and investing in them, but to date that investment is not taking up a big part of our investment because the opportunity is so much closer and realizable on the other side which has not been declining.

I mean it's been continuing to increase overall.

So we're constantly looking at that data.

I think whatever shifts take place are not going to be quarter to quarter.

They're going to be over a long period of time and I think we're out in front enough that we can absolutely pivot in terms of how much gas we put on that effort as we go.

Thanks very much and congratulations on the quarter.

Thank you and thank you all for being with us this morning and we will see you in a few months, 3 to be exact.

Thank you very much.

Thank you.

This concludes today's conference call.

You may now disconnect.