Match Group Inc (MTCH) 2011 Q4 法說會逐字稿

Good morning.

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

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

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

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

(Operator Instructions)

Tom McInerney, CFO, you may begin your call.

Thank you, Operator.

And thank you, everyone, for joining us this morning for our Q4 2011 earnings call.

Barry and Greg will make some brief remarks, after which I will 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 Q4 2011 press release and our periodic reports filed with the SEC.

We'll 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.

Good morning, everybody.

They say that pride is a dangerous thing.

But I really am very proud of the consistent performance of the Company, and particularly the work that Greg Blatt, our CEO, who has been here just now a year and a month or two.

Been here, meaning been in his new position.

The amount of attention and aggression and smarts that has been brought to the Company over this last year has been great.

And we all feel that our ability to be consistent over now these eight quarters in terms of growth is, I think, attributable to a group of extremely talented managers.

Now, the earnings of the Company, predominantly in search and in personals, which are big engines, but under the hood of the Company, there are a great many initiatives, investments, businesses that we've started or acquired and are building, that I think over the next years are going to come through.

Certainly not all of them, but more than one, I would say.

And as you look, I'm not going to talk individually really about these, but whether it's Vimeo with its 15 million a month audience, or Urbanspoon or Daily Beast's Traffic hitting its highest ever this month with 11 million-plus uniques.

A year ago, a year-and-a-half ago it was, I think, 3 million.

Or initiatives with DailyBurn.

And making a tech-enabled workout system for people that is Internet and savvy.

Or Electus which I think it's almost two years, if that, has made incredible progress.

Dozens of projects.

Its first prime time series, Fashion Star, debuts on NBC in February.

Or College Humor making its first movie.

There are a lot of initiatives and the initiatives do take investment.

And yet we're able to invest and continue to grow substantially.

And I think that's going to be rewarding.

So with that, Tom or Greg?

Thank you for the unjustifiably kind words.

With respect to the quarter, obviously another strong quarter that speaks for itself.

As Barry mentioned, our results are primarily driven by the performance at the Match and the Search businesses.

I feel really good about the outlook for each of them.

I think our focus on execution and on near-term management has been very solid, as reflected in our results.

And I think that as we hit that rhythm, I think we've been able to focus on some long-term initiatives and mix those in, in a way that should really fuel continued growth.

And hopefully over time expand the definition of these Businesses.

And I'm really excited about the balance that we've been able to achieve there.

And think it will really help to deliver shareholder value well into the future.

Also, as Barry mentioned, we've got a lot of these smaller initiatives.

I like to call them unvalued options within IAC.

I think that my own personal focus for the next year is going to be more on those than they have been.

I think that there's going to be value there.

We're going to be able to unlock it.

I won't predict which one it will come from, or how many, but there will be value, I believe, that will come out of some of these things that we don't really talk about.

So, I think that that's going to be a real focus.

I think the great thing about IAC is that we start lots of things, we do lots of things, we've also been successful at shutting down the things that don't work.

And I think that one of our main roles here in this room is matching resources to opportunity, making sure that we are going fast enough on the things that matter.

And that we're not putting resources against things that don't have promise.

And we're going to continue to try and do that more and do it better.

But I think it will be a major contributor at some point to our returns.

Finally, a word on Meetic.

Meetic, make no mistake, it is a turnaround project for us, as you can see from the publicly disclosed numbers.

They've lost a lot of subscribers, revenue is in decline.

And as I said before, our objective for 2012 is to stabilize that decline and start to climb back up again.

I think we're as far along as I could have hoped in the process right now, meaning essentially that we have diagnosed the underlying problems, we believe, and we've constructed a game plan to tackle them.

And now we're in execution mode.

By the time we report next quarter, I'll be able to tell you how well we've been able to execute and whether that execution is having the desired effect.

The good news is, the problems we found are familiar to us, as we expected.

And we're applying solutions to the problems that have worked here in the US.

There is a lost-in-translation risk.

Will it have the same effect there that it had here?

But the good news is it doesn't have to.

We think that there will be meaningful positive impact, even if not to the same extent as in the US.

And that will be more than enough to turn this thing around and start back on positive trend.

So, we're excited about that and will report more detail next quarter.

Tom?

Thanks, Greg.

Just be fore we jump into Q&A, I want to spend a few minutes on some supplemental information as it relates to the results.

Obviously, the overall results were exceptionally strong, to round out a truly great year.

For the quarter, revenue and OIBA were up 32% and 88%, respectively.

Notwithstanding the write-off of $23 million in deferred revenue related to Meetic, which impacts both the top and bottom line.

In Search, our B2C operations, B2B operations, and destination websites were all up strongly.

As in recent quarters, while the overall pricing, or CPC environment was fine, at least for us, the revenue growth was predominantly volume-led.

We saw good revenue growth from existing and new products on the B2C side, existing and new partners on the B2B side.

And increasingly effective marketing on the destination Website operation.

On the profit side, reported OIBA growth was 75%.

But I'll remind you, we had $9.6 million in restructuring costs a year ago.

So, adjusting for that, OIBA growth up exactly in line with revenue growth at about 35%.

Going forward, fundamentals look very good.

Same principal drivers intact.

We've said as loudly and as consistently as we can that we run the business, really all our businesses, for annual OIBA GROWTH, not percentage margins So, the precise relationship between revenue and OIBA growth remains to be seen, as we look to grow OIBA over the course of the year.

And again, the outlook is positive and trends are good.

Match continued its outstanding performance.

Excluding Meetic, which was not in the prior year period, so it's not apples to apples, revenue increased to $123 million, or 13%, driven by a 16% increase in revenue from Match's core operations.

Also excluding Meetic, Match's OIBA was up 23%, as we benefited from lower cost of acquisition due to better marketing efficiency and a host of initiatives.

With Meetic, as mentioned earlier, revenue and profits continue to be impacted by the write-off of the deferred revenue, as required by purchase accounting.

I'll remind you, this is noncash in nature, as the rules don't allow you to recognize into revenue the deferred revenue that was on the balance sheet at the time of the acquisition.

This produced revenue OIBA for Meetic by $23 million, as I said, for the quarter.

And that was higher than what we estimated on the last call.

That was an estimate and the number just ended up being higher.

This was in essence a pull-forward of our previous estimates.

So, the remaining impact in the current quarter of Q1 '12 will be only $5 million, which is less than we previously estimated.

Putting aside this accounting effect, as we indicated last time, we're deep in the throes of bringing our best practices to Meetic.

So, it's a little too early to see these efforts bear fruit.

In the meantime, we'll remind you that Meetic has historically not made any money in Q1 due to seasonality.

So, with that and the deferred revenue write-off, it will be modestly negative in Q1 before contributing the rest of the year.

Before moving to Q&A, one financial reporting item I want to call out.

As you may have seen, we've amended our 2010 10-K and interim reports to fix a very old accounting error, which emanated in 2002 related to deferred taxes.

Due to the somewhat technical nature of the issue, and in the interest of time, I'm not going to go into detail here.

And all the details are filed with the amended K.

But the upshot is that, stemming from the transaction 10 years ago, whereby we exited the traditional media business, we should have had a deferred tax liability on our books that we didn't have.

The liability is effectively permanently deferred, but the GAAP rules for deferred taxes are somewhat idiosyncratic.

In some cases, like earnings permanently reinvested offshore, you don't have to provide for deferred taxes.

And in other case, such as this one, you do.

Anyway, we regret the error, but it's ultimately of no economic consequence.

Final word on cash flow and capital management.

You can see in the release, we finished another very strong year of free cash flow, with $332 million for the full year.

That's about 8% of our market cap, or just under 10% of our enterprise value right now.

And as has been consistently the case, favorable working capital trends and very controlled CapEx have driven this.

And as we look out over 2012, we generally expect continued favorable dynamics here.

This has allowed us to be very aggressive buyers of the stock since we last reported, spending just under $200 million for approximately 5% of the Company.

And obviously, still remaining in a very strong capital position.

With that, let's take questions.

How much stock percentage over the last five years?

Since the four-way spins, we've essentially bought back $2 billion worth of stock, and just under 84 million shares Over 50% gross and over 40% even net of issuances.

All right, then.

Let's go to questions, please.

(Operator Instructions) Jeetil Patel, Deutsche Bank Securities.

A handful of questions here.

When you look at the search business out over the next several years, in particular the non-destination side, how do you think about the longer-term growth rate of the business in terms of products, managing it?

In general, how do you think about sustaining that growth or balancing that growth as you look out over the next several years?

Maybe second, more structurally, you're seeing a shift towards tablets, Windows 8 coming out.

All these things are probably -- curious if that has any impact on the business as you look forward, as it relates to toolbars as a whole since that seems to be a broader concern that we keep hearing.

And then as it relates to Meetic, I'm curious, any surprises, any themes or strengths or weaknesses inside the business as you've had a chance to now dig into it for a bit?

Okay.

Let me try and take those in order.

Look, we feel really good about the search business over the next few years.

I'm not going to sit here and tell you that the growth rate that we've had this quarter, and the past few quarters is going to be the growth rate over the next three years.

I also won't tell you that it won't be.

But I don't make those kinds of predictions.

We feel really good about the fundamentals.

I think if you look at the destination side, which I know you brushed aside, but I don't think we should, we've really been developing the core Ask product, differentiating it with content and community.

And it's paying real dividends.

We found lots of successful marketing channels for it.

We've actually begun to brand advertise for the first time in several years, with real positive ROI.

And I would say, and I look around the room, but for the first time maybe since we bought it, I think Ask is really hitting its stride.

It's growing.

It has a strategy and it's executing on it.

So, we feel really good about the destination side.

On the B2C side, we also feel really good.

That's a product development business and a marketing business.

And we feel really good about where we are on that.

I think if you look at our growth this year, quarter-over-quarter, most of that growth in the B2C side came from new products.

They are developing lots of them.

The contribution of the top 10 products to total revenue is declining, meaning we're getting better breadth.

And I think the focus there is going to be on, really I think, creating certain products and investing in products, making them a little more durable.

Which allows for diversification of revenue streams beyond search, and also greater efficiency in marketing.

But we feel really good about the progress there.

And there's certainly no decline in the need or opportunity for the types of products that we distribute, and we feel really good about it.

On the B2B side, we're also rolling.

We've added partners, meaningful partners over the last year, while growing with our existing partners.

The download world is not going away.

And we think there, also, there are real opportunities, not just with the search business we're in, but also diversifying revenue streams going forward.

So, we feel really good about all three legs of the business.

I think with respect to the shift to tablets and the diversification away from Internet Explorer, I don't have the exact stats, but two years ago, Internet Explorer's share of the marketplace was much bigger than it is now.

We had zero presence on Chrome.

Et cetera.

We were an Internet Explorer business.

The world has gotten meaningfully more complicated in this area.

And yet our growth has accelerated through it.

And I think that that's really one of our key success and what's allowing us to, I think, succeed, at the expense of other people who play in this space.

Differentiate that from a Google or a Bing.

But there are lots of people who play in this convenience search space, and we've been beating them because we're able to handle the complexity.

We've built up an infrastructure to do it.

And, again, I'll take Chrome or mobile as an example.

Two years ago, we were not there.

Now we are.

These are not technically toolbars.

They are different ways to distribute our search and products across these mechanisms or these devices or platforms, whatever word you want to use.

And I think that our ability to meet each of these device and platform challenges or opportunities is a real strength of ours.

It's an issue, but it's one that we continue to overcome and actually create opportunity out of.

So, we feel good about it.

We're getting on mobile devices through browser deals and that sort of thing.

And there's lots of different ways to tackle this diversification.

Not to mention the fact that even as mobile and tablets are growing exponentially, Web-based search is continuing to grow meaningfully, as well.

So, I think that you're not so much talking about cannibalization as you are increasing size of the marketplace and opportunity.

And we feel really good about it.

On the Meetic side, I would say there are no surprises in the sense of something that we didn't anticipate.

I think from the moment that we made our tender offer back in June to today, I think the negative trends we were aware of at the time have been more pronounced than we expected.

I think that the subcount at this point in time is lower than we expected.

So the hill we have to climb is higher, but it's not different.

And we continue to be as optimistic as ever that we can reverse those trends and make that climb.

Mark Mahaney, Citi.

Two questions.

First, just to follow up on Meetic, could you talk a little bit more, provide any more details on what some of your plans are to go over that hill?

And to what extent does that involve maybe major personnel change with that segment?

And then secondly, just in terms, as you think about cash, capital reallocation to shareholders, and you weigh share buybacks versus dividends, could you just talk through your philosophy as to how you decide how much to buy back?

And what to do with the dividend that you have in place now, how you think about raising that over time versus share buybacks?

Thank you.

Sure.

On the Meetic side, first of all, not planning any changes in personnel.

We are very supportive of the team there.

And they have been doing a great job really accelerating what I'll call three years, four years worth of learning at Match in the US into a very short timeframe over there.

And they have been great, and are working great with the US team.

It's really a joint integrated effort.

So, no issues there.

The changes are highly technical in nature.

They have to do with literally the way you lay out a page, the way you deal with the subwall in certain instances versus other instances.

Things that were tried and tested and by trial and error over many years, that drove a lot of the success at Match over the last few years are now being brought to bear.

So whereas at Match in the US, we might have tried seven different iterations of something and then chosen the winner, we are just taking the winner and exporting it there.

It is mundane on one level.

It's highly sophisticated on the other.

Just implementing the means of testing new product iterations with the variety of A/B and other variants.

And a way to do marketing and a way to test and measure marketing efficiency across multiple channels are all things that we're bringing to bear.

It's not some central feature.

But, these are the things that have driven much of Match's success over the last few years.

We have the road map.

We know exactly what we intend to do with Meetic.

Which is the expertise that you gain over a long period of time and deploying it in a business that's probably not really had that kind of experiential testing, et cetera, and process.

That is absolutely correct.

We know what we're doing and we'll tell you whether it works the way we think it will next quarter.

But we feel good about it.

Capital -- there's no ratio really that we follow in terms of the difference between dividend policy and the purchase of shares.

We instituted a dividend policy, dividend, because we thought that it made absolute sense for this Company, which has had a consistent cash position, consistent earnings.

That it made sense to begin.

Our intention is, of course, once you start with the dividend, your intentions are to increase it over time.

And that is very clearly our intention.

On buybacks, we've always said we're opportunistic.

We are, as we noted earlier, buying back 50% of the Company in relatively few short years is remarkable.

And we'll keep going based upon what we think the values are and what that discount is that's reflected in an everyday stock price.

You can really look to our past, as to what we will do in the future.

And on dividends, which is the only new news, as I say, once you start, you keep going with increasing your dividend, as long as all your other needs are satisfied.

Thank you, Barry.

Thank you, Greg.

Ross Sandler with RBC Capital Markets.

Just two quick questions.

Barry, on that theme of using the past to look at the future, given the early successes of the Expedia Trip Advisor spin and the success of the original IAC split-up, do you think there's any efficiency to be gained by separating personals, now that it's a more global business?

And then I have a follow-up from one of the previous questions.

Internet Explorer is around half the browser market share.

Do you guys know what percent penetration you think Mindspark has of that 50% Internet Explorer market share?

And then, Greg, on the technical side, for these browsers that don't allow add-ons or extensions, how is Mindspark technology working around that issue specifically to have toolbars or that functionality installed on those machines?

Thanks.

I am the spin master.

You do six spin-offs and people want more.

Like stock buybacks.

I'm so pleased, because we started doing this before became popular, spinning things off.

When they got to be, we thought, of sufficient size that they ought to be on their own.

And that general sensibility prevails, but I do not think that it makes sense at this time.

I don't think my colleagues at all disagree with me.

That we would now spin off the personals business or spin off the search business.

The real test on that is are they being maximally managed and in this configuration.

And I think the results would confirm that.

As far as the future, I think that depending upon what happens with this Company, this IAC Company, having gone through these multiple spin-offs over these last years, is right now at very good size with very good prospects.

And I think we're going to keep this configuration for a period of time, depending upon what happens.

And grow things and all sorts of other issues.

It could change.

But I don't certainly contemplate it.

I would also just add to that, which is that, on the one hand you can look at this and they are different businesses.

There's no question about it.

But there is a commonalty amongst them, in terms of the things that you look for, the things that you need to understand, many of their drivers.

That really do make this more of a Company, I think, certainly than we've ever had here in my nine years.

And I think that that does lend to real -- synergy is a word I probably wouldn't use, but real efficiencies of management and ability to collaborate, share best practices, and drive other things.

That, frankly, we've done some of, not as much as we should, not as much opportunity as there is.

Moving people around.

I think there's been a lot of that.

So I feel really good about the configuration right now.

And as Barry says, never say never.

But I think right now, we're--

Not now.

That's right.

We keep the hand.

Did you want to comment on the Explorer one?

Yes, Ross, we don't have a precise quantification for your question.

I think the question was what's our share on Internet Explorer, given their share of the overall market.

Which, as Greg indicated, has been coming down, but it's still substantial.

I'll just say that at the end of the day, the vast majority of people out there have one or more, and probably in most cases, more than one toolbar.

We have a very significant piece of that market.

And Internet Explorer is the biggest piece of that market with a mid-50%s share of the browser thing.

By definition, we're going to have a high penetration of the Internet Explorers that are out there, and they are a big piece of our business and everything else.

So we embrace that.

We've been through multiple rounds.

I guess 10 is coming.

9 is out now.

And the evolution is quicker and quicker on the browser side.

And, as Greg said, in a sense, it's a competitive opportunity for us because we have more resources probably devoted to this than anybody.

And the ability to adapt to very quick and changing browser technology, both within a brand -- ie, IE (no pun intended).

And also across brand, whether it's Chrome or Firefox or whatever, is one of our competitive attributes.

And then with respect to the other issue, I'm not going to get into technology differentiations.

All I can say is that we're in the business of distributing products that monetize through search.

And we've found ways to do that, not just on Internet Explorer, but on multiple other platforms and devices, as well.

I can't speak to the exact underlying technological distinctions between them.

But toolbars is just a word.

Each one of these things has its own code and its own interaction with the platform.

Technological relationship to the browser, whether it's in the browser or it sits on top of it or next to it, or whatever it may be.

Brian Fitzgerald with UBS.

A quick one on ServiceMagic.

Was there anything in particular driving the increase in service requests on the positive side?

Or pressuring the accepts for requests on the other side?

And then on the media side, we want to know if you can give us a little more color on the timing of the Electus YouTube channels.

And maybe some thought process around the focus on pop culture, Latin culture, and food, and the opportunity to expand in other verticals there.

Thanks.

Yes.

I think on the ServiceMagic side, it's a very complicated business, but in some ways it's a very simple business, which is you have consumers on the one hand and then you have service providers on the other.

And if you increase the number of consumers, thereby service requests, which is what we successfully did through better marketing, efficient marketing, et cetera, if you haven't commensurately increased the service providers, then your accepts per service request are going to go down.

So, we have driven the growth in the consumer side quicker than we've been able to grow the growth in the service provider side.

So, that ratio comes down at the expense of the increase in the consumer side.

Our trick is to grow both.

We're focused on that.

We have initiatives.

We're excited, over the course of the next year I'm confident that those numbers will head in the same direction.

On Electus and its digital efforts with YouTube, we have three separate ventures.

And they are now staffed, and they are moving forward to develop the content.

It will probably not be until, I realistically think the end of the year.

Certainly not for six months or so -- six, eight months.

But these things will be iterative.

They will start, and like any program service, they will begin and they will follow one step in front of the other until they get the vein that they want.

The areas that we've chosen, though, are areas that I think are extremely rich and where we have real sensibility.

Look, it is an experiment in the sense that YouTube has not followed an original content or channelizing platform.

But, they're ambitious about this and they are fully funding it.

And it's very good, I think, for us to cut our teeth against it, because it allows us to employ people we wouldn't otherwise employ, get them in the mix, in the system.

And then who knows what happens, like any program service.

So, we're glad we're doing it.

No one can predict whether it will have any value.

Okay, thanks, Greg.

Thanks, Barry.

Jason Helfstein with Oppenheimer.

Three questions.

First, you guys continue to sustain double-digit organic subgrowth at Match, which I think has surprised some people.

So, can you talk about your strategy for sustaining the growth there?

And then, do you expect that to continue for the foreseeable future?

Second question, Barry, can you talk about your appetite to continue to sustain losses at Daily Beast, and if there's a line in the sand you've drawn when you would like that to start to become profitable?

And then lastly, if we could just get some color on why CityGrid revenue slowed in the quarter.

Was it impact from local deals companies, Google initiatives, or anything else you want to cite?

Thanks.

Yes, on the Match side, I've been pretty consistent that I expect core subgrowth in Match to continue at double-digit levels as far into the future as I can see.

So, it's certainly not a surprise to me.

I think the market is growing.

We are increasingly taking share within that market, even as we grow it and expand it.

Our execution has been great.

I think our brand is increasingly thought of as the pre-eminent brand in the space.

And we're doing it across multiple properties.

So, I feel really good about it.

I think if you look at mobile, mobile's been a huge growth driver for us.

Continue to open up new marketing channels.

And I think we've got plans over the course of this year to do things which I think will continue to make it ever-more exciting and to create real, hopefully, competitive distance between us and our competitors.

So, I feel great about that.

Barry, do you want to take Beast?

I'll follow.

Okay.

On the CitiGrid side, I don't think there was anything major.

It can get a little choppy in the revenue because a lot of the revenue comes from resellers.

We've brought down a fair amount of our own internal sales force and sales efforts, which is a big driver of that decline.

So, if you think about us as having two revenue streams, one of them came down by our own hand because of the efficiency of it, et cetera.

And the other one, the growth in the other one hasn't outdistanced that decline yet with respect to Q4.

But it's nothing I think more meaningful than that.

Tom, do you want to add?

No, I think that's right.

We bring on these big resellers and there's a bit of a lumpiness to them, because you have to get them integrated and then ramp them.

So, the timing this particular quarter added up to what it added up to, but I don't think there's something fundamental there.

On Daily Beast Newsweek Company -- and I choose to call it investment rather than losses -- we, let's say, ramped up our investment.

It's now on the decline.

A nominal amount, meaning, this year will certainly be a loss, but it will be less than last year substantially.

And we are making progress.

Our stats on the Newsweek side in terms of ad pages sold are improving.

The book is every issue, I think, improving.

We just this last Sunday, we rolled out, or debuted, our iPad Newsweek app, which is simply superb.

It is real value add.

If you look at the book and then side by side you look at the iPad, and you see the additional pictures that you can put, the additional video, supplementing stories in different ways.

This is the great thing about this wonderful means of communication.

Which is that there's no cost in adding content.

In every other form, the addition of content has been a big cost factor, and inhibited by paper stock and fall sorts of issues like that.

And all the things you know about.

With the Internet, in order to add real value to a product, marginal costs are almost nothing.

Anyway, I think that the entity, the Daily Beast Newsweek Company, is making progress.

And I'm pleased with its progress thus far.

Quick follow-up.

Just back to Mac for a second.

When do you expect to resolve the app issue with Apple and then get the app back on the App Store?

Thanks.

I don't expect to resolve the issue with Apple.

Apple has a set of standards or requirements that they have, both financial and otherwise, to be in the App Store.

And we decided that didn't really make sense for us.

Removing it from the App Stores had zero noticeable impact on our business.

Our mobile business is booming.

In December 2011, just an example, 40% of our log-ins were on mobile.

That's over 50% increase from the prior year.

Huge.

15% of our new customers in December were coming in through mobile.

Huge increases.

The majority of our users are on Android, but a large number on Apple.

They are using our web-based product on Apple instead of the app.

I think the App Store is great for discovery for, I think, unknown brands, for brands that spend lots on marketing.

They'll go where our product is.

And when we took it off the App Store, there was literally zero impact on our Apple business.

They just started doing it through the HTML5 product, which is close to as good, and soon will be as good, as any app-based product.

It's just the nature of technology.

So anything can happen.

Apple can change its requirements for inclusion.

But it's not an active initiative of ours to try and get back in.

We'd love to.

We made the absolute right decision.

The idea that essentially a service charge would be as high as 30% makes utterly no sense for anyone selling almost anything.

Certainly not if you're putting meaningful marketing dollars behind it.

If there was no incremental value to us -- well, modest incremental value.

And beyond the money, they also wanted to control the customer relationship and customer care and all these sorts of things.

It just didn't make sense for our business.

So, we took it off and haven't missed a beat.

Great.

Thank you very much.

Matt Schindler with Bank of America.

Great quarter.

I was looking at the search particularly, and you've grown now, shown accelerating growth in search for six quarters in a row.

And looking particularly at fourth quarter, I take your 35% search and advertising growth, which is mostly pure search, and I compare it to what Google reported.

And if you break down Google's report down to what was an estimate of what their desktop search grew, which I think is most comparable for you, their desktop search revenue growth was around 15%.

You're at 35%.

You can break down search into basically three pieces.

There's query volume.

There's click-through rate.

And there's CPC, or cost per click.

Since Google provides your main monetization for search, I would imagine there's not much you can do on CPC.

And there's not much that changes versus Google's growth.

On the other two, click-through rate, I imagine there's something you can do there.

And then there's query growth.

So that's taking share.

Not necessarily from Google, but gaining share on where Google is, to clear that gap from functionally 15% to 35%.

Where would you break that down how that is happening?

And how sustainable is that growth?

If it's coming from click-through rates or revenue per query, how sustainable, how long can you keep upping that difference between you and Google?

And if it's coming from query volume, really where are you getting it?

Okay.

There's a lot in there.

I'm going to take a stab at part of it and then Tom will come over the top.

First of all, there is a lot that one can do on RPQ, or revenue per query.

We have a variety of products and they vary dramatically across our products based on different things that we do.

So to think that because we get our sponsored listings through Google that we have no impact on that is, I think, incorrect.

But, as Tom said earlier, it has not been the big driver of growth, at least recently.

It's been on the volume side.

I think that the way you're breaking it down against Google, I'm not familiar with.

But the way we think about it is, a big part of our business is in what we call convenience search.

And the players that we are competing with in that convenience search, it's not Google.

It's not even Bing.

It's lots of smaller companies that you probably haven't heard of.

Gazillion of them are out of Israel.

We deal with them all the time.

They're out there.

There's Infospace.

There's all these different businesses that play in this area.

And our competitive position vis-a-vis those players is simply stronger and stronger every day.

We're reliable.

We've been growing.

As I said earlier, we've got all the technology and ability to handle the changing landscape.

And this is all good for Google.

I think to say this is coming at the expense of Google I think is wrong.

This is search queries that Google would not otherwise be getting that we are getting through growing this area.

So, we're really pleased about it.

Also, a large part of our query base is international, which I think doesn't necessarily always get factored into this.

I think the majority of our toolbars are actually international, not domestic.

I think it's very hard to do the kind of math that you're doing to try and get to our growth versus Google's growth.

I think it's a false analogy.

Our growth, in many ways, is Google's growth, and they get the benefit of that.

Tom, is there anything?

Just a couple of.

Completely consistent with that, I think it depends on how you look at it.

I think Google's revenue from their O&O properties was up 29%.

So, our number is much closer to that.

That includes, I think, international.

And then if you look at other big players in search, Yahoo!

and AOL reporting this morning, were both down in search.

So, I think we're taking share.

If you think of it as a share gain, we're taking it from the smaller players, as well as the portal players.

But again, we're really aligned with Google more than anything else.

Kerry Rice with Needham & Company.

You pretty much answered my question there with the last one.

So, can you talk a little bit about maybe valuation with ServiceMagic?

You have a new public competitor out there.

And the businesses seem somewhat similar, but the valuation I would argue is, you're not getting as much valuation for ServiceMagic as your competitor is.

And it goes back to maybe spinning things out or making that more visible, I don't know.

But maybe could you talk about what other investments you're making in ServiceMagic to grow, because I know you've been making those investments for a while?

I'm certainly not going to comment on our competitors' valuation.

But it is what it is, and there are a variety of factors in it that make it what it is.

It's obviously in a very different stage than this business and has a different model.

We probably don't get any valuation, particularly, for ServiceMagic.

And if so, it's really de minimus.

Angie's List is what it is, and it's value is whatever people say it is.

I can't get to the bottom of it.

But with respect to ServiceMagic, ServiceMagic is a business, it's profitable.

None of the other businesses in the area are profitable.

Its growth in revenue is not nearly the growth in revenue and users that that business is.

That business is being valued based on a promise that will be delivered someday in the future, or not.

And that's up to you guys and investors to decide whether that promise will come through or not.

ServiceMagic is delivering, meaning it's profit is its profit.

Its revenue is its revenue.

We need to grow it.

And we're doing that.

I think spinning it off doesn't change that math any.

No, it's not ripe.

Time will tell, but it's not ripe now.

Just one point on that.

Which is, the local space, the local advertising space, even in home services, is a huge space.

Still, the vast majority of that is going to Google, I would imagine.

There are a lot of different ways that people find these providers.

Angie's List is one of them.

ServiceMagic is one of them.

But neither of them are remotely the biggest.

And there's this whole other area that we need to grow into and there's a lot of room still to go.

John Blackledge with Credit Suisse.

Couple of questions on search.

Just wondering if you can frame a couple things.

So, up side, on the top line in search in 4Q, just wondering how we should think about the growth profile in 1Q '12.

Could it be up sequentially?

And then on search margins, in 4Q, flat if you take ex the 4Q '10 charge versus the first three quarters of the year where margins were up.

How should we think about margins in 1Q?

And then things are going so great over there, I do have to ask about an update on the CFO, on a potential for Tom's replacement.

Thanks.

I'll take the first one.

I said in my script, the fundamental drivers on search momentum are intact.

By definition, if you play this game of each quarter expecting to sequentially accelerate, you either become the world or it ends.

So, we can't play that game.

But the fundamental drivers are intact.

And we don't see a major change in momentum or direction there on the top line.

On margins, because we run the business to drive absolute dollar profit growth year-over-year, then we will take -- and so much of our business is driven by online marketing -- we will take every opportunity to spend more money if it drives positive contribution.

And often that next marginal dollar may be spent on something that's percentage-wise a lower-margin marketing opportunity.

Or where the revenue actually comes in, in subsequent periods.

Yes, there may be timing things, as well.

So, at the end of the day, I think the kind of margins we've been operating at are probably the go-forward levels.

In any given quarter they could bounce around for a lot of reasons.

I wouldn't read anything positive or negative into sequential quarterly margin progression.

If we're getting the kind of revenue growth we're getting, then we'll be thrilled with flat margins year-over-year, adjusting for the charge, as you point out.

On the CFO side, obviously we've been in a process, we've met a lot of good people, we feel good about where we are.

Nothing to announce.

Would be surprised if we didn't have something by the next quarter.

But until it's announced, it's not announced.

Michael Graham with Canaccord.

Just wanted to go back to the buyback for a minute, if I could.

You bought back half the Company, which is really great.

And you're on track to do 10% to 20% per year or so.

And I'm just wondering, can you comment on how long this can go on?

And is there a floor level of either liquidity or shares or market cap where you feel like you need to knock that off?

And then as a follow-on to that, the implication of all the buyback activity is that that's what you see as the most attractive use of your capital.

So, can you just comment on, are you actively exploring expanding the business into other business lines?

Thanks a lot.

The first thing that we do is, of course, we say what can we invest in our own businesses, use our capital to invest in, what we know and where we think opportunities are in line.

And then, of course, there's the daily opportunity that comes in the door and that you get excited about, and use capital for that.

We are constantly -- we're certainly multiple numbers of acquisitions a year.

None that have taken large amounts of capital.

But we're certainly not shy about it.

And partly the reason why we've always been as overcapitalized as we've been, which is the ability to invest in the businesses.

Obviously, do buy back stock in the Company.

And to be acquisitive where it makes sense.

Please don't get in your minds that every year we're buying 10% to 20% of the shares outstanding, because I would not contemplate that.

As far as how far you can go, we're not anywhere at a point of not having enough liquidity and not having enough shares outstanding in the market for trading purposes.

Nor do I think we'll get anywhere near that within the next several years.

So, that's not, I think, a gating issue for us.

All right, that's great.

Thank you.

All right.

Thank you all very much.

If there are no comments from my colleagues?

We'll see you next quarter.

We'll definitely look forward to talking with you next quarter.

And our intent is to, of course, keep this momentum going.

But thank you for your time today.

And now get on with other earnings announcements from other players.

This concludes today's conference call.

You may now disconnect.