Match Group Inc (MTCH) 2012 Q1 法說會逐字稿

Good morning, my name is Jessica and I'll be your conference operator today.

At this time, I'd like to welcome everyone to the IAC first quarter 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) Thank you.

Jeff Kip, you may begin your conference.

Thank you, operator, and good morning and thank you to everyone on the line for joining us for our first quarter 2012 earnings call.

This is my first quarterly earnings call at IAC after six years of doing the same as CFO of Panera Bread and I couldn't be more excited to be part of the team there, especially with the Company performing the way it is right now.

While all businesses of the size have similarities, I'm having a great time getting up to speed and learning the range and complexity of the businesses within IAC.

I'm going to turn the call over to Barry and Greg.

We'll make some introductory remarks and then I'll come back with some color on each of our segments.

We will then finish up with Q&A.

First, however let me 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 first quarter 2012 press release and our periodic reports filed with the SEC.

We will also discuss certain non-GAAP measures.

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

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

Thank you.

And Kip, welcome.

You have more than big shoes to fill which we all know.

And I don't know if we ever, even on our last call, talked about how much we are in debt, grateful about Tom McInerney and what he meant to this Company over --

11, I think?

Yes, certainly more than 10 years.

13, actually.

He was, is outstanding in every way and I don't think we'd be in exactly the situation we're in now, and have been for a while, if it had not been Mr.

McInerney.

So we expect similar contributions from you too, Kip.

So anyway I don't have that much to say.

It's rare and sometimes it is a matter of concern when everything seems to be going well.

Complacency, arrogance comes in which I would emphatically say for the companies that I'm responsible for, which is IAC, Expedia, and TripAdvisor, all of which have reported earnings now -- IAC being the last but TripAdvisor, yesterday, and Expedia, last week -- each of them reporting fine quarters.

And it is because of the management in each of these companies, Greg, and Dara Khosrowshahi at Expedia, and Steve Kaufer at TripAdvisor.

I certainly know that I am in good hands.

As for IAC itself, one thing I would note, which is that since the spin of the multiple companies that began with IAC originally, we have bought back over 50% of the shares of the Company at 88 million shares at a price of $28.

We're of course most interested in, most engaged in the operations of the Company itself and if we do well at that, and we have done well at that, then everything else pretty good follows.

But I also think that the capital management company over the last years has been consistent and deeply sound as I think that last stat can give you.

So with that, I think you're next on this Mr.

Blatt.

So why don't you proceed.

Sure, thanks, Barry.

It's been seven months, about, since we closed are tender offer for Meetic and I wanted to give a general update for where we are in the process.

As I said from the outset, 2012 is going to be about reversing core trends in the business to set us up for a healthy 2013.

I think over the span of 2011 the business lost over 100,000 subscribers, clearly cause for concern and frankly a bigger drop than we expected at the time we made the offer in June of last year.

So we certainly had our work cut out for us.

But I'm happy to say that through today, we are very much on track.

Our focus was really on three core metrics of the business.

Let me get a little bit more granular than typical because the reported numbers can, in a turnaround trend in the subscription business, they can be hard to weed through.

So we were really focused on three core metrics.

The first was conversion, which is the percentage of our members who subscribe.

Second was re-subscriptions, which is the percentage of our former subscribers who come back and subscriber again, and the third was marketing efficiency, which is the cost of acquiring a member.

It's early.

We still a lot of work to do but we have had success in meaningfully improving all three of these metrics and are ahead of our internal plan.

Conversion and re-subscriptions are driven primarily by improving the product.

Those product changes are generally things that we've imported from the US and we've had great success in doing so.

Marketing efficiency to date has been driven by mostly an increase in analytics which is the ability to assess your marketing on a granular level and what we've effectively done is cut out a lot of spend that was previously unprofitable.

Still lots of work to be done but if progress continues the way it has, our full-year expectations, deferred revenue, purchase accounting aside, is the following.

For the full-year we think revenue will decline year over year due to the significant subscriber losses we experienced last year.

We think that's probably the single-digit range because revenue trails subscribers over the life of subscription.

There's a delayed timing effect there.

Nonetheless, we expect OIBA to be flattish year over year, giving the offsetting cuts in unprofitable marketing that I indicated and product improvements.

Finally, we do expect to get subscriber growth going again this year, driven by the improvement in product that we're implementing throughout the year.

I want to point out, I know that there was a big jump in profitability in Q1.

That's primarily driven by the fact that a disproportionate amount of the marketing cuts that were made take place in Q1.

So the flattish OIBA prediction for the full-year still holds, despite the fact that we had a big jump in Q1.

Don't go out and model that lift throughout the year.

It's is not what we expect.

In fact, the biggest risk to that flattish OIBA is actually success, meaning if we're ahead of schedule in improving conversion and improving re-subscription, et cetera, then marketing efficiency in and of itself improved which would lead us to increase in marketing for 2013 growth, which would cut into 2012 marketing.

So I don't think that 2012 is the year you should really be focused on margin or OIBA.

It's really about the trends in the underlying business.

Switching topics, I just want to speak briefly about our current leadership situation.

I'm incredibly excited about the senior team.

I think in the 15 or so months since I've been CEO, we've made meaningful changes at the senior level, across all our principle businesses, plus we've added Jeff to the senior team.

Very excited about all of it.

It's the first time in that period I'm not personally recruiting for a senior slot, which is great.

And I think we've developed a really great mix here.

We've got proven entrepreneurs who started and sold internet businesses, Sam Yagan, Jason Finger, Kerry Trainor, Ricky Van Veen, to name a few, plus seasoned business executives with a different skill set, who came from larger organizations.

Joey Levin, Mandy Ginsberg, Josh Meyers, Chris Terrill, Doug Leeds, Ben Silverman, again, just to name a few.

We like this mix.

We think it gives us a great variety of perspectives to tackle the multiple challenges that a business like ours in multiple areas faces and I feel really great about the future because as Berry pointed out, it's all about management.

It's all about execution and it is a pyramid.

We're all relying on each other and we feel great about the team.

With that, I'll turn it over to Jeff to make some comments about the quarter and some outlooks.

Thanks, Greg.

Again, IAC delivered an outstanding first quarter, driven primarily by strong performances in our Search and Match segments.

I'd like to give you little color now on each of our four segments starting, with Search which, as noted, had yet another great quarter.

Our strong year-over-year and sequential revenue and OIBA growth came across all three Search businesses, destination websites, B2C, and B2B, driven primary by volume and to a lesser degree by improved monetization.

We expect top line growth to continue on a year-over-year basis but, as you know, we'll have more difficult comparisons to last year's revenue growth as the year progresses.

All else equal, we expect revenue to be sequentially flattish through quarters two, three, and four.

Similarly, while we saw OIBA margin expansion versus the prior year first quarter, we expect some contraction in the second quarter as we continue to invest in new product development.

Next, our Match segment also continues to perform well.

When we exclude Meetic, Match revenue grew 13% year-over-year, driven by a 12% increase in subscribers in Match's core operations.

OIBA, again excluding Meetic, grew even more rapidly than revenue, primarily because we moved some of our traditional first quarter marketing spend into the second quarter.

We now expect second quarter margins to be roughly flat year over year, given that shift in spending.

In our new Local segment, we saw modest top line growth in the first quarter but OIBA was down versus the prior year, due to some relatively significant transitional costs in that business, as well as increased investment in Urbanspoon.

For the remainder of the year, we expect double-digit top and bottom line growth in this segment.

Wrapping up, our Media and Other results reflect an increased level of investment in our new businesses, including Vimeo, Electus, CollegeHumor, and Daily Burn.

Please recall that when we realigned our segments, we moved Pronto, which historically made a positive contribution to revenue and OIBA to Search and we moved Daily Burn into Media and Other.

Through the remainder of the year, we plan to continue to invest in our new businesses at roughly the same overall rate, although we're constantly evaluating our levels of investment and could decide to increase or decrease the amount, based on results.

As you know, our strategy across all of our segments is to reinvest a modest amount of our current profits into initiatives to set us up for continued future growth.

Investment is most visible in this segment but we're investing in Search and our product pipeline in Match and our developing businesses and in both of our Local businesses.

Before we go to Q&A, let me give you a quick update on share count.

We have two tranches of warrants expiring May 7 which were issued as part of the consideration [in the VUE] transaction in 2002, which in aggregate represent 6.6 million shares.

If the warrants are exercised on a net basis, our share count will increase approximately 2.9 million shares and if exercised on a gross basis, share count will increase 6.6 million shares but we'll also receive approximately $180 million in cash.

Please recall as well that we repurchased 5.1 million shares since our fourth-quarter 2011 earnings call.

With that, let's take your questions.

(Operator instructions)

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

Your line is now open.

Thanks.

Welcome, Jeff.

I like to dig a little deeper into the Search business.

Just have two questions.

First is -- as this segment continues to grow, are you seeing the same unit economics, either defined by lifetime value or some other metric, with these newer toolbar products, as you were with some of the older ones?

Or are the unit economics improving?

And second -- this business has doubled in the past, call it, two years.

Can you talk about the return on ad spend that you're seeing as you get bigger and bigger?

With each of these new products that you roll out on the toolbar side, is the marketing ROI holding constant, or does it hit a law of large numbers at some point?

Thank you.

I think on unit economics, the Search business is really broken into three parts.

You've got the B2B, the B2C, and the proprietary, or destination.

So it's a little different across.

On the B2B side, where's it's mostly distribution deals, the economics are generally holding.

Our cost of distribution are consistent and the monetization is going up for a variety of reasons, but the margins are basically holding.

In fact, the margins are basically holding across all of the businesses.

And LTVs on the various applications we distribute -- they go up and down.

They tend be a function of a whole variety of factors, some of which we control and some of which we don't control.

A big driver is the mix of products and applications that we distribute.

Some have higher LTVs; some have lower LTVs; but what we really focus on is the contribution margin.

So you may have a lower LTV product, but it is cheaper to distribute, and so you're maintaining contribution margin.

So I think LTV is a piece, but not the major piece.

In terms of return on marketing spend or distribution costs across those three businesses, I think they're holding.

And I think that's really one of the big competitive differentiators we have, which is -- in a large part of that business, what we have is years and years of experience of collecting data, identifying opportunity, developing applications or marketing strategies to meet those opportunities through a highly analytical process.

We probably have more data, more analytics, behind it; and it really is a continuous process.

So development of an application, a proprietary application, will often be linked to our identification through data of a particular opportunity.

So really we've been growing this business through expanding marketing, which we've been able to do through this process, all while maintaining margins.

So I think of course it's possible that the law of large numbers kicks in at some point; it does for most businesses.

But I don't think there's anything particular to this business that makes it any more imminent or cloudy than any other.

We're not seeing a slow down right now.

We're continuing opening up new channels and developing, I think, the critical new products to meet those channels.

Thank you.

Next question, please.

Your next question comes from Mark Mahaney from Citigroup.

Your line is now open.

Thanks.

Two questions please.

First, on Urbanspoon -- could you just discuss the type of investments you want to make in Urbanspoon and why?

And secondly, I have a feeling that the financial markets are going to focus over the next month or so on maybe the resurgence in brand or display advertising.

As one of the leading search players on the internet, could you talk about whether you think that there is a broad overall greater interest from advertisers and display brand advertising?

Is that something that you think you want to pivot for?

Are you already positioned for that?

Or do you think that there's not necessarily that kind of dramatic shift?

Thank you.

On Urbanspoon, first, let me say that I think two weeks ago, a new CEO of the CityGrid business that includes Urbanspoon, took over, who is very experienced in this area.

He started and ran and then sold SeamlessWeb, which is in the internet restaurant business.

And we're giving him some berth in developing the strategy and the outlook for that business.

So we have been investing in it, small amounts in any absolute way, but I think I wouldn't comment on what our long-term strategy is right now, as it would be preemptive; and he's certainly developing it.

But we believe the opportunity to grow that business in a variety of ways.

Happy to speak more about it next quarter.

In terms of display advertising, I think it's an area that we don't have nearly as much exposure in as we do in Search and subscriptions.

We do have exposure in it.

It is growing as our businesses grow.

Historically, I think, it has not been as desirable a place to be as Search and subscriptions.

I don't know if there's a shift from Search to display.

I think there's a general shift online, and businesses like Facebook are growing the opportunity to spend in display, and so the opportunity's growing with it.

But we certainly don't view it as a strategic imperative to increase our exposure in that area.

Thank you, Greg.

Well, I hope our exposure does increase by virtue of growth of our titles -- our sites that take display advertising.

I've believed for some time that the evolution of display advertising is at a beginning stage.

There has not been enough creative development in display advertising as there has been in the innovations that search advertising brought.

I'm hopeful.

I don't, though, see any particular sign of it, but I'm hopeful that, as time goes on, people who are in this site business -- meaning this product business -- will begin to really innovate in products that allow display advertising to be more effective than the little 2 by 300 box and banners and things like that, which are okay.

But they're never going to be particularly highly valued.

More, I think that the internet develops video is really the chance for the Internet system to replicate what we all know as television advertising.

Pre rolls in front of video do work.

They work, in some cases, you can say, even better than 30-second spots, because you can't exactly race through them.

But it's evolutionary.

It's not that much video, paid video, display -- I mean advertising on the web.

But I do think that will continue.

But there is nothing right now that you can grab your little hand and say that there's some change.

Thank you, Barry.

Your next question comes from the line of Jason Helfstein from Oppenheimer.

Your line is now open.

Thanks.

Three quick questions.

The first, just on CityGrid.

You talked about it being up slightly.

Can you just give us any more specifics on the outline for that business, given all of the companies crawling to that space, many of which have now become public?

Is that as beneficial to you, as far as increasing awareness of advertisers, that there's all these of local opportunities that you can help them with?

Just looking for more color.

The second question -- in Media, you highlighted Vimeo and Electus as growth drivers; however, revenues only grew 4%.

I'm just wondering if there were any assets that were a drag on Media growth in the quarter?

And lastly, can you give us an update on Vimeo user and submetrics, if you want to do that?

And can you comment on press reports of the Company seeking to sell a minority stake in Vimeo?

And if so, what would be the reason for doing so?

Thanks.

We've got to go back and answer that first question -- that last question.

So Greg, start.

We're technically challenged over here.

We are.

On CityGrid -- new CEO, so I don't want to get too much into strategy.

I think that the quote, unquote awareness driven by public companies is more relevant to all of you than I think it is to the advertisers we serve.

They're well aware of the opportunities online, and what's going to drive our growth in that business is our ability to serve them well.

I don't think there's an awareness issue there that is helped.

I think Media growth -- Barry, do you want to take that?

First of all, we call this category Media and Other.

Essentially, it's R&D for us.

This, for our Company, is really research and development.

That's the category.

If we had reported it that way, you would say, for a company our size, the amount that we are investing in R&D would be, at a minimum, appropriate.

And so, of course we report it and we expense it, and therefore we report losses.

But I think for analyzing it and thinking about it, think of it as R&D.

And the investments that we make, once they -- as Pronto has now spun out and so too with Urbanspoon -- spun out the sense of being reclassified outside of this Media and Other sector -- once a business becomes either something substantial or something that has got real revenues and expenses, it will come out of this category.

And then you can make judgments about its continuing growth, profitability, et cetera.

I also think it's important to note that this is really a bottoms-up thing.

Which is, we're not spending what we spend because we think we should be spending that amount.

We're spending what we spend because we analyze individual opportunities that we believe in and they're worth spending.

Obviously, if the number got unwieldy, we would look at top-down, and we'd try to contain it.

We don't think we're at that point.

Each of our businesses -- Daily Burn, Vimeo, et cetera -- we're investing what we invest because we believe in the opportunity, and we continue to make those assessments every day.

Sorry.

Stats on Vimeo.

Vimeo -- we don't disclose them granularly, but I can tell you that revenue, uniques, and subscribers are all up meaningfully year-over-year.

Again, another business where we have a new CEO.

Again, about two weeks into it -- Kerry Trainor -- working on expanding and even further accelerating the growth.

But we're very happy with the track we're on track and made that hire because we believe in the opportunity and the ability to go after something large.

In all of these areas, we'll look at giving more granular metrics as we go, which generally conflict with competitive and other issues.

And in each business we'll look at it and at the right time, we'll start breaking them out for you.

All right, thank you.

Next question?

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

Your line is now open.

Great, thanks.

Two questions, one on Search and one on Media and Other.

On the Search side, the overall Search market is growing 20%-plus.

In 1Q '12, IAC Search grew two times -- at least two times -- the Search market.

So maybe if you could just provide some more insight into the drivers of the share gains, and some color on the sustainability of that?

And then, also just remind us again why the revenue growth would be flat sequentially for the rest of the year?

And then, on the Media and Other side, maybe give an update on the TV production slate at Electus and Notional -- in particular, Fashion Star and Chopped?

And how do you view these segments' potential contributions to the Company over the long-term?

Thank you.

Sorry.

This is my fault again, and I will technologically remove myself from this table.

I may still be here by voice, but not by technology.

I'm sorry, Greg, I've done it to you twice now.

No problem.

By the way, it happens when we're not on a call as well.

Anyway, the comparison to the Search market generally, I think, is flat for number of reasons.

In our proprietary destination Search business, or whatever word we're using at the moment, it really is a fundamental -- what we've done is, we've really created a fundamentally different experience, I think, than traditional search.

Which is, traditional search is around organizing a navigation from a query to a third-party page.

And what we've done is we've gone after a portion of the market that I think lends itself to giving direct answers, and we're organizing content around that.

So we've found an area where we can grow, in, let's call it a large number of queries, but by no means the majority of them, that haven't been well served by the traditional search experience.

And we're finding real marketing opportunities in that area which is allowing us to grow off a very small number.

It is a different area though, than what, say, a Google goes after, which is omnibus, universal destination search.

So I think we are able to exploit an area.

It is search, because we call a search, but is more than that.

It's a somewhat different offering.

And I think that, that and our applications business is driven primarily by marketing.

As I said earlier, we've been able to develop a really strong marketing machine that has opened up opportunities.

Most of the people in the traditional search area are not spending money like this on marketing.

They are growing more organically.

Google, for instance, if you peel back all the efforts they're doing and you focused purely on their Search business -- which I don't think is the way they report -- I'm sure you'd have a much higher margin business that is growing organically faster than our business grows, and they're just not playing in what I'll call this space, which is generally incremental to what they do.

It's convenience search.

It's coming off a Google click because we're giving an answer instead of a middle ground.

So I think, as we evolve, we've got to think about the way to talk about this that isn't that direct comparison, because I think it's a flawed one.

In terms of flattish growth, I think -- look, this business is like any business.

It sometimes comes in spurts.

I think we've had a big spurt.

We've developed a lot of products.

We exploited a lot of marketing opportunities.

Some of them have come quicker than we expected, and now we're working on that next round of products and marketing opportunities that will grow it.

Of course anything can happen.

We could do better than that.

Frankly, we could do worse, and that's just the reality of this business.

Was there a Media question?

Yes, about our television and digital production activity, which is between three entities, which is Electus, CollegeHumor, and Notional.

We are certainly in it.

Electus has got real momentum.

It's got lots and lots of projects in development, and it does have several shows, series that are on various cable networks and one show that's on NBC, which is called Fashion Star, which you specifically asked about.

Fashion Star has done well in the ratings, particularly in the demos.

Like everybody else, we're in discussions, hopeful about having it be renewed for a second season.

We won't know that of course until they set the schedules in the next couple of weeks.

But it's been a good effort.

CollegeHumor and Notional, with Chopped, which has been on the air for 1,000 years and does endless numbers of episodes that everybody seems to like.

CollegeHumor is expanding its audience consistently.

It made its first movie.

So we're in every kind of segment of this production business, with a particular emphasis on digital.

Electus' digital effort includes programming three channels for the YouTube efforts, which are beginning to roll out now.

So it's early, but to answer the fundamental, which is -- are there expectations for this to be a contributor?

There definitely are.

It will take some time, but if we can build a strong, independent, both television and digital production operation, that will be of great enduring value.

Also, just to be clear, we're not doing any of this for fun.

Every single thing we're doing, we do because there's an expectation that it will be a contributor, and that's what we're working towards -- to state the obvious.

That's great.

Super helpful.

Thank you.

Next question, please.

Your next question comes from the line of Kerry Rice, Needham & Company.

Your line is now open.

Thanks a lot.

I was hoping that you could give us an update on The Daily Beast.

It looks like, if you look at the equity losses and income from unconsolidated affiliates, it looks like that loss came down.

Or was there something else in the quarter related to that?

Look, there are definitely expectations here, as well as what I last talked about, the television production Media businesses.

The losses are declining.

I wish they would decline faster, but they are declining year-over-year, month-over-month.

I expect that, that will continue.

First quarter of advertising was extremely difficult for all the [pirate] magazine category.

Almost every single magazine was down single to double digits.

Newsweek was up 20%-plus, off of, not a great base, but nevertheless, pointing in a good direction.

The book, the magazine itself, I think is getting better.

Daily Beast hit a new record of uniques with 12 million, just, I think, this week.

I think it's the month or the quarter.

That's how we look at that.

That's tremendous growth.

Last year it was 5 million, so that's enormous growth.

And the revenue for the Beast is up 60%, 70%, I think, from a year ago, just on the Daily Beast piece of it.

But the book itself, the magazine, continues to improve.

And I expect that now that integration -- which is very difficult, it took us at least the year -- has been completed, Tina Brown and her staff are now for the first time really able to plan issues in the future, like the issue we did on Mad Men that got such tremendous reaction.

Those things take a lot of planning, and we're just in the position where we can do many more of them.

And that's what we are going to be doing in the next year.

Thank you.

You're welcome.

Next question.

Your next question comes from the line of Nathaniel Schindler from Bank of America.

Your line is now open.

I was wondering if you just help me out on two questions.

One on Search and one the Match business.

First, on Search -- can you give us a little more detail on the churn rates that you see, and how they've changed over time, for people who download a toolbar?

Said another way, if I download a toolbar today and affect revenue in this quarter, how many more quarters will that download be affecting revenue?

And then, on the Match side -- can you point us to what you think is the really long-term sustainable margin of the Match business?

Or what's your aspirational margin for that business?

That's a new category.

I like that.

Aspirational margin.

Let's be clear.

Everything we say is aspirational.

(laughter) Everything we say about the future is aspirational.

In terms of churn rate, I understand what you're saying, but imagine it this way -- you get 100 application downloads.

Some percentage of those never get used at all.

Some percentage of them last many months.

Some get used once and then get discarded.

So there's a whole bunch of -- it's a continuum.

And then the things that affect that -- you may love the application, but if you get a new browser, it's gone.

That's churn.

You may get rid of the application affirmatively.

There are a whole bunch of things that go to it, and they tend to vary by demo, because of the rate at which people the churn their browsers.

They tend to very much vary by the application itself, based on it.

So, I think there's a whole bunch of things.

In aggregate, in average, I think we're probably up a little bit over time.

But a whole bunch of things go into it -- mix, et cetera.

I don't think it's necessarily the meaningful number to look at.

In terms of Match margins -- again I hate to do this, but it's such a mix issue.

The Match US margin is meaningfully higher than the segment margin.

It's the greatest margin in the world.

OkCupid -- very high margin.

To the extent that those two businesses take on an increasing percentage of the business, margins go up.

Meetic, a smaller margin.

Chemistry, a smaller margin.

PeopleMedia, smaller margin.

So you get into these growth rates -- not to mention the fact that we've got a meaningful amount of money invested in the segment in developmental products that we haven't even launched yet, and so that crimps into margin as well.

I think aspirational [year as out] is very hard for me to say.

I think in terms of this year, for the full year, I'd like margins -- Meetic aside, which I said, don't focus on the margin -- to be up slightly year-over-year.

And ideally, aspirationally, that grows over time, but it really is a mix issue.

What we're much more focused on is growing profit long-term, and if we grow profit by spending more on marketing and bringing down margin, we're fine with that.

Great thank you.

Next question, please.

Your next question comes from the line of Heath Terry from Goldman Sachs.

Your line is now open.

Great, thanks.

I wonder if you could update us on the mobile toolbar initiative, and particularly around -- and also around the effort to grow the mobile business -- sorry, not mobile but the toolbar business, at Mindspark outside the US?

Sure.

Outside the US, it's actually robust, our application.

I think we have more downloads internationally then we do domestically.

Monetization isn't as good for a number of reasons, but we're working on that all the time.

But certainly International is a big component of the business today, and we work on expanding it through our finding marketing opportunities, et cetera, all the time.

In terms of mobile, in the Ask business alone, the mobile queries have grown into the double digits now as a percentage of our whole.

Again, in mobile, across virtually every business category, monetization isn't as good as it is on desktop yet.

But we believe that will come, again, across all businesses; and the Ask business is making meaningful inroads, mobile.

Same with the dictionary business, all part of Search.

In terms of the application side of the business, I think because applications take a concerted effort to go after and exploit these channels, and because the opportunity has been so big in other areas, we haven't really geared up for it.

The analogy I would draw is to the browsers.

Three years ago, everything we did was on Internet Explorer, because that's where a big opportunity was.

Over the last couple of years, we've developed teams to work on Chrome and Firefox and some of the others.

I think mobile is like that.

I think we're soon to launch our first application, straight application, out of the Mindspark business on mobile.

I don't think I can disclose who that's with, but that's number one.

And I think it will grow from there; but it really is a question about assessing the opportunity near- and long-term, and allocating resources against it appropriately.

And to date, the desktop has been such a bigger opportunity that, that is where most of our resources have gone.

We think over time, that will change.

Great, thank you.

Next question, please.

Your next question comes from the line of Mark May from Barclays.

Your line is now open.

Thanks for taking my questions.

It's really just clarifying questions, regarding your outlook.

I believe that you said that you expect Search revenue to be sequentially flat Q2 through Q4.

I'm assuming that's referring to absolute revenues to be flat?

Is that, in fact, what you said?

And if so, are you really expecting flat sequential Search revenue growth in Q4, given the typical seasonality there?

And then the other question -- again, clarifying question -- I believe you said you expect Meetic's non-GAAP revenues to be down in the single digits on a year-over-year basis.

Is that, in fact, what you said?

And then it looks like RPU for Meetic was lower than expected in Q1, lower than what we were forecasting.

Was there something that was artificially impacting RPU in Q1?

Thanks.

In terms of the Search, we did say flattish in terms of sequential growth.

I think the further out we look, the less certain we are.

I think we do expect to have some seasonal lift in Q4 over Q3.

The question is magnitude.

Last year, we saw dramatic increases on a comp basis.

The growth level will be lower.

I would be surprised if we didn't get sequential growth in Q4, but it's not going to be at the same magnitude that we saw last year unless we develop some new things that hit.

As we say, we haven't predicted every beat that we've made along the way internally as well.

And we certainly don't manage to what we tell you; we manage to try to get the most growth we can.

But in terms of foreseeability, that's where we are right now on the Search side.

In terms of Meetic, that is what I said.

Again, we lost over 100,000 subscribers in 2011.

Frankly, the sheer math of it is, that no matter what we did this year, you're going to have revenue decline, because you effectively bear the brunt of that sub decline later, in the subsequent periods.

So again, we expect to start sub growth again, but that revenue impact, because the way deferred accounting works, even without purchase accounting, we'll feel that more 2013 than 2012.

In terms of RPU -- I'll be honest with you, I was not focused on that number.

If it's down, I'm actually somewhat surprised, because I think we eliminated a fair amount of discounting that they were doing last year.

I believe you that, that's what it says, but it's certainly not concerted or anything that I would be focused on or that marks a trend.

In fact, my instinct would be the trend will go slightly the other way over time.

But that's to be seen.

And maybe if I could ask a follow-up on Meetic's margin guidance.

I understand that you had some shift in spend from Q1 to Q2.

But the guidance for the full year for flattish margins -- I believe it was for Meetic -- on a full-year basis, would imply obviously that margins in Q3 and Q4 would be below what they were a year ago -- again, non-GAAP basis.

It sounds like you're doing a lot of things that would actually drive margins higher there.

Are you just being conservative in the back half of the year?

Or are there some other things that we should be considering?

I think I said that OIBA overall would be flattish year-over-year, with revenue down in the single digits.

So that, by definition I think, means some margin expansion.

Although, again, I really caution that in this business, the single biggest driver of margin is how much we spend on marketing.

So we had a big margin increase in Q1 because we cut a lot of marketing.

That is fine for a quarter, but that's not what you want to do long-term.

As we start getting the core mechanics of this business working again, and humming the way we want, we expect to increase marketing.

And as we increase marketing, you will have near-term margin compression, again, because you get revenue in subsequent periods, but you take the marketing expense in the current period.

So I stand by the flattish OIBA for the year, with down single digit revenue; and then I'm expecting revenue and OIBA growth in 2013 to resume off of that.

Well, that's your whole plan for Meetic.

The plan for Meetic is to take an entity that was not performing and had done poorly, purchase a majority position in it, get engaged in the business, and turn it around to becoming a contributor of size and substance, just as the Match property is.

That is correct.

That's the plot.

Nothing that we know says that plot is not well underway.

That's right.

I think one thing that may help you understand the numbers a little bit is -- you think about subscribers in both businesses.

This may answer some questions I know that have come up in the developing subscribers as well, which is -- all subscribers are not created equal; and to the extent that you pay $10 to acquire subscriber worth $12 -- I'm sorry, the opposite, reverse that.

To the extent that you spend $12 to acquire a subscriber that's worth $10, you'd rather have a sub decline and lose that.

And what's happened at Meetic is, we are losing subs but we're losing a lot of subs that were unprofitable to get to begin with.

So really, a way to think about it is, we're right-sizing the business, by getting rid of a lot of subs that we never should have had to begin with; and then we're going to grow the profitable subs again.

I think the same thing is happening with developing subs, which is -- we acquired a business called SinglesNet.

I know people have raised that question.

That sub number continues to decline, because that was an unprofitable number to begin with.

So while aggregate sub numbers are coming down, profitable areas like Canada, which has been developing, are growing.

And we're focused on putting money towards the profitable subs and taking money away from the unprofitable ones, and in the near term, that can cause some confusion about the trends -- but that's our strategy.

Frankly, all you should understand is what the plot is for Meetic.

The plot for Meetic is that you will start to see it being a contributor in '13.

A growth contributor.

Yes.

You can't see in '12, because '12 is the period that you're doing all this work to create the opportunity.

Anyway, the only other thing I would say is, we've had an extremely good quarter.

You are not listening to people who are saying, as some people who've had good quarters have said, and then say -- however, our orders for the future are down; our this is down; or we don't expect that or this.

We're going to have growth this year.

We're going to have substantial growth this year.

We have comps, and that's the trick of the game.

We have comps that are, of course, stronger because we've been performing now for several years.

But we're going to beat those comps.

So don't anyone think that the conservative, standard thing we do on these calls is in any way a negative.

Full stop.

One more question.

I certainly don't think it is a negative.

Thank you.

Next question, please.

Last question, please.

Your next question comes from the line of Peter Stabler from Wells Fargo Securities.

Your line is now open

Thank you very much.

A quick one on Search.

Greg, wondering if you could tell us what kind of levers you guys are able to pull to improve click-through rate, if any?

Thanks very much.

Sure.

I think on the monetization side, click-through rates is the metric that we have the most control over.

Meaning, CPCs are basically what they are.

Ad coverage is basically what they are.

That's a pass-through.

Click-through rates property to property -- it's designed around -- we have a sort of smart system that determines how many ads to serve up.

We get whatever ads we get from Google, and then we determine how many to serve up at any given moment.

Optimizing that drives click-through.

I think the way the page experience works from property to property also drive click-through.

We've actually moved it meaningfully over the last couple of years, and I think we're always looking to optimize that.

And could you quickly characterize your strength there versus the query growth you've seen?

How much of a driver has been the improvements you've been able to make on CTR?

I think that we've got improvement from both.

I think volume has out-paced -- the volume of queries, at least in this quarter, have been a larger contributor to the growth than has improvement in click-through rates.

I'm looking at my friend, Jeff Kip, to confirm that, that's correct.

Yes.

He's confirming that it's correct.

But we've had movement both.

Thank you very much.

All right.

Well, thank you all.

We will get back to you with our next quarter, within a quarter.

Thank you.

Thank you.

This concludes today's conference call.

You may now disconnect.