Match Group Inc (MTCH) 2012 Q3 法說會逐字稿

Good morning, my name is Kirk, 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 prevent any background noise.

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

(Operator Instructions)

Thank you.

CFO, Mr. Jeff Kip, you may begin your conference.

Thanks, good morning, everyone.

Welcome to our third-quarter 2012 earnings call.

Barry and Greg will make some remarks, after which I'll return with some detail on each of our businesses, and then we will go to Q&A.

But first, let me remind you that during this call we may discuss our outlook and 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 comments 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 third-quarter 2012 press release and our periodic reports filed with the SEC.

We will also discuss certain non-GAAP measures today.

I refer you to our press release in the investor relations section of our website for all comparable GAAP measures and full reconciliations.

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

Thank you.

The figures kind of speak for themselves.

I guess that should mean goodbye, but we are here for a while to answer questions, et cetera.

It might be interesting simply to highlight the consistency of the Company, which is that for 11 quarters, our average growth is up 28%.

We are a solid dividend paying company.

We return cash to shareholders.

Over 50% of the stock has been repurchased over the last several years.

In this quarter to date, we've -- not quarter, sorry, year-to-date, we've purchased 9 million shares, over $400 million.

We are acquiring and investing, acquiring in this quarter $350 million of acquisitions and investing in our businesses and creating new businesses.

All of these are consistent actions.

I think they are fairly rare in terms of just box up these attributes of this somewhat unique enterprise.

And I think that this consistency has a lot of runway in front of it.

So, I think now what we do is I turn it over to Mr. Blatt, and he will give you details about what happened and what will happen.

Thanks, Barry.

Actually going to focus on following up on what Barry said, going to focus on the two biggest acquisition that we've done in recent times, and that is About and Meetic.

About, we obviously, I think announced and closed during this quarter, and About really is one of those rare acquisitions where there is two-way mutual synergies.

I know people like to tout that all the time, I'm not sure it is usually true, here it really is.

Just draw you to -- we have been talking about search strategy for a while, that Ask is really differentiating itself based on its search attributes, but also its characteristics as a Q&A content provider.

And About is a rare collection of very wide breath, high-quality content.

What that enables is that we can actually, through distributing about content on the Ask experience.

We improve the quality of the user experience on Ask, which is obviously very important, and we also increased the distribution of About.

In doing so, we increased the returns on both products.

Going the other way, we've obviously become pretty good at distributing content across the web.

As you've seen from the Ask results, and we now bring those expertise to About, which again will lift those results.

Finally, there was a small acquisition that we did, I'm actually not sure whether it was this last quarter or the quarter before, called End Relate, which is a small product that we bought relatively cheap.

What that product does is it effectively -- if you go to a site like CBSnews.com, which is one of our clients, and you go to the bottom of the page, it will typically have something that says something like more stories from CBS, more stories from the web.

It is a widget that we provide, and in enables publishers to redirect people to other pages on their own site, but also to effectively direct people to paid content from other sites.

And as such, it needs both publishers and content distributors.

And About now, along with Ask, become 0 and 0 publishes and advertisers on that network.

And together with CBS Interactive, which we did the deal with this quarter, becomes three real anchor tenants that give us the scale to play in this area, which we think is exciting for us.

So together, these attributes drive near-term incremental profits which are exciting, but also serve long-term strategic initiatives, and that is really just the kind of acquisition we want to be doing at the kind of multiple that we paid.

Meetic is obviously the biggest deal we'd done prior to that in a while.

And going into this year, I said that the goal for the year was pretty clear; we wanted to resurrect growth while holding EBITDA flat to 2011.

And I guess 10 months in, we are ready to declare victory on those objectives.

In 2011, Meetic lost over 100,000 subscribers, but we will end the year up in subscribers year-over-year/.

We will also hold EBITDA flat for the year as against last year despite a meaningful revenue decline.

And so really, those two objectives have been met.

That is really hard.

I think in a subscriber business, once it starts to go down meaningfully to stop that flow and turn it around, and it really has been great work both on the part of the Meetic team in France and the Match team in Dallas.

Looking forward, while I'm on it, why don't I hit the Match segment, which is Meetic will be down EBITDA-wise Q4 over Q4 because as I say, the objective was for it to be flat year-over-year.

We took out a lot of marketing in Q1, moved it to Q4, so we are up through nine months meaningfully over last year, but the goal throughout has been to hold it flat.

I think we've said all along that as conversion and other things improve, we will increase investment in marketing in the back half of the year, so very much on target.

Going into 2013, we expect solid single-digit revenue growth in sub growth and double-digit profit growth in Meetic.

So, really coming off the 2011year in which we bought it, the 2012 transition year.

We head into 2013 with solid growth, we are very excited about it.

The rest of Match, while I'm on it, I think the core business, which is the big subscription sites in the US, certainly have dragged more than we had expected.

We had some technology hiccups along the way that hurt our product roadmap, it was a general drag on the performance of the site.

And the big product initiatives that we did get out this year, while they've been very successful in driving increased customer satisfaction and other things which pay off on LTV and that sort of thing, they haven't moved the needle meaningfully on the volume side.

But we are very confident in the plan.

We've got, just like we did at Meetic, a whole host of things that we will now do.

And I'm highly confident that core, after some further decline modestly in Q4, will rebound to healthy levels throughout 2013.

Further, the developing growth rates in 2013 which have been negative for a while are going to turn positive.

So, those become meaningful contributors next year and all in, I think for that Match segment next year, we expect a high single, low double-digit revenue growth and high teen profit growth with solid margins and overall very good performance.

Just before I turn it over to Jeff, we are in the midst of our 2013 planning process.

The lawyer in me likes to say that the future is always made up, but we're feeling were feeling very, very good about prospects, solid double-digit revenue and profit growth in 2013 on a consolidated basis.

So, we see a lot of good.

And with that, I'll turn it over to Jeff.

Thanks, Greg.

Looking at our third quarter on a consolidated basis again, revenue and OIBA were up 38% and 44% respectively over the last year, and our operating margin expanded 60 basis points, which is our seventh consecutive quarter of consolidated operating margins expansion.

Let me now give a little detail on our segment results for the third quarter and our expectations looking forward.

Our search and applications revenue was up 43% in the quarter over last year.

Our website's revenue growth was up 49%, driven by 52% query growth at Ask, and our applications revenue growth was 38%, built on 20% query growth in year-over-year monetization gains driven by both optimizations and favorable partner mix in our B2B business.

Our segment OIBA margins of the quarter were up year-over-year, consistent with our expectations on the last call.

Looking forward, we have no real change in our thinking on revenue for the fourth quarter, excluding the impact of the About.com acquisition.

We are expecting modest sequential growth versus the third quarter, maybe old little lower third quarter versus second-quarter sequential growth.

However, we are now expecting segment OIBA margin in the fourth quarter to expand year-over-year given stronger direct domain and algorithmic traffic than anticipated and some shifts in our off-line advertising spend from the fourth quarter this year into the first quarter of next year to better optimize our marketing impact.

Greg has stressed the strategic value of the About.com transaction; in terms of financial impact, About on a stand-alone basis in 2012 is expected to earn around $40 million of EBITDA and approximately $35 million of OIBA on revenue of approximately $100 million to $105 million.

We will get about one quarter's worth of About OIBA in the fourth quarter impacted by some transition expense.

We expect to start realizing synergies and grow full year OIBA in 2013 to more than $40 million at roughly the same margin or modestly lower that we are looking at in 2012.

For the rest of the segment in 2013, excluding About, of course, we expect to see double-digit revenue growth and modest OIBA margin leverage as we have seen in the past.

We really always expect solid revenue growth in search and applications over time, but realize that that growth can be more volatile quarter to quarter in this segment than in many of our other business.

I'm now going to move on to local, because Greg really already provided color on Match.

As in the second quarter, local segment revenue growth in the third quarter was modest as growth has been a little slower than expected at CityGrid and Home Advisor, formally known as ServiceMagic, has continued to optimize its marketing spend, generating greater profitability at lower revenue growth.

OIBA for this segment was roughly flat to the prior year in the quarter, however, Home Advisor generated nearly 30% OIBA growth on its optimized marketing spend, offset by CityGrid, which went to a loss from profit in the prior year.

For the fourth quarter in local, we are expecting similar revenue growth to the third and flattish to modestly down OIBA before the expected restructuring charge we'll have at CityGrid.

Home Advisor's OIBA will see reduced growth based on investment spending in support of the rebranding and new site rollout.

You'll recall also that historically, Home Advisor generates lower revenue and OIBA in the fourth quarter as Service requests hit a seasonal low.

Further, like the third quarter, CityGrid will swing year on year from an operating profit to an operating loss.

And on top of that, we expect the restructuring charge in that business to be in excess of $2 million, which will bring reported OIBA for this segment to low single-digit millions for the quarter.

However, we expect that the results of the changes at CityGrid will be to make that business significantly more profitable in 2013.

We believe --

That's one of the strengths, sorry, of our business; that we can invest in these areas, invest in these businesses, to make them grow while still showing very high overall growth for the Company.

That is something we are always ready to do, and we can do it without adversely affecting the overall results.

I think it is a strength of the Company.

Right, and we think that not only will we significantly improve OIBA next year, but we are going to set ourselves up with improved focus to drive solid revenue and OIBA growth at CityGrid going forward.

Further, we anticipate that the HomeAdvisor rebrand and site redesign will lift both volume and quality of traffic and result in accelerated revenue and OIBA growth in 2013.

Wrapping up with the media segment, revenue excluding Newsweek/The Daily Beast, which contributed about $23 million to segment revenue in the quarter, grew approximately 55%, and we expect similar results in the fourth quarter.

Revenue growth was driven primarily by Vimeo and Electus with more than 100% and 200% revenue growth respectively.

In terms of our overall level of investment in the media segment, we previously guided to a OIBA loss of approximately $33 million to $38 million for the full-year.

We now expect incremental operating losses at Newsweek/The Daily Beast as we go through the transition there and currently project an OIBA loss in the media segment before restructuring charges to be a little over the high end of that loss range for the full year.

Restructuring charges in total at Newsweek will probably be in the range of $5 million to $10 million, we are still sorting that out, which would be incremental to the operating loss.

The restructuring, however, will materially reduce by close to 80% of the OIBA loss in 2013 versus 2012 for that business while creating the focus on the digital product needed to drive future growth.

Looking forward to next year for the media and other segments together, we expect now to materially reduce our OIBA loss overall into the $25 million to $30 million range while still investing in our promising earlier stage businesses including Vimeo, Electus and newer ventures such as Daily Burn, our online fitness business and BrightLine, our e-book publishing startup.

As you know, with such early stage businesses, these numbers can move up or down as we make decisions throughout the course of the year consistent with what Barry just said.

We are now ready to take your questions.

(Operator Instructions)

Mark Mahaney, Citi.

Great, thanks.

Can we talk a little bit about -- could you please talk a little bit of the search business?

This is an old question, but as mobile becomes more and more material across the Internet sector, how you think IACI's search assets are positioned for that?

And if you could just briefly the CPC and the CTR trends you're seeing in that segment?

Thank you.

I had a little trouble hearing you, but I'm going to do my best to answer what I think your question was.

On the search side mobile, if you look at our business, we break it into two categories.

We have got our branded products called an Ask, Dictionary, About, and there are mobile strategies very consistent with our desktop strategy.

Meaning we've got applications where they make sense.

Certainly on Ask and Dictionary, we have got applications, both IOs android plus web-based products, and we are gaining distribution there.

Queries are up, everything is moving.

The problem is like everything on mobile, modernization is still lagging behind desktop; but we are there, we're making progress and I think Q&A wise, which is our focus, I think is especially relevant to the web -- to the mobile web, which is people searches tend to be more Q&A in that area.

So, we are there, monetization for us, like everybody else, is slower in mobile than it is in desktop.

And we are probably not going to be the ones who solve mobile modernization, but we will benefit from those who solve it.

Mobile modernization is going to get better over time, there is no question about it.

The applications business is a little different, which is there we don't have branded products.

So, unlike Ask or About where you need to be there even it when the monetization isn't great, because you are building up the user base, our willingness to invest in mobile in the applications business is somewhat dependent on the economics.

Right now, the economics of mobile aren't ideal.

The runway in desktop continues to be huge on the application side.

So, we haven't given a lot of investment principally because whether we have coupon alert, whether we have our application coupon alert available on mobile now at a loss does nothing for us when the economics of mobile improve and we start to distribute it at that point in time.

So, that has not been a big focus for us, although we do think there's lots of opportunity as monetization improves.

That said, we are in mobile, meaning our search products are powering the Symantec mobile browser application of it.

So, we have things there, but it's not a big focus for us yet because the economics aren't yet great and the opportunity on desktop is still very robust.

I think there was a second part your question, but I really could make it out through the static.

That's all right, thank you, Greg.

Ross Sandler, Deutsche Bank.

Thanks, guys.

I have two questions first on search and then on personals.

Just to follow-up on the search revenue growth, it looked like it was strong in both websites and applications, but you have diverging dynamics between volume growth and revenue per query in each of those two segments.

So, can you just talk about what is going on and what is driving the divergence in price and volume in search?

And then on the personal side, Greg, you guys have already said that online penetration of personals is still very low.

What you think the long-term CAGR is for this category?

And given the valuation for IAC, the parent company, some would argue that either personals or search is being undervalued or not fully captured.

So, any update on the idea of potentially spinning one of these assets out to unlock additional value?

Thanks.

So, just to walk back through your questions on search, the monetization issue, you get -- you are getting stronger growth in applications because of, A, partner mix in the B2B business and then B, some optimizations that we've been able to do on the pages there that have driven better monetization.

Overall, what you see is with websites we seen it closer to flat, but that's because we've had slightly stronger international growth then domestic; not dramatically, but somewhat that's averaged the growth in RPQ back down towards flat.

Overall, in terms of what you called divergence in volume, we see the whole business together in a way and we are growing the whole business 30%.

Ask happens to have seen stronger query growth this quarter and this year, and it is mainly tied to the ability to mark it at a positive ROI.

We mark it out best to where we have a positive ROI, and we've had more opportunities of the Ask business this year.

But we don't see it as a problem divergence, I think we are growing both businesses 20% plus.

Also, the applications business by definition is lumpier because you have new partners, you have new products.

And so you like to have a steady flow at all time of hits.

Sometimes two of them come together, sometimes two of them come further apart, so I don't think it's some macro trend.

And to Jeff's point, it's all about getting queries through various forms of marketing and distribution, and in one quarter the mix may be skewed towards one more than the other.

On the personal side, it's a global business, right?

And each market is so different.

I think if you look historically at our business, and I haven't done this, so I will say this maybe factually incorrect, but I'm pretty sure it's not, we've grown profit 15% plus a year every year for like 12 years.

For as long as I've been here, I believe we have.

And sometimes the revenue growth is higher, sometimes it's lower, but the business is such that it allows you to continually grow profits while revenue to be a little choppier.

I think that domestically, I think there is still a lot of run rate.

If you think about our business, in the United States alone, I think we do something like 500,000 people to 600,000 people sign up for a sites every week.

Globally, it's over 1 million.

We monetize a very small portion of those people.

So, there is clear interest in these products across the way, we are constantly getting better at improving the nature of the product, getting more people to pay as payment means become easier in places like Latin America, Asia,, et cetera, that monetization will just go up and up and up.

I'm loathe to say the CAGR is 17% for the next five years, but I will say that in my mind, that's how to think about it.

I think about it as an overtime, a team profit CAGR,, a high teen profit CAGR, into what I call the foreseeable web future.

But that is as fine a point I can put on it.

In terms of -- sorry, just in terms of splitting up, I think Barry and I have answered this question the same for a long time, which is we like our hand, we think that these assets at this moment in time are better off together than apart.

We think that they actually add value to each other and operationally and from talent distribution to know-how distribution to competencies, we think it is working really well.

As Barry said, there has business this model of consistency in terms of delivering operating results for a long time.

I don't think that is an accident.

I think with different mixes of assets that could be not the same thing, and I think that we like the results that this thing is producing.

Now, we are also IC and we think of that everything from time to time, but Barry, do you want to amplify that?

No, I don't think so.

I agree with you that there is a discount that I think we've always suffered.

I'd hoped, continue to hope that such consistent performance would narrow that discount.

I still think there is a huge discount, but our work is to continue to be consistent.

At a certain point, depending upon this, that, and other obvious things, we would consider spinning off any of our assets.

We've already spun off seven.

So, it is not like we are not adept at that, but at this stage, we see no reason to do so.

Thank you.

Next question, please.

Peter Stabler, Wells Fargo Securities.

Good morning, thanks.

A couple of quick questions on the HomeAdvisor rebrand.

Wondering if, Greg, if you could give us a little bit more color about the thinking there.

I know you guided to not spending a lot of money behind this, but nonetheless, there are costs involved.

And we've seen that you've added some functionality, reviews are more prominent, there's an advisory service in here, and then you guided to better profitability.

So, wondering if we should expect an acceleration on requests and accepts that is commensurate with the kind of traffic gains that we think this kind of brand would probably give you over 2013?

Thank you.

I think we said when we brought Chris Carol in now a while ago, we said that the challenge that we've had in this business is we've done great on the execution side, but it was not a branded business with a consumer experience focus, and we brought in somebody who has that focus.

And I think for various testing, we just weren't -- neither the marketing nor the product experience was optimized for repeat usage, branded experience.

It was highly, highly transactional.

And there is math behind all this.

When you think about repeat usage and what is the value of repeat customers and everything else, and you do surveys and you evaluate the brand equity in ServiceMagic versus other things, and that is what Chris' expertise is.

We think we've created a brand that has broader appeal, we certainly think we've created a broader product experience that is not just for coming, using it, leaving and forgetting what the hell you did, but it actually has some resonance and real added value.

And by definition that will pay off in improved marketing economics, et cetera.

In terms of SRs and everything else, that is a mix.

We expect them to grow next year, obviously.

Jeff indicated what our expectations were, we think it will obviously be a positive contributor or we would not have done it.

And we have high hopes for this business.

We think it is a really good experience now.

I am really impressed with the work that has been done, particularly in the thinking behind the rebranding and most particularly about the added services that are in the site.

I think it was not a very good consumer experience before, and this is a radical change in terms of really benefiting people who are looking for all sorts of home services and have an inefficient and gnarly process to access them.

So, I'm very impressed thus far.

And I will have to see, but I can't imagine -- I shouldn't say it that way.

I have big expectations for the growth of HomeAdvisor over the next years.

I will also add that I saw some speculation about how hard it is to do a rebrand on-the-fly with a high-volume website, and I guess that is theoretically true, but these guys pulled it off without nary a hiccup.

So, really, really well done in that regard.

Next question, please.

Jason Helfstein, Oppenheimer & Company.

A few questions, I guess I want to start out just asking Mark's question a little bit differently.

So, in the quarter we saw application queries slow from 26% last quarter to 20% this quarter, and I think there is an overall concern that over the next X number of years as people's shift to tablets and perhaps those become their primary computers at home, that there won't be an opportunity for toolbars and presumably, the value add that the tool bars provide could be recreated an app.

However, the monetization of that would be on mobile presumably and not search.

Can you just talk about how you think about that?

Because I think it is something that people try to think about, what's the terminal value of the business.

My second question, can you give us any color on Meetic with respect to currency?

If it had any impact on the third quarter and then what impact currency might have on the fourth quarter?

And then one follow-up after that.

Just on the mobile issue, look, I -- the answer has pretty much been the same for a while, which is we are very, very small and desktop search is very, very big.

And while the shift to mobile will impact Google and other very large players in the immediate future, although desktop is still growing despite the search -- the mobile search growth has been incremental to desktop search growth.

We are so small that we grow through adding partners, adding products, et cetera.

The impact of mobile on our business negative we believe on the application side to be years away, meaning there is so much untapped potential in terms of product development and everything else that I don't believe that the mobile issue is affecting our applications business negatively today in any way.

I think that the growth has slowed to still a very healthy number, and I think we've been pretty straight all along that our long-term expectation, mobile aside, is not for continued 40% plus growth rates in this business.

We think that -- I think Jeff gave you our thoughts for next year, and that is reflective of just being natural evolution of product development and distribution, partnership development and distribution.

We hit some great veins.

We expect that to continue to go forward and to have solid growth, but I think reading into the slowing from the 40s% to the 20s%, some big macro shift, I just don't believe that is what is behind it at all.

Then there was --

Currency question on Meetic, third quarter and fourth quarter?

We had about $4 million of currency impact in the third quarter, and you need to get your own forecast on currency, I think, to make your judgment on how that plays into the fourth quarter, but directionally it will be similar.

And then just a follow-up.

So, with respect to that guidance you put out there, which it looks like the tape is misinterpreting.

Somebody just hit that and said you guided overall OIBA to a loss of this $25 million to $30 million as opposed to saying that's just the media segment.

So, I guess that will get worked out in the tape over the next few hours or so, but (multiple speakers).

We're going to interrupt you, we don't know what you're talking about.

You guys -- you filed an 8K with the media guidance for next year with the OIBA, a loss of $25 million to $30 million.

There is a required non-GAAP to GAAP 8K filing that was made to reconcile the forward guidance on the media and others.

Correct, and that hit about 10.30 AM and that is when the stock started to fall apart.

So --

(Laughter) People thought that that --

I just got an alert from one of these tape services that we use that that was your overall Company guidance.

So, just throwing that out there.

But anyway, I want to actually ask about that.

(Laughter) We would like you now to broadcast to the world that --

This is the Twitter generation, right?

It's just media and other and it's, again, it's a significant improvement in those two segments over this year.

And I think that whoever was reading the 8K would see that it is talking about media and other.

Starting right now, it's a buying opportunity for somebody.

So, asking that question, so that's about $5 million worse than we had in our model.

We had a $20 million loss, and not a big deal.

But to the extent that that is your -- is it fair to say your first brush at those numbers before you put this restructuring in place?

And would that be a conservative estimate if you had to characterize it?

That is our current projection for next year all-in across both segments versus this year.

That is for everything.

Yes.

For everything, media and other.

When everything could be, again, misconstrued.

But I also, I want to reiterate what Barry said at the beginning, which is this is a category where against our overall results, $25 million to $30 million is a tiny number.

And net of that number we are delivering solid, solid profit in revenue growth, and these are things we believe in.

If we start to believe in some of the things a little less this number will come down, and if there are new exciting things, we'll come and talk to you about them.

That is not a number that we are overly concerned with, given the opportunities.

I have always -- all my life I've lived under the thing of the world saying, you lost money, and I said yes, we've invested money in starting Fox Network and we are not on the other side of it.

I've had it said in endless numbers of situations where, why are you losing money?

And I say no, no, no, we are investing money.

There is a big difference.

It is not as if we were taking the money out, dropping it in the ocean and seeing it sink.

I recognize this is always going to be an issue.

I am mostly amused by it, because I know that investing is the only way to creating.

So, it lives in my metabolism quite easily.

So FYI, as we've been talking, the stock has rebounded 3.5%, so it looks like this will get resolved, et cetera.

So anyway, I'll let the next person --

I'm glad you got the flash.

Yes, thank you.

I would only say also about, just for a second on mobile, the media, and we all know this in so many different areas, the media is a giant mall, more giant than it's ever been.

So much essentially vacuum out there with not essentially that much to say.

There is no question that we are -- that mobile is growing.

Of course it is growing.

Smart phones have just been around for relatively short period of time, and they are just getting real functionality.

That does not mean that life is over by any stretch.

People will use form factors for different purposes.

We see screens getting smaller and we see screens getting bigger.

So, I think more is made of this in dramatic terms and I mean not just for today, I mean for many, many years from today.

So, that is my belief, piece of needless commentary.

Next question, please.

Kerry Rice, Needham & Company.

Really, most my questions have been asked, but going back to maybe a housekeeping question as it relates to Newsweek/Daily Beast and the consolidation of that business on the financials.

It is my understanding that Interactive owned 50% of that, and the JV you've taken control of that.

So, was the $23 million, was that the total consolidation so the $23 million was incremental on top of the 50% you owned, or in total did Newsweek/Daily Beast contribute $23 million to revenue?

That is the total figure.

We own currently around 80% of Newsweek, the Harman Trust owns the balance.

We have made, I think the tough in right decision to cease printing.

We know that the results of that are going to dramatically decrease losses in the future, dramatically.

And we have a very, very solidly growing Daily Beast, and there is some prospect, who knows, but some prospect, whoever knows when you are making such a dramatic change.

But there is real enthusiasm for Newsweek Global, and all digital product.

But, we have no stars in any of our eyes, and our plans for next year do not in any -- plans for next year or any year forward are not going to relate in any way, any material way to the results from Newsweek.

So, it is not like we are projecting that this digital product is going to have X or Y subscriber, et cetera.

Nevertheless, we are on -- it is a painful processes, you can imagine, were having to down size considerably, which is appropriate.

That is difficult.

We are doing it as there and positively as we can.

But, you can't set that aside except to say that the prospects for the enterprise are much improved by this tough, difficult, but necessary action.

Just, I guess for clarification, last quarter in Q2, did you own 50% then of the Daily Beast or Newsweek/Daily Beast?

Is that the right way to think about the previous ownership?

We have been increasing our ownership in Daily Beast only because the Harman Trust informed us really shortly after the death of Sidney Harman, the trust informed us that they did not intend to contribute in the future.

The result of that is a natural dilution.

Okay, thank you.

Next question.

Brian Fitzgerald, Jefferies.

The integration of About,and maybe if you could give a little color on how you plan to integrate About and drive traffic and content between the interactive sites.

And then to the extent that you would use great kind of About content to answer Ask queries, is that a potential optimization exercise where you would be substituting Ask core Ask revenue, Google generated tack revenue with organic display revenue from About?

Thanks.

Look, we are going to do it in a whole bunch of ways.

Ask is a pretty dynamic experience, and it really is a blend of search results, Q&A pairings from answer farms, community, as well as what has typically been licensed or outsourced third-party content.

About is a good source of that, and now that we own About, we can use it even more prominently in that regard.

I'll give you just an example.

Literally last week I went to Ask and I typed in a query about --

Bike riding.

But what kind of bike should I buy for riding in the city?

And I typed it and the first thing that came up on the page was a smart answer from About.com, followed which were some Q&A pairings and some ads and then some links.

And I e-mailed the head of Ask and I said, oh, is this as a result of the acquisition?

He said no, this we were actually doing anyway but now we do a lot more of it.

So, it's about using About for content on the page.

It is not really -- in some instances we were replacing other things, but it is other third-party content with what is now 0 and 0 content.

And the economic benefit of that is obvious, which is if instead of About, today About is on that page and we don't get any revenue when somebody clicks through it.

Now when somebody clicks through it and then clicks on an ad, we get all the revenue.

So, it's incremental distribution in that regard.

And then as I said, there'll be incremental distribution the other way as well where we can just bring some techniques to About to distribute it beyond Ask.

You know that the Q&A process of Ask, the natural language question and answer that Ask has pursued over the last 1.5 years or so, maybe two years at the most, is a really value added.

And it took a while, of course, to get enough answers out there, both from community and from content.

But now the thing -- the damn thing works.

And it is a very good experience, and now you add this incredible amount of content that comes from About.

And I don't want to get heady here about Ask.com, but I think that it's brand promise is now being answered in the product, and I think that has a real chance to create a long-term valuable brand.

I think so as well.

All the signs are good.

We market the product in a variety of ways, offline marketing, online marketing, SDO, direct domain, et cetera.

And really over the last year, the trends have been really good across all of the channels, meaning the direct domain is up, the online marketing is up, the SDO is up, everything is up, and that is driven by brand recognition, repeat usage, higher click through rates et cetera.

All of which are invariably related to the good customer experience that people are having.

And with voice-recognition, mobile Q&A is going to thrive, I would think.

Anyway, thank you.

Thank you, thanks guys.

Stephen Ju, Credit Suisse.

Good morning, guys.

Wondering if we be reading anything into the move to rebrand the ServiceMagic platform in terms of its longer-term positioning, because it seems like to us that the platform could also be used for other verticals outside the specific home improvement sector that it is in now.

And further, is there any appetite on your end to morph the business into more of a CRM -based platform which will help manage a contractor schedule, handle payments as well as back end functions to increase stickiness with your supply base?

Thank you.

With respect to the first question about verticals, I think it is interesting, one of the big things that this new management team did was they stopped looking at home services as a vertical and recognized that it is actually multiple verticals.

Meaning an architect is a vertical and a plumber is a very different vertical.

So, I think we are always looking to add verticals where we can do so profitably.

We've got a lot to do on the verticals we have right now.

I think that is unrelated to the name change, but I do think we are always looking to add good verticals.

In terms of the CRM, what I think you're saying is, are we looking to create a suite of tools that create better value add and stickiness for the service providers associated with business?

CRM would be a part of that, so would closed loops payments and all the rest.

The answer is, by God, yes.

They are hard develop, the service professionals in this area.

So, you have to do it through mobile, you have to do it through ease of use things.

We are working on it, but we do think that really is the -- certainly that is the key to explosive, explosive, transformative growth when you can really nail those sorts of things, and we are certainly focused on them.

But don't have anything dramatic to show for it at the moment.

Understood, thank you.

Next question, please.

Mark May, Barclays.

Hi, thanks for taking my questions, I had a couple, please.

So, the core Match business, I believe revenues grew something like 8% year on year, and that is a really respectable number.

I think it was a slow down, though, from the last couple of quarters growth.

And you mentioned some things that you are disappointed in.

Can you -- so you are suggesting that growth should be higher than that.

Can you give us a sense of when we should expect to see a better revenue growth number?

Are we talking next quarter, or do the initiatives you put in place take longer to play out?

And then secondly on use of cash and buybacks, there were a number of questions during the quarter when the About.com deal was announced.

Is there a change in the company's plans here?

And we did see that the Company did only purchase $60 million worth of cash in the quarter.

Can you talk about, was that purely because you were blacked out during part of the quarter?

Or is there a new way that we should be thinking about use of cash going forward?

Yes, on the Match side, I think -- let me put my comments in a little bit of context, which is, I think 8% core revenue growth in and of itself is not bad, I'm not disappointed in that long-term.

I think with the mix of business that we have going forward, and obviously the core number keeps getting bigger and bigger within the United States, double-digit and high double-digit growth becomes harder.

So, I think you've got a very, very healthy business.

If you stay in core revenue growth in the high single-digits going forward, you can grow profits meaningfully into the high teens and even twenties with gross from the developing that's going to come, et cetera.

What I was commenting on was really the trend, which is it has been trending down, as I highlighted, I expect to trend down a little bit further and fourth quarter, which is just the nature of the cycle it takes to reverse it.

And I think that that was, again, we had some technology hiccups.

We did some product things which I think are great long-term and are having a meaningful impact on the consumer experience, but aren't necessarily impacting the number of consumers we have to begin with.

And so that's a long-term investment which doesn't pay off in immediate returns.

So, I think my comment on disappointment was that it's come down quicker than I'd like and it's going to down a little bit more.

It's then going to reverse itself over the course of next year, and I think 8%, 10% whatever, those are healthy long-term core subscriber growth numbers.

I'd obviously rather have more, but my ability to predict the difference long-term in core US subscriber growth between 8% and 10% is beyond my abilities.

8%, 10%, 12%, whatever, I think it will get healthy again and have robust trends.

And then as I mentioned, the developing business is now going to start to become a meaningful contributor.

Meetic is a meaningful contributor, and so overall we feel really good about the prospects of the business.

Okay, that is great.

Our model, by the way, is a 8.4% in Q2 of next year.

But --

Thank you for that.

We will try to live up to your aspirations.

On the cash, again, I used, over used maybe, but the word consistent, we've used all the verities which is acquisitions, dividends.

Repatriation in terms of share repurchases, we are going to continue that.

There is nothing to say, we have nothing to say about a quarter in which we do not buy stock.

We have always said we are opportunistic, and we may go for a quarter or two quarters or whatever.

Doesn't have any change in our cash philosophy, which is -- which again as been very, very consistent, and I think reading anything into a lack of purchase in a quarter as a trend or direction is just incorrect.

Thank you.

One final question, please.

Hello?

We seem to -- is there anybody out there?

And your next question is --

Did you take a nap?

(laughter)

Nat Schindler, BofA Merrill Lynch.

Yes, hi, guys.

Thank you for taking my question.

Just for modeling purposes, now that you're giving us more detail on websites versus applications, is there any fundamental margin differential between those two businesses?

They are really pretty comparable, in the same general range.

You can bounce around because you have different mixes of things, but I don't think it's right to model any meaningful difference between the two.

Okay.

Great, thank you.

Jeff, can you tell us anymore about this?

Then we will end the call, but I think it is a headline.

What we understand is that, news we've gotten here in the newsroom (laughter), is we understand that trading was halted because -- FactSet picked up the $25 million -- the reconciliation of the $25 million to $30 million OIBA guidance and printed it as all IAC OIBA guidance, which is obviously incorrect if you listen through the segment commentary on the rest of the call.

Of course it is incorrect, but how could they do that?

I believe the term would be clerical error.

Yes, in a way, where information spreads quickly, the old saying, --

Go to the source (laughter).

Consider the source.

Anyway.

Rumours get out there while truth is putting its boots on.

Hopefully we can get this information out, so at least people can make their judgment as to our operating results, which we're happy for them to do.

It is hard when there is a factual misreporting that says we are going to be at a loss.

So anyway.

Jason Helfstein, thanks for pointing that out.

We really appreciate your pointing that out.

Just as we were sitting here thinking we can't be talking this badly (laughter).

It is inconceivable that we are that rank in terms of answering your questions.

Anyway, it is nice to be with you all again, and we look forward to your having a good holiday season, and we will be back with you after the first of the year.

Thanks very much.

Thanks, everybody.

This concludes today's conference call.

You may now disconnect.