Match Group Inc (MTCH) 2014 Q1 法說會逐字稿

Good day, and welcome to the IAC reports Q1 2014 results conference call.

Today's conference is being recorded.

At this time, I would like to turn the conference over to Jeff Kip, Executive Vice President and CFO.

Please go ahead, sir.

Thanks, operator.

Good morning, everybody.

Welcome to our first-quarter earnings call.

With me today is Barry Diller, our Chairman and Senior Executive; Greg Blatt, Chairman of The Match Group; and Joey Levin, CEO of our Search & Applications segment.

Barry will start the call with some introductory comments, then I will give a review of our first-quarter financial performance and our expectations for the second quarter and the year.

Then Greg and Joey will discuss The Match Group's and Search & Applications segments' performance and outlook, respectively.

And then I will conclude with some color on the Media and eCommerce segments.

Before we get to our results, though, I'd like to remind you that during this call we may discuss our outlook and future performance.

These forward-looking statements typically may be preceded by words such as we expect, we believe, we anticipate, or similar statements.

These forward-looking views 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 2014 press release and our periodic reports filed with the SEC.

We will also discuss certain non-GAAP measures, which will include our new financial metric, adjusted EBITDA, which Barry will discuss in a moment, and which we will refer to as EBITDA for simplicity during this call.

I will refer you to our press release in the Investor Relations section of our website for all comparable GAAP measures and full reconciliations for all material non-GAAP measures.

Barry?

Thank you.

It is nice to be with you all.

For me, I think that the story this quarter is not on the consolidated earnings, but on the growth of our largest businesses, and also some great stories in some of our developing ventures.

What I want to do is just simply make four points before my colleagues fill you in more fully on the quarter.

First, on our accounting changes.

There shouldn't be any worries.

There's nothing nefarious going on here.

We are simply changing from OIBA to EBITDA because it will allow easier comparisons to the other companies in our sector.

And we are also reorganizing our businesses under their more appropriate leadership, that's it.

Second, as we said last quarter, Greg Blatt has become the Chairman of The Match Group.

We broke this out because we love this team and its expertise in subscription Internet products.

We added two new ventures to the group because of their expertise, Tutor in the revolutionary Internet education space, and DailyBurn, in the high-growth fitness area.

Third, note the healthy status of Search with sequential growth.

These are our two large businesses, but we have two fine stories in other parts of the Company.

Our home grown Vimeo is seeing tremendous adoption, and HomeAdvisor is turning around and will be a substantial earner this year.

Finally, a word on Aereo.

While this is a small investment, it certainly created an awful lot of comment and noise as the beginning or the end of television as we know it.

It's fate is not material to IAC, but there is a lot of interest and controversy.

We went to the Supreme Court last week, and, of course, no one knows what its decision is going to be, but I would just like to make one comment.

Aereo has been criticized as a gimmick, as way of avoiding copyright rules.

In fact, it was built to comply with copyright law.

And I'm really tired of being accused of stealing anyone else's programming when we are not.

And I'd never be part of any service that was doing so.

We are no more stealing programming then the person who puts up an antenna to receive the signals he's entitled to receive.

It is kind of obnoxious for broadcasters to take away the signals they promise the public that they could receive directly simply because they want to squeeze every dollar they can from consumers.

Think if the 30-year-old Supreme Court ruling on video recording went in reverse, abolishing video recording, what the world would have been like.

Stop Aereo when you stop technology.

Thank you all, I had to get that out.

And now we turn it back to Mr. Kip and my colleagues who will talk about everything else.

Thanks, Barry.

In the first quarter, on a consolidated basis, IAC earned revenues of $740 million and EBITDA of $108 million, about flat and down 15%, respectively, from the first quarter last year.

Taking the segments one by one, in the first quarter, The Match Group's revenues increased nearly 10% and the segment's EBITDA decreased 1% versus the prior year.

Although segment EBITDA growth was impacted by $11 million of losses this year in our investment businesses, Tutor, DailyBurn and Tinder, versus approximately $3 million last year, as well as a positive $3.9 million adjustment for VAT taxes this year.

Excluding those impacts, segment EBITDA would be up mid-single digits over last year and dating EBITDA by itself would be up, as well.

In the second quarter, we expect The Match Group's revenue growth to be modestly higher than in the first quarter, with EBITDA growth mid-single digits after taking into account high-single digits to low double-digits millions of investment in Tutor, DailyBurn and Tinder during the quarter.

For the full-year 2014, revenue and EBITDA growth will accelerate from 2013 for both The Match Group in total and the dating business by itself, even at expanded levels of investment for Tutor and DailyBurn within the group and significant expansion of investment at Tinder within the dating business.

In terms of overall investment levels, which could change, we are currently expecting to expand investment to roughly $25 million to $30 million in 2014 across Tutor, DailyBurn and Tinder combined.

The Search & Applications segment had a solid first quarter growing revenue sequentially on both an as reported and an organic basis.

Growth was driven by the websites business.

The Applications business was about flat sequentially.

Adjusted EBITDA margin was down approximately 400 basis points in the segment from first-quarter 2013, primarily driven by significant marketing spend in the B2C business, spend which will be ROI positive for the year.

Our full-year outlook for 2014 remains the same for websites, mid-single digit sequential growth in revenue each quarter, resulting in modest growth for the year.

Our Applications outlook has changed somewhat, however, based first on some softness in the business.

We expected it to be modestly up sequentially in the first quarter and we were flattish.

And, secondly, on the accounting impacts from the acquisition of SlimWare, a small but rapidly growing PC software subscription business which Joey will discuss in more detail shortly.

We purchased SlimWare for a low-single-digit multiple of actual cash flow.

The deal is accretive on a cash basis.

However, the deal has two accounting impacts which will make the deal mid-single-digits percent dilutive to Search & Applications EBITDA in 2014.

The majority of dilution is from purely an M&A accounting impact and not reflective of the Company's ongoing profitability on either a cash or an accounting basis.

The remainder of the dilution is the impact of deferring the subscription revenue over the subscription's life, which at this stage of the Company's growth turns positive operating cash flow into a negative impact to EBITDA.

So we now expect that Search & Applications will see flat to modest revenue growth this year, and that, although free cash flow will benefit from the SlimWare deal, EBITDA will be modestly down year-over-year given the SlimWare accounting impacts first and then, additionally, softness in the Applications business.

In the second quarter, we expect modest sequential revenue growth and flattish margins for the segment, flattish in the first quarter that is.

Media and eCommerce revenue together fell 14% year-over-year.

If you exclude Newsweek and CityGrid, however, the segments together grew 6% driven by growth at Vimeo first and also HomeAdvisor.

EBITDA in the two segments combined was about minus $5 million, a significant improvement from the first quarter of 2013 if we exclude one-time pickups related to the closure of Newsweek print.

In the second quarter, we expect about $160 million of revenue from the two segments, and a few million in EBITDA losses.

And for the year, we expect mid-single-digits growth in revenue, high teens, though, excluding Newsweek and CityGrid, and low-double-digit millions in EBITDA losses driven primarily by expanded investment in marketing and mobile product at Vimeo.

I'll now turn it over to Greg, and then Joey, to discuss performance at The Match Group and in the Search & Applications segment, respectively.

Greg?

Thanks, Jeff.

Happy to be here talking about The Match Group for the first time, I guess, in this configuration.

Things are going well.

We are excited about both where we are now and where we are headed.

Obviously, we've changed the segment reporting, which is apparent from the release.

We've also gone ahead and taken this opportunity to rationalize the metrics that we report to help shed light on performance.

Originally in the dating business, when we started with the notion of Core and Developing, developing was really a euphemism for other in that Core contained all the economically relevant businesses that we had, and Developing was a mix of declining businesses and small early-stage growth businesses that swings in PMC revenue really didn't affect economic value of the business.

Since then we acquired OkCupid, have built that up, Twoo, have built that up.

We then we acquired Meetic, which was its own public entity, and so it reported discretely.

And the reality is, it sort of no longer made sense in that in the Core grouping there were 30 different businesses.

OkCupid was in Developing, but if you moved to OkCupid into Core it would've been the third biggest business in Core.

So to call the one Developing and the other Core really didn't make sense, and breaking out Meetic as a standalone entity didn't really make sense.

So what we did is we changed it to how we actually think about the businesses, which is dating is a local business and each country is its own market.

Each market has its own mix of products and services, business models, et cetera, that we build, acquire, grow, for the sole purpose of building revenue and profit within that market.

We think that's the right way to report geographically.

For simplicity's sake, we've broken it into two groupings, North America and International.

Currently, Europe is the substantial majority of International, although we hope that the non-European pieces expand and that substantial majority lessens over time.

For now, obviously, we are reporting that the segment in full, but our metrics are going to be limited to the dating business until the education and fitness business become more material, although we will talk about performance and growth in those businesses supplementally as circumstances dictate.

Let's talk about dating.

Dating is something we're really excited about right now.

The market has been really growing.

We think it is going to continue to grow, and it really grows on three separate vectors.

One is adoption, one is engagement, and one is monetization, and I want to talk a little bit about each of the three, sort of where we've been, and where we think we are going.

If you look back over the last five years on adoption, the number of US singles who have tried dating, a dating product at least once, it is up about 20% during that time period.

That's a result of declining stigma, the Internet generation coming-of-age, et cetera, plus just regular growth in the single population.

And we think that both those dynamics will continue.

We know that the growth in the single population is expected to continue and we think that the decline in stigma, increasing Internet adoption in all generations, although it is crazy to even talk about that, there is still that adoption going on.

We think that's going to propel that 20% growth over five years to higher levels going forward.

There's also engagement, and this is really where a lot of the spectacular sort of growth has come, and the [use] over the same five-year period are up 20% -- sorry, up 50%, two-and-a-half times the adoption increase.

That's really driven by a couple things.

One of them is mobile.

The huge migration to mobile has just made everything higher, engaging, stickier.

It is just easier to use these products and keep using them.

It takes less effort to do so, and that dynamic is, obviously, going to continue.

Also, we've got better products that yield better results.

And that keeps people in the category longer.

The favorite stat we have is that over this five-year period the number of relationships in the US that start on these products is up three times over this period, now to more than one-third of all US relationships starting on one of these products, which is a statistic we are excited about both from a business perspective, but also just generally.

It is a great thing to be doing and seeing the rewards come through are a big part of what keeps us going here.

Then I think the final piece is monetization.

We've talked about monetization a lot.

We've made really big strides in this area.

This is a metric that's hard to talk about from a market perspective.

We really have to look at our own products because we don't really know, given the private nature of most of the people in this business, what other people are doing.

But within each of our business lines, we've been able to meaningfully increase the number of people paying for our products over the last five years.

All while holding or increasing the rates at which they pay us.

Most notable in this is the free to communicate category of OkCupid and Twoo, where two years ago, three years ago, no one was paying for these products, and now the number of people paying for these products is significant.

This is generally driven by paywall optimization.

In the beginning, there was the standard subscription pay to communicate wall.

Since then, that wall has continued to thrive, but we've developed other means of developing subscription businesses, transactional fees, et cetera, and we don't see that stopping.

We keep getting better at it, and as I talked about last time, the things we are learning in one place we're migrating over to other places, and we see big advantages there.

This is all very contrary to an analyst's report that came out in the last couple weeks talked about that we were driving advertising revenue, degrading customer experience.

The reality is that less than 5% of the revenue in our dating business comes from advertising.

In fact, in the formerly Developing businesses where that report was focused, the percentage of revenue that comes from advertising has declined meaningfully over the last few years.

What's driving this business is subscription revenue.

These are people who are paying for services that they want.

And the overall majority of it, especially on the growth side, OkCupid, Twoo, is coming from adding discretionary features that people can choose to use or not.

It is really an optimized paywall and if they have a good experience, if they don't pay, and if they pay, they get enhanced features, enhanced placement, et cetera.

And it is not affecting retention, it is not degrading user experience.

It is really the fuel that's been driving this business.

So we are really, really excited about that.

I think the key thing here is, it sounds a little cheesy, but helping someone find someone special is a very high value proposition.

What we are learning is that if you find the right place, the right time and the right way to ask people to pay for that value, they will do so, and do so gladly.

From an overall category perspective, we are very excited.

Let's talk a little bit about Tinder, which is doing a lot of work on two of those three fronts, which is engagement and adoption.

A large number of Tinder users, as I think you know, are new to the dating category.

This is driven by a large number of under 25-year-old users, which has never been a demo that we've been able to attract effectively before.

This drives a lot of incremental adoption.

This is bringing new people into the category that would not otherwise be there.

It is also a big driver of engagement.

Tinder users who are not new to the category are approximately 50% more likely to use multiple products than category users generally.

So you have got your two dynamics there, which is new users coming in, and existing users using Tinder in addition to multiple products.

That's really great for engagement, really driving up both of those metrics.

This is not on small numbers.

Tinder is getting to be a meaningful business.

March global downloads were up 15% sequentially over February, and up 300% over the 2013 average monthly number.

The US momentum continues strong, seven consecutive months of sequential download increases.

And given that Tinder has generally better retention characteristics than other products in the category this is getting to be a very, very big user base.

I think it remains unclear what Tinder will ultimately be.

It is clearly a very effective dating product.

I think there's a chance that it's something more messaging, social discovery beyond dating, other forms of discovery.

It is really so early in its existence that I think it is definition has not yet been written.

Yes, we are not yet monetizing the business, but really that's just a matter of time.

Even if all we did was take our existing monetization playbook, with discretionary subscriptions, a la carte transactions, background advertising, we would generate huge returns off these numbers.

And given the unique nature of Tinder, we think it presents its own unique monetization opportunity, as well.

We have very little reservation about the ability for this to be a meaningful business.

Turning to the quarter, I think we said in the last call, Q1 would be our lowest of the year.

Jeff walked through some of the numbers.

Generally, where we anticipated, North American business was really driven by declines in acquisition efficiency driven by changes in our Yahoo!

deal, which I mentioned previously, general inflation and advertising pricing which was up about 5%, 6% offline and on, and, frankly, aging creative, which we will be turning out.

And we also had a decrease in renewal rates.

Part of that was due to comps, but because we had a substantial package mix shift and People Media [on] the longer packages, which push terms into future quarters and we took a hit on that Q1.

We also had an unexpected hit from a significant amount of credit card turnover resulting from the Target security breach and some others which knocked some people out of the pool when the regular renewals come up.

And lower rate, lower monetization rate, which we talked about, as we said, over the course of last year monetization rates came down.

Over the course of this year, we expect them to build back up and that's really the timing of the dynamic pricing initiatives that we've talked about.

International was driven by very similar things, with the addition of anniversarying the acquisition of Twoo which came in Q1 last year.

For the rest of year, we've got a host of monetization, acquisition and conversion initiatives rolling out which give us a lot of confidence about the trajectory we foresee.

Just as a example, Match launched its iPhone app last Thursday.

We actually didn't have an iPhone app, we have -- as we've mentioned -- a big mobile business, but for various reasons we did not have an app in the iO store.

In just a few days, it is already the number four highest grossing app overall excluding the gaming category.

And given the average lag time that we have in Match between downloads and subscriptions, you are not grossing until you get the subscription, we, frankly, expect that number four ranking to increase.

That is translating into real numbers.

Sunday and Monday, which is the sample size, a few days in, our overall regs were up week-over-week by 25% with 20% of all those regs -- sorry, 20% of all regs come from the iO store.

So this is meaningful lift in our business.

While I don't expect that level to sustain itself, clearly, this and several things like it are giving us a lot of confidence.

Just wrapping up, in dating [MAUs] for our business overall are up approximately 50% year-over-year.

As we know, MAU growth leads to payer growth, which in turn, leads to revenue growth, sort of in sequence.

So we feel really good about the tailwinds that this gives our business going forward.

And as Barry mentioned at the beginning, on top of the dating business, not as meaningful contributors this year or probably even next, but thereafter, we've got great entrance in the $50 billion fitness market, $10 billion education market.

These are markets where technology has not yet implemented real transformation.

We like our entrance in it, and we feel really good about the long-term growth prospects it give us.

Joey?

Thanks, Greg.

Q1 was a solid quarter for the segment.

We returned to sequential revenue growth and we continue to be excited about the progress and prospects we see for high-quality content publishing on the Web.

Websites revenue was up 14% sequentially on the strength of About.com and with the help of the acquisition of the assets from ValueClick.

As result, our mix of profits from the content sites, excluding Ask, continues to grow as a percent of total, and is now nearly one-third of the full segment EBITDA.

With the added focus on the new content properties, we also switched our metric from queries to page views.

The prior metric wasn't able to tell a full story because it didn't reflect audience engagement on the content side.

So we felt it important to update the page views.

Page views at websites were up sequentially on both desktop and mobile, with mobile and tablet growing much faster, and now combined representing 44% of total websites page views.

We now have traffic growing sequentially at About, Dictionary, and Urbanspoon.

Ending Q1, as you know, we added Investopedia and PriceRunner to the group.

While mobile was a meaningful contributed to the growth, we also continued to work through that playbook upgrading the best practices across the sites.

This effort included successful expansion in the marketing driven user acquisition, one of our core strengths and key competitive advantages.

We're also seeing some nice wins on organic traffic as we've been cleaning up the basics, improved site speed, lighter and cleaner pages, responsive design, and, of course, most importantly, more and better content.

At About.com, we added over 150 new experts to our rigorous recruiting and screening process since we began a focused effort at the beginning of Q4 allowing us to open or reopen over 100 new categories and continue to improve in others.

The new experts added in Q1 exceeded new adds in any quarter for years, and coupled with the technology and process improvements in our content management system, we're driving double-digit growth in our high-quality long form content creation.

So we continue to move vigorously along the lines we outlined, transforming and delivering best practices to a great set of branded content properties, and we've got an exciting road map for further improvements in innovation.

We continue to experiment on mobile monetization, and we saw small lifts in mobile RPMs in the quarter as result.

On monetization across the board, we're also starting to benefit from investments we have been making to our ad systems, particularly as we look to optimize delivery across a stack of direct sold programmatic, native ads and search.

On About.com in Q1 we were able to lift CPM on ads sold programmatically by 13% sequentially over Q4, and over 46% year-over-year, all without increasing the number of ads we show.

And we still believe we have upside here as programmatic tech continues to improve and we start to nail the opportunity in direct-sold premium ads.

Turning to Applications, we continue working our way back toward growth.

The momentum has continued in our business over the last few quarters, which grew double-digits sequentially and offset continued challenges in our B2B business.

While we expect to resume sequential growth on the B2B business in Q2, the lengthening sales cycles in a tough competitive market there may continue to be a drag on earnings growth for the year.

We are also excited to officially announce the acquisition of SlimWare, a small but rapidly growing subscription software business with a respected product suite, a solid team and great momentum.

SlimWare represented a very attractive opportunity for us, not only because of the price, but strategically because they figured out how to make a consumer subscription model work successfully with downloadable software.

SlimWare software products today deliver PC maintenance and optimization tools, and combine a desktop application with a cloud-based set of back end services that enable consumers to keep their computers up to date.

As an added bonus, the team has cultivated a strong community of users that provide meaningful crowd-sourced data, including product reviews and technical analysis to enable a more accurate and effective service.

As a subscription model rather than a search or ad-supported model, SlimWare is currently cash flow positive and we expect the business to continue to grow nicely and profitably standalone.

I also believe we can further accelerate the growth once we plug it into our distribution platform.

Jeff will walk through the accounting issues that will impact the P&L this year, so I won't rehash those.

But in sum, we are really excited about the Search & Applications business.

I think we are in the first or second inning in our content strategy, and we're already seeing the fruits of our efforts with the strong momentum in that business.

And we see new and exciting opportunities in the Applications business, especially with things like SlimWare.

With that, I will turn it over to Jeff.

Thanks, Joey.

We are obviously feeling extremely positive about the developments in our two larger businesses.

We also continue to be very happy with the returns we're seeing on our investments in our Media and eCommerce businesses.

In Media, Vimeo continues its strong growth trajectory.

ComScore unique viewers are up 56% to an all-time high of 171 million in March.

Vimeo's audience has expanded across all devices.

Vimeo's mobile audience actually exceeded desktop for the first time this quarter, and we are making significant investments in our mobile product and platform this year.

Vimeo revenues were up 60% in the first quarter, and Vimeo now has over 470,000 paying subscribers with increasing per-customer value and life.

The Vimeo On Demand open VOD distribution business launched in the first quarter last year is also gaining real traction without any significant marketing or promotion.

Vimeo On Demand now has over 8,000 paid titles in its catalog, and monthly transactions have tripled over the last six months.

During the first quarter, we also announced plans to invest in more high-profile content for the platform.

A recent example is the film In Your Eyes by Joss Whedon, released exclusively through Vimeo On Demand immediately following its world premiere screening at the Tribeca Film Festival.

We view the development of Vimeo On Demand as the online equivalent of the rise in premium pay television: great content, no advertising, premium pricing.

We plan to continue to invest in the VOD platform and content catalog throughout 2014.

Likewise, HomeAdvisor had a great quarter, registering its first quarter of double-digit revenue growth since the first quarter of 2012, and its first quarter of double-digit EBITDA growth since the third quarter of 2012.

Additionally, both service requests and accepts saw positive growth for the first time since the first quarter of 2012, and active service providers grew 15% year-over-year.

After a difficult rebranding last year, the business is recovering well and we are very optimistic about its prospects.

We have several other bright spots among our Media and eCommerce businesses.

Just to mention two, we've seen great traffic growth at The Daily Beast with unique viewers up over 30% year-over-year to roughly 18 million, and at CollegeHumor, where we saw monthly unique viewers rise 70% to an average of 19 million for the quarter.

We continue to be excited about our entire portfolio of businesses.

With that, we will take your questions.

Operator?

Thank you.

(Operator Instructions)

Ross Sandler with Deutsche Bank.

Thanks.

I just had one question for Jeff, and then maybe one for Joey.

Jeff, a question on capital allocation, you guys didn't buy back any stock in the quarter, yet the liquidity position is over $1 billion, and looking back in history, the only time you haven't bought back shares is when there's some kind of strategic situation going on.

So can you just give us an update on capital allocation, and maybe what would've prevented you guys from doing buybacks given the market environment right now?

And then, Joey, you mentioned a bunch of new initiatives.

Can you give us a little bit more color on which of those is driving the strength that you are seeing in the website's revenue sequentially?

Are those initiatives organic versus paid traffic, and where do you think we are in terms of Google smart pricing, and our we over the hump on those issues?

Thank you.

On capital allocation, just to take your first question, our view today is no different than it has ever been.

We will buy back opportunistically, and in any given quarter.

We didn't buy any this quarter, we didn't buy any in the third quarter last year, but we have, obviously, bought back a tremendous amount, $230 million approximately last year in share buyback, $716 million in 2012, and almost $3 billion since the beginning of 2009.

So I think we are just the same.

We only talk about what we've done or not done, so to speak.

We don't predict.

We don't comment on why or whatever.

We are opportunistic and nobody should read anything into whether we buy or not.

Over time, we've just been very clear that we are buyers of our stock and that's been true for more years than my little brain can count.

So there that is.

Joey?

On the website side, it is a few things.

It is both organic and acquired.

About is doing very well.

We continue to be pleased with all the progress we are seeing there in terms of how they are growing content, how they are growing traffic on both an organic and a paid side.

Obviously, we added ValueClick in the quarter, and so that helped on the growth too, sequentially.

As it relates to Google smart pricing, for that change, we are -- sequentially we are clearly growing that, which is good.

I think we are still -- if you go back to comping to Q3 2013, I think we still have a few more quarters to comp to on a year-over-year basis to something better.

But sequentially, we are making progress and clearly improving there.

John Blackledge with Cowen and Company.

Great, thanks, just a couple questions.

Maybe, Greg, if you could just discussed timing of Tinder monetization, and what are the unique monetization opportunities for Tinder, aside from using the traditional Match monetization playbook?

And what's the current user base?

And then, separately, how should we think about prior local media and other guidance to the new Match Group and Media and eCommerce segment guidance?

Thank you.

All right, on monetization of Tinder, I think, this still an early business.

I think you'll see us begin to monetize it soon, but I think that will be more in terms of nailing the business model as opposed to a push for maximum revenue.

I think when that comes will depend on a whole host of things.

It's really a question of -- it is certainly big enough that you can start to monetize it now, but I think there's priorities, this is a small start-up like team that we are building, and everything you do comes at the expense of something else.

So I think that you'll start to see certain things, but I wouldn't be looking for big P&L impact in the near future.

I think in terms of what opportunities Tinder presents itself that others don't, I think there are a couple of ways.

One, advertising has not been a great monetization vehicle in this category traditionally.

I think Tinder has the possibility of changing that.

I think the nature of the Tinder user experience presents itself -- presents real opportunities for native advertising that certain of our other products don't.

I also think that just, each business, because of the way its feature set works and product works, presents its unique opportunities for discretionary feature monetization, and I think Tinder's are unique in that way.

I think just the pure engagement levels of Tinder, which are just so much higher than our other businesses, provide more a la carte, lower price transactions, priced through the app store, but in high volume create meaningful revenue, whereas a Match, with its hard subscription law just does not present those types of opportunities.

Why don't you take the bridge question, Jeff?

Listen, I think what we said last time was that we spent $15 million or so investing in DailyBurn and Tutor a year ago, and that we would expand that investment this year, and that the rest of our investments in what are now the Media and eCommerce segments were going to be low-double-digit millions which is what I think I just said.

And I think we commented on, if you throw Tinder in with Tutor and DailyBurn we get to 25 to 30.

Although that number could change, to Greg's point, these are early stage businesses that we only have interest in making great, and so we're going to opportunistically invest and then we could pull in here or there, or we could expand.

The nature of these businesses is such that the loss numbers tend to go up when things are going well at this stage.

So if you see momentum, you double down.

I will give an example, DailyBurn this year, Q1 is a big quarter in the fitness business, and we invested in marketing and we grew Q1 ended subs seven times higher than the prior year, and just over the course of the quarter alone we grew subs by 300%.

That's on loss marketing.

That is lifetime value, subscription marketing, that's a loss number, but that kind of -- but it is profitable on a lifetime basis.

So that kind of thing enthuses and drives further investment not less.

Tinder has got great momentum.

Jeff gave you the numbers for right now and we will update you as we go, but certainly not numbers that we can lock into at this point.

Thank you.

Jason Helfstein with Oppenheimer.

Thanks.

One housekeeping and then just a few questions on Match.

Can you talk about that $30 million purchase, of now controlling interest on the cash flow statement?

Does that have anything to do with Tinder, and are you willing to comment?

Then, secondly, on Match, is a fair way to think about the fourth -- the first quarter sub change versus the fourth quarter, so basically North American subs were up 11% in this quarter, paid subs.

Core were up 9% the way you previously reported it.

Is that the right way to think about it?

Did 9% go to 11%, or just help us bridge that?

And then just lastly, can you just talk about the long-term guidance for Match, previously it was $500 million of OIBA.

In 2016 -- you're moving to EBITDA, if you just want to give some color around that?

Thank you.

Sure.

On the $30 million question, I will confirm that over the course of the quarter we bought in all the minority interest in Tinder, such that today we together with management own 100% of the business.

I will say that we bought in -- the amount we spent to buy that in was greater than that $30 million in the cash flow statement.

The accounting does not match up with the economic reality.

I'm not going to tell exactly with the valuation was, I'm not going to tell exactly how much we spent, there are confidentiality agreements, et cetera.

But I know that people have tried to back into that $30 million and it is not doable.

Let me put it that way.

But we do now own 100% together with management.

On the Core issue, or the Core to North America issue, look, I think whatever you do it changed like this -- it is a little hard to bridge.

I will say that the big shifts in North America are that OkCupid and Match Canada, effectively both of which are big grown businesses, came into Core is the way to think about it.

And then on the other side, Twoo, which was in Developing went into International, and then you have LatAm and all that sort of thing.

I think in that 11%, I think that there is higher growth at OkCupid and Match Canada, and lower growth in what was traditionally Core, and that gets you to the 11%.

And that lower growth in traditional Core was driven by the things that I talked about, which was the decrease in acquisition efficiency, the increase in terms, and we think, as I said on the last call, I think that Core, although we are not going to continue to report it, will have a comparable year this year to last year, that's what we think.

Things like the App Store entry last week and a whole bunch of other things are going to drive that number back up, and over the course of year we expect the PMC growth numbers to rise.

What was the final question there?

The final question was about the $500 million --

The $500 million was always EBITDA.

I've always talked about it from a EBITDA perspective.

Again, my statements stand, but I do want people to re-examine them, which is it is not a $500 million absolute stake in the ground.

It is a way of looking at the growth of the business.

And I think that -- I still feel very good about fact that is a reasonable way to look at the opportunity.

We are not including fitness and education in that number, so that's exclusive of fitness and education.

I think it becomes, depending on what we do with Tinder, it becomes easier or more difficult depending on -- there's a bunch of different ways to get there.

I feel good about it, and as I said, I think, last quarter, I don't know whether this going to be $479 million or $521 million, it is three years away, but as a general way of thinking about the size, nothing has diminished our enthusiasm or confidence in that outlook.

Thank you.

Peter Stabler with Wells Fargo.

Good morning.

Question for Joey.

You called out some of progress you have been making on pricing and the websites business.

I'm wondering if you could just talk a little bit broadly about programmatic?

The shift to programmatic hasn't been universally hailed as a positive across the industry.

It sounds like you guys are getting some good traction on pricing year-on-year.

Any additional color would be appreciated.

Thanks very much.

Yes, it really depends on your starting point, so I think the biggest place where we are doing programmatic is at About.com, and I think that when we picked up the asset, and for the first period that we owned it, it was woefully behind the market.

We didn't have the premium ad sales group really communicating with the programmatic ad sales group in any way, and we didn't have that whole stack of things optimized.

So just putting that all together and having it all work on a common system where you can basically optimize a waterfall of ads really dramatically changed it.

We were in -- I think that we were years behind the market in looking at programmatic and using programmatic technologies.

So where we've improved there is really just getting up to market, and now I think we can start to really innovate on things.

But, again, all that by the way, has been with the same number of ads.

So we are not increasing the number of ads about.com at all, except actually in one small area, the search results pages.

But other than that, the article pages that get the vast majority of the traffic, we are not increasing the ads.

What we are doing generally is improving the ads, improving the placement of the ads.

We are on a one ad in, one ad out policy, so when we bring in a unit we will take an old unit out, and just that optimization has really dramatically transformed that.

I think as we start to roll that out to the other properties, we will start to see more efficiencies there.

One quick follow-up, if I could, on the websites business, could you offer any color about query growth and revenue per query there?

We understand the restructuring, but any color would be great.

Thanks.

I think on revenue per query there is -- I'm trying to remember exactly.

I think what we said last quarter still stands in terms of what we think of the trend in query growth, which is, we will be growing from here on queries.

And revenue per query is, again, it is not a totally relevant metric anymore, which we explained.

Queries really only cover the search businesses and didn't meaningfully cover the content business -- so we really should focus on page views now.

But revenue per query, I believe --

It is up in Q1 in both businesses over Q4, and we expect it be at roughly the levels it is now through the year.

Things could change, but that's our current expectation.

Thank you.

Mark Mahaney with RBC Capital Markets.

I just wanted to ask a basic question about the potential spin for all the Match businesses.

Let me ask the question this way.

Is there anything structurally, is there anything about the business itself that you think makes it not yet ready for a spin, or do you think the conditions are all there to spin the asset if you wanted to do so today?

Thanks.

Well, it is not a precise measurement.

We have a lot of experience in this area, as you all know.

When and if, when and if are really accurate.

We don't have a when, and even to proceed with that, we don't have an if.

There's no way -- speculation here is lovely, but as I said, there's no precise measurement.

And, again, I just repeat, when and if we do, we will.

And I can't say any more than that.

There is nothing more to say to it than that.

What do you want to add, Mr. Blatt?

The direct answer to the question, though, I think is I don't think there's any major structural problems to do it, meaning, if we wanted to do it -- the issue, the decision-making process is the same as it is always been.

It is a subjective process.

There is a right time and a wrong time and there's an if --

Or there is a no time.

That's right.

And there is an if, and there's a whole bunch of things that go into it.

But certainly I think that there's no structural deficit to doing so.

There's never been a structural reason.

We've always structured everything so that we can spin anything off, and God knows, we have gone in that direction seven times so far.

Thanks, Barry, thanks, Greg.

Heath Terry with Goldman Sachs.

Great, thanks.

Just a couple of questions.

Greg, completely understand the decision to pull back on some of the disclosure around Match, but with the deceleration in paid subscriber growth, can you just give us some context around where the growth in the business is happening, whether it is in the kind of recurring subscribers that you have at Match versus the premium subscribers at sites like OkCupid?

And then, Joey, I guess, can you give us any sort of sense of the contribution from ValueClick to the Search business this quarter?

I guess, if we assume roughly $34 million in contribution, which is what we are assuming for Q4, then it would suggest that the Search business declines actually accelerated this quarter.

That's really rough math, so I'm sure it is probably wrong, if you could help correct us there, I'd appreciate it?

On the first half question, again, not to quibble, I don't think we've really pulled back on disclosure.

We've just moved basically -- again, we basically moved OkCupid into Core and Twoo into Developing because to call big business to Developing that are bigger than Cores didn't make sense anymore.

So we are trying to give the same level of disclosure and there's a temporary dislocation, but then you will have this disclosure and it is as fulsome as the last, I think.

So I don't think there's an issue there.

I think that clearly, though, as we've said for awhile, different [ones] of our businesses have different growth trajectories within each market.

Over the last 12 months, OkCupid has grown faster than Match and PeopleMedia.

There was a time PeopleMedia was growing faster than Match.

But these things sort of rise and fall based on a variety of things.

I think there is an error in your question, which is the OkCupid subscriber is not different than the Match subscriber, meaning, it is literally the exact same thing, it is a monthly subscription, they pay it every month, there are packages.

The only difference is the bundle of features that you pay for.

In Match, you pay for one set of features, on OkCupid, you pay for another.

In fact, the net contribution of an OkCupid subscriber over a lifetime is equivalent to the net contribution lifetime of a Match subscriber in terms of lifetime value.

It is why these distinctions don't really make sense.

We've got a market, we've got a bunch of different products.

The nature and quality of the revenue coming from OkCupid is the same as from Match in really virtually every way.

But certainly OkCupid and Twoo, in their respective, North America and International, have been growing faster for a while then the rest of the business, although, again, it jumps around.

The launch of the iPhone app in the App Store, we've sustained that kind of growth, that reversed itself.

We've got four other things coming online.

These are about feature sets.

Unfortunately, given so many businesses, we can't launch everything we have planned at the same time.

And last year, we launched subscription and other things on OkCupid that drove big growth.

This year, the road map is much more focused on the Match business and PeopleMedia, things that are going to drive growth there.

And so I expect those growth rates to merge over the course of this year.

On ValueClick and organic -- sequential growth.

The websites grew organically sequentially, meaning, excluding ValueClick, websites grew organically.

I think low- to mid-single-digits.

Then in terms of EBITDA overall, if you look at the down 16% year-on-year for the quarter, the big contributor to that was the spend we did in B2C marketing.

We saw a big opportunity to, for ROI positive spend.

When we see those we spend into them, and we are generally very good at predicting the ROI of those, and we fell good about that spend.

That was really more of a choice in terms of what we decided to do there in terms of profit.

Jeff, you can add to that, but I think that answers the question.

That's right.

Okay, great.

Thank you.

Brian Fitzgerald with Jefferies.

Thanks, guys.

We were hoping you could help us think about the strategy around Vimeo as you incubate it.

Right now, are you trying to aggressively grow user levels, maybe maximizing the user base, or are you more focused on driving near-term revenue potential, maybe both?

And then on the monetization side of Vimeo, how do you think about pre-roll advertising versus the efficacy of in-stream versus display versus subscription?

Thanks.

Last first, which is Vimeo is not an advertising product.

We do not do -- the only kind of advertising we do, we do not do display.

We will never do display advertising.

But the only kind of advertising we do would be the deepest kind of native advertising where an advertiser has a story to tell and there is some sort of underneath, so to speak, mostly indirect, relationship to the products that they have.

We feel very strongly that Vimeo is a differentiated product, particularly from YouTube.

And part of that differentiation, one of the strongest parts, is that it is clean, it is safe, there's nothing there other than the video, which is protected by the person who puts it up.

And we feel very much that that is why Vimeo is having such growth is because it is emerging as the trusted video brand for user-generated video.

In terms of what the strategy is, the strategy is on all fronts.

We are absolutely after building continued to build our audience, which we have been doing.

We are after subscriptions, which we have been growing.

I think it is remarkable where we have this many subscriptions and this short of time, being in the subscription side of Vimeo, the tools and services part of Vimeo.

And we are starting to build video on demand, so there's really three strategies.

They each, I think, reinforce the other.

And we are very, very aggressive, and intend to be aggressive, in furthering those strategies.

The goal here is not anything to do with near-term revenue extraction.

It is to build this brand into something that is not only enduring, but that is a real differentiator in the whole space of video.

Awesome, thank you, Barry.

Eric Sheridan with UBS.

Thanks for taking the question.

Barry, following up on that, with respect to Vimeo, you have talked a little bit recently about original programming for Vimeo, and we've seen a big push by a lot of parties around online video to invest in original content.

Maybe help us understand your plans around investing in original content as the driver for the subscription element of that business?

Sure.

This is a very long-term project of ours on video on demand.

We've really just begun.

We are not at this time going to announce doing television series or announce doing, let's call it, a House of Cards like program, though I would hope in time we would be able to.

What we are doing is we're really in the middle part of the long tail where independent film is ripe for us.

Joss Whedon is a recent example.

The Avenger series is -- and made his own film and is offering it $5 a pay-per-view.

These are all relatively small efforts until we build our base, know what our audience is interested in.

We have said that we are going to put probably $10 million into program development of various kinds, that's not a big number in video terms.

But we absolutely believe over time that we will build up a substantial video on demand business, but the flavor of the day, everybody and their mother plunging into high cost video over-the-top programming, I think is great.

But for us, it is, in our way of doing it step-by-step-by-step, find out what our audience is interested in, acquire products, stimulate production, et cetera.

Jordan Monahan with Morgan Stanley.

I think we will take one more question after this and then wrap up.

Well, great.

Thank you for taking the question.

Actually, just two quick ones if I can.

I know Match has been discussed quite a bit, but I had just a higher level, bigger picture question about online dating.

I think if we looked at online dating 10 years ago, it seems like one of the big barriers to entry was actually generating an ecosystem that had enough participants to have effective matches.

Now with Facebook's ability to use its API, and anyone's ability to develop an app on top of that, has that changed in your view the barriers to entry, to building a successful dating app?

And do you actually see the competitive environment as any different than it might have been pre-Facebook?

Then just a quick question on Search.

I'm wondering if you have any updates on your distribution strategy, just given some of the changes toward mobile tablet and so on in the last couple of years?

I think it is an interesting question, and it's a question that we -- we were preoccupied with four or five years ago.

Which is where are the fundamental dynamics of liquidity, construction going to change with Facebook and every else.

And the reality is it hasn't.

If you look back over the last 10 years there have been hundreds, if not thousands, entrants into the category.

There was a time when I was first at Match where I just had to stop reading like TechCrunch because every day there were five new sites coming in and I just couldn't -- it was just ridiculous.

But very few have come up and achieved that scale.

Over the last 10 years, really the only ones are OkCupid and Tinder.

And OkCupid did it over a long period of time, and they did it brick by brick, and Tinder did it very quickly.

But Tinder is the only one who's done it very quickly.

And Tinder didn't do it using Facebook distribution.

There was a period two or three years ago where users, for instance, took big advantage of this when the window was open, where Facebook virality enabled people to build these businesses very quickly.

They then shut that down.

You can no longer use the feed in that way.

You can't spam people.

All these tactics that were usable for a brief window are now gone.

And Tinder has grown through creating brand, and they did it themselves.

They used Facebook to authenticate identity.

But they don't get distribution on Facebook, they got distribution through word of mouth.

People telling other people, and using it.

That's magic, but it is very hard to do, and it is as hard to do today as it was 10 years ago.

So I think the concern/opportunity we once had about Facebook and virality, that window is, I think, is gone.

And I think that it is as hard if not harder than it ever was because you just have that many more big powerful brands in this space.

And it is a brand business.

OkCupid is a brand, Match is a brand.

Tinder is now a brand, a very powerful, quickly built brand, but it is hard to do.

So we actually don't -- when we look at this all the time.

We have new entrants into the category, et cetera.

And it is not to say that there will never be another new entrant, I'm sure there will be, that's the history of this.

But it is very rare that one breaks through and becomes something enduring.

There are still only a handful of them in the entire space, and other than Tinder they've all been around for a long, long time.

Joey?

On the website side in terms of distribution strategy, it is, our content really is fundamentally what we call pull content as opposed to push content.

Meaning, we make the kind of content that people are looking for and our job is to get it in front of people wherever they are.

And I think we've done a very nice job getting that in front of people on mobile devices, as well as on desktops, et cetera.

I think we have a huge portion of our traffic now coming from mobile and tablet to all the websites.

And we continue to look for new forms of distribution there, but wherever people are doing searches, wherever people are doing queries, wherever people are asking questions we find a way to put our content there.

On the application side, there isn't a perfect analog in terms of that business model, and that business model being search monetized, but one service that that application provides in addition to distribution for our services is that the application model offers a monetization solution for developers.

And developers on mobile, as much or maybe more so than on a desktop, need monetization solutions.

They need help in monetization, and while we don't have anything to report yet there, we are continuing to experiment with things there, we are continuing to work with various developers and hope to have something to discuss there soon.

Okay, last question.

Kerry Rice with Needham and Company.

Thanks a lot.

A quick question on HomeAdvisor.

It appears that the marketing has been ratcheted up with that business.

I wondered if you could talk a little bit more about the strategy and what you plan on doing to continue the turnaround there, and if you're going to continue to raise your marketing levels?

Yes, listen, the increase in marketing last year and the increase [so far] this year is largely TV advertising.

On national cable TV advertising, we've had very positive ROIs, has led us to choose to expand it, and it is been very effective at attracting both SPs and consumers, so we are pleased there.

Our strategy is what it is, I think, with most of our business which is to differentiate and build a great product and to build a great brand.

And we think that the business has turned the corner on building its brand, we hope, and it is on its way on a good trajectory.

Great, thank you.

Thanks.

And thanks, everybody, for joining.

This does conclude today's presentation.

We thank you all for your participation.