Match Group Inc (MTCH) 2014 Q2 法說會逐字稿

Good day, everyone, and welcome to the IAC reports Q2 2014 results conference call.

Today's conference is being recorded.

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

Please go ahead, Sir.

Thanks, Operator.

Welcome, everyone, to our second-quarter earnings call.

With me today is Greg Blatt, Chairman of the Match Group, and Joey Levin, CEO of our Search and Applications segment.

Before we get into our results, Outlook, and general business overview, I would 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 statements are subject to risks and uncertainties, and our actual results could differ materially from the views expressed today.

Some of these risks have been set forth in our second-quarter 2014 press release and our periodic reports filed with the SEC.

We will also discuss certain non-GAAP measures, which, as a reminder, includes adjusted EBITDA, which we will refer to today as EBITDA for simplicity.

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.

Before we get into the businesses, I would like to just note that we announced today that we are increasing our quarterly dividend by $0.10, or more than 40% from $0.24 to $0.34 a share based on our confidence in our strong cash flows going forward, continuing our track record of returning capital to the shareholders.

With that introduction, let me turn it over to Greg to discuss the match group.

Then, Joey will discuss the search and applications segment, and I will wrap up with a few comments on our media and e-commerce businesses.

Greg?

Thanks, Jeff.

Good morning, everybody Second quarter was another phenomenal quarter for our dating business in terms of overall user growth, up more than 60% year over year in MAUs, reinforcing our long-term expectations for the business.

As we will discuss, we missed a few short-term opportunities, and our current-period financial results were a little shy of expectations, but the fundamentals of the business are very strong.

In that light, we are reaffirming our belief that $500 million is a reasonable and attainable 2016 EBITDA number for the dating business.

When we first started talking about that number, we really talked about two different pieces.

The first was our newer businesses, OkCupid, Tinder, Twoo, and our theory there was that we had to nearly double MAUs and monetization rate over a three-year period.

We're just a few quarters in, but MAUs in these businesses have already increased by more than 50%, way ahead of schedule.

In our non-Tinder businesses, monetization is already up about 30%, way ahead of schedule.

And, we plan to start to monetize Tinder this year.

We're very confident in the contribution from this bucket.

The second piece were our older businesses, which we said needed to keep growing at historical rates.

Those are lagging slightly behind in 2014, but we are confident they will improve.

The reasons are really as follows.

We were late in launching new marketing for Match.

We've talked about that for a while, but we launched it two weeks ago.

And, the early returns are very good.

It builds, but we are very excited with the lift that we are seeing in these early weeks.

The second piece -- we talked about this a little bit last quarter is our renewed focus on native mobile apps.

Back in 2010, we were really the first people in the space into these.

We had an app literally in everything.

We had BlackBerry apps and Palm apps and Windows apps and Android and IOS, et cetera.

But, as the App Store started layering requirements, we backed out, and we basically made a bet on mobile web.

That was very good for engagement, and our mobile web business has been great for users.

But clearly, we've missed out on big customer acquisition opportunities.

As we talked about last quarter, we've reoriented towards tackling that.

As part of that, Match launched its IOS app three months ago.

Yesterday, we actually became the second-highest grossing app in the store other than gaming apps.

But, it's really just a fraction of the opportunity we see there.

The App Store is like the web in a way in which you get good at discovery, and we're really just starting.

We are really just starting paid acquisition.

We're starting with App Store optimization, et cetera.

We think there's a lot more to do here and lots more upside.

The other drag we have seen is that this new focus on native apps has actually affected our desktop performance.

In that, we've only got so many resources to allocate.

As we allocated resources to mobile, we had fewer [spats] to drive product performance.

So, we actually had for the first time in a while, a little bit of a conversion miss, which we didn't expect.

And, we need to be much better at driving mobile and desktop performance simultaneously.

To accomplish these objectives, we're planning some changes to how we approach product development and technology.

First is a substantial increase, as we've discussed, in resources devoted to native mobile development.

This will allow us to meet our goals of catching up in this area, and then getting out ahead.

Secondly, we are making our various products and platforms more compatible.

Allowing changes we make to a given product to roll more seamlessly across our other products and platforms.

The end result will be a lift in product efficiency for many products, increased speed to market for product innovation, greater investment in mobile development, and overall lower cost.

These initiatives won't affect all our businesses.

We're confident the end results will be incremental revenue growth and real margin expansion.

This is still in planning stages, but we will be able to discuss in much better specificity how this is going to happen and over what period next quarter.

When you look at our businesses, excluding Tinder which has not yet monetized, and we look ahead to 2016 and how we are rolling up now.

We see low double-digit annual sub growth.

We see modest overall rate declines driven primarily by mix shift, but partially offset by rate increases across most business lines.

We see meaningful margin expansion driven by both mix shift and the technology changes that we discussed above.

That doesn't get you to $500 million in 2016, but it puts us in striking distance.

Then, we've got Tinder.

It's growing like a weed, MAUs are up 140% year-to-date with June over May growth almost 2X May over April growth.

So, it is growing very strong.

We're starting to monetize it this year.

It's a work in progress in terms of the exact manner and timing of how we're going to roll out the various monetization features, so I don't want to give specific projections at this point, although we will as we go forward.

But, I wanted to give you an example of the opportunity here.

If you took Tinder's current user base -- so June, 2014.

And, you monetized its North American and European users at the rate that we monetize on OkCupid, and we monetized Tinder's users in the rest of the world at 25% that rate, you would be looking at about $75 million of additional EBITDA this year.

Obviously, we think Tinder's user base is going to grow dramatically more between now and then.

We also think that Tinder, and frankly, OkCupid should both monetize better tomorrow than OkCupid does today.

We see lots and lots of incremental opportunity here.

And, more on that as monetization develops over the next few quarters.

Before I get to Outlook, just a few strategic things that we are very excited about.

We just announced an upcoming acquisition of FriendScout in Germany.

Germany is the world's second-biggest online dating market in terms of revenue.

But, it has been fiercely competitive with lots of marketing spend, and it has really driven profit out of the market.

We've waited for years for the right opportunity to get in there.

Because of those dynamics, we haven't really competed full-on in the way we have another markets.

But, we finally got what we wanted at the price we wanted.

We've been looking at FriendScout for a while.

It's the business we wanted, and we are acquiring it at what we think is an attractive price.

The acquisition will take us from fourth place in Germany to first place.

We are confident that the leadership position that it gives us will help us break the profit log jam that that market has seen.

Second, yesterday, we announced an acquisition of the Princeton Review.

We've spent a year turning Tutor.com into a great consumer product.

We haven't talked that much about it.

But, it instantly connects students to a network of high quality tutors anytime, anywhere.

It has got a 95% recommend rate among its users.

We are set to take it to market and begin a marketing campaign this fall to build a brand.

It has currently been an institutional business.

But, when we started talking to Princeton Review, we saw a huge opportunity here.

They have an authoritative brand.

Everybody knows it, and it represents high quality.

They've got the best test prep product, and we really started looking at the industrial logic of this and started looking at test prep and tutoring like selling airline tickets and hotel rooms.

Meaning, you've got a consumer who is looking for the exact same thing.

You meaningfully increase the lifetime value of the consumer, and we are very, very excited about it.

Lots of industrial logic here with lots of cost and revenue synergies, and we think that this will meaningfully accelerate the timeframe in which Tutor becomes a meaningful contributor of profit to this business.

Turning to Q2.

As I said, overall results were okay but a little slower than we would like.

Mostly because of the factors we discussed previously.

There was also some media inflation, especially in Europe, and some lingering effects from the credit card security problems that we faced earlier in the year.

But, as mentioned, we are very confident in the strategies going forward.

Looking ahead, we think that comparable to slightly better growth in Q3 than Q2 and meaningfully better growth in Q4 in each case -- in both revenue and EBITDA.

That's before FriendScout and Princeton Review.

We expect those to add about $40 million to second-half revenue with about $12 million to $15 million of net expenses and charges, mostly from purchase accounting and other transaction effects.

Both of these businesses have substantial deferred revenue pieces in the accounting.

We wipe that out, so you take a hit in the first couple quarters of the business.

We're excited about where we are, the strategies take us forward.

We are building momentum into 2015 with a strong outlook for 2016 and beyond.

With that, I will turn it over to Joey, and I look forward to taking your questions later in the call.

Thanks, Greg.

We delivered EBITDA for the quarter up nicely sequentially and narrowed the year-on-year decline from last quarter.

We have two specific issues to work through in the back half of this year in our applications business.

The first is chrome and the second is the marketplace for B2B applications.

I will start with chrome.

Last week, Google released a new version of the chrome browser which we expect will have an adverse impact on applications.

As you know, reacting to these kinds of browser and platform changes is a part of the business, and from a technical perspective, we've made most of the necessary modifications to be compatible with the new version and the latest chrome Web store requirements.

And, have been reviewed by Google in the context of our broader commercial relationship.

However, the changes will reduce the near-term revenue-per-offer for chrome extensions, and we have reduced our forecast for the remainder of the year to reflect the changes.

We've managed this sort of transition with new versions of Internet Explorer and Firefox before and based on our experience with other major browsers, we believe the impact will be more pronounced initially and then settle over time as the marketplace adjusts and we optimize accordingly.

We should complete the transition by the end of the year as the tail on the old chrome extensions winds up, and we start to ramp distribution of the revised products.

On B2B applications, the market remains tough competitively with some of our largest distribution partners posting sequential declines which outweigh the new business we are bringing in.

Some of those declines relate directly to the market dynamics where our partners lost distribution to competitors supported by more aggressive monetization, and some issues are partner-specific.

We will continue to manage the business for the long term with sustainable practices and consistent with our values which we firmly believe is the right approach for our users and important as we focus our efforts on working with market-leading software providers that place value on customer experience.

On that note, we just renewed our agreement with Oracle where our products are distributed with Oracle's Java application, and we signed two new deals with top-tier software providers representing millions of potential installs per week, including a leader in the security software space and the other, a well known media player.

On the B2C side of the applications business, we had our highest profit on record in the quarter, and the business remains well positioned competitively.

Our control over product development, marketing, and monetization provides us with a very strong offering and allows us to adjust quickly to the market.

We will take a hit there in the back half of this year on the chrome changes but fully expect to be able to grow again once we settle into new levels, and we will ramp our marketing budget back up as we see opportunities.

We also continue to make nice progress on software subscriptions since we've integrated [swimwear].

So, we will see how it all plays out on applications, but we've adjusted our Outlook from here to reflect the B2B softness and the chrome impacts.

We expect the year over year decline in applications revenue for the second half of the year to be around 500 basis points or so greater than the Q2 decline and stabilize over the course of Q3 into Q4 as the tail on older chrome traffic runs out.

So, our applications business within chrome is likely smaller than it was but still quite sizable and profitable, and we expect to resume sequential growth early next year.

On the website side of the business, we remain excited about the progress and the future where we continue to see sequential revenue growth excluding acquisitions.

We are now publishing quality content to an audience of over 300 million people monthly across our sites with meaningful contributions from About.com, Dictionary.com, Investopedia and PriceRunner as well as Ask.com.

Just to give you a sense of that on a relative basis, if you look at just our websites business, standalone and treated it as a single property, we would be among the 15 biggest properties globally, and that's all owned and operated, not a network.

Mobile continues to grow sequentially and as a percent of total and could reach lose to 50% of total page views by the end of the year there.

On RPM, we're still comping against the period before the pricing adjustment in Q3 last year so we probably won't see RPMs grow again until Q4 this year.

But, excluding Ask where we saw the bulk of the RPM hit last year, RPM is up nicely year on year without any increase in ad density.

Reflecting our ability to improve user experience and optimize across both direct and programmatic.

We're also getting better at attracting users.

Total marketing spend as a percent of revenue at websites is down double digits year on year.

So, the building blocks are all there, and we are moving in the right direction.

At About.com, we've continued to make substantial improvements qualitatively with massive upgrades in both user experience and content quality and quantitatively with big increases in content production and yield.

At the end of last year, we began in earnest to add more and better experts in the right categories.

We've added almost 200 new experts this year alone.

At the same time, we've accelerated our ability to analyze the performance and quality of our content which means we can evaluate and act on performance with experts much more quickly than we could previously.

And, the quality of experts we are recruiting on to the platform is really exciting.

People who are not only passionate about a subject but have also proved themselves as writers and savvy marketers particularly through social media.

With access to the tools at About.com, many of these experts have been able to meaningfully grow their fan base.

The effects have been noticeable.

Since the end of last year, the number of new articles published has grown double digits while continuing to raise the bar on quality.

We've also improved our content management system, launched a brand-new homepage, and are in the process of a complete site redesign.

The result is a better quality product, which we see reflected through improved engagement metrics like time on page.

The effects flow through to monetization, too, in both direct sales and programmatic.

The revitalized brand, new design, and fresh content are enabling our sales team to increase deal size and improve sell-through.

Mobile revenue has grown nicely in particular from non-google sources which now comprise 40% of total handheld mobile revenue at About.

Ask.com is also making real progress on a number of fronts.

First, we've managed effectively through the price adjustments we saw at the end of last year and grew revenue and earning sequentially, in part through efficiency gains which resulted in lower revenue growth but expanded margins.

That result is certainly a testament to the strength of our contents and marketing platforms and people.

But, I think it also reflects the enduring strength of our brand in Q&A as a desired use case.

In that regard, we are putting real energy into developing more proprietary Q&A content and expect that to grow throughout the year.

Adding that all up for the websites business, we expect Q3 to have sequential growth similar -- sequential revenue growth similar to what we saw in Q2, and we expect Q4 to grow nicely year over year as we finally lap the pricing changes which began last August.

The percent of revenue coming from non-app sources as a percent of total websites revenue has doubled year over year with healthy margins.

So, EBITDA from those businesses will be over $100 million this year, and I expect to see further diversification as we grow and add more publishing assets going forward.

For search and applications overall, we anticipate EBITDA margins for the remainder of the year similar to Q1 given the expected revenue declines in the applications business.

This chrome transition for our applications business is not our first time nor will it be our last time managing through browser changes.

I don't believe there's any Company better equipped to handle these transitions than us.

We've already found avenues for optimization to improve performance in the new chrome while continuing to generate meaningful cash flow.

At the same time, our portfolio of content properties comprising our websites revenue continues to grow and diversify.

We're excited to keep on building.

Thank you.

Thank you, Joey.

Revenue in the media and e-commerce segments were together down 16% versus last year with a total EBITDA loss of approximately $4 million in the quarter.

The segment decline was driven by the presence in the prior year of CityGrid revenue in local and Newsweek revenue in media.

On an apples-to-apples basis, the two segments would have grown revenue, although total revenue was lower than expected driven by the slippage of Electus shows out of the quarter.

We expect solid revenue growth year over year in both the third and in the fourth quarters given that CityGrid revenue and in part Newsweek revenue will not be included in the prior year.

We also again expect a comparable combined low single-digit millions of EBITDA investment in both the third and fourth quarters.

As you know, we've got several businesses in the media and e-commerce segments which we are excited about.

In the media segment, Vimeo enjoyed another strong quarter of growth with nearly 60% growth in ComScore monthly unique viewers and nearly 50% growth in revenue.

Vimeo also reached 0.5 million subscribers in early July, a real milestone.

The strong momentum in the Vimeo on-demand business has continued as our catalog in videos of films has now grown to 11,000 strong, and our monthly revenue run rate for that business is up nearly 50% sequentially from the first quarter.

Additionally in media, we continue to see strong traffic growth at both the Daily Beast and CollegeHumor, where monthly uniques are up approximately 30% and 35%, respectively.

In the e-commerce segment, HomeAdvisor had its second consecutive quarter of accelerating double-digit revenue growth.

The business had its strongest performance in both total revenue and total service requests ever in the second quarter with paying service providers also up 20% and service requests up solidly for the second quarter in a row with organic service requests up over 20% year on year.

With that, we will take your questions.

Operator?

(Operator Instructions)

We will hear first from Jason Helfstein from Oppenheimer & Co.

Hi, thanks.

Greg, I just wanted to dig in a little more into the international slowdown.

So, specifically, internationally would you say you are seeing more competition from paid services?

Is it other free services?

Or, are you potentially cannibalizing yourself?

And then, just overall it does seem like we're seeing the space more competitive.

You did talk about an acquisition you did in Germany that you think helps your positioning.

Just if you can go into a little more detail about that?

Thanks.

Sure.

I don't think the space is more competitive than it has been.

If you exclude Tinder for a second, there hasn't really been any meaningful movement in the space in a long time.

We do a survey every year, probably the biggest single survey anywhere that looks at all of this stuff.

There's not a lot of publicly available information.

But, eHarmony, plenty of fish, being domestically and some parts internationally big players, continue to be big.

No one new of any size has come on the market in a long time.

In the US, you have got Tinder and OkCupid that have grown a lot over the last few years, and that certainly impacts the landscape.

We happen to own both of them, which is good.

Other than that, there hasn't been a lot of movement.

Europe is a big place, and each market is different.

But again, I would say Tinder is the single biggest change there recently.

There was [Bidoo], but that made a big push three-plus years ago and then has slowed.

There are a couple players in a couple markets.

But in general, again other than Tinder, which does have an impact, but it is primarily at a young demographic that our traditional sites don't -- it doesn't make up a big part of their business.

The competition really hasn't changed much.

I think part of it is in Europe I think there is media inflation, which I don't think is limited to the dating market.

Meaning, I don't think that's a reflection of competition in dating.

I think it's a reflection of an aggregation of media markets, both online and off-line that have just increased the pricing.

But, we look pretty hard at this, and I don't think there's any meaningful change in the landscape other than Tinder.

Thank you.

Thank you.

Moving on to Ross Sandler, Deutsche Bank.

Thank you.

This is Deepak actually for Ross.

I have two questions, one on Match and then generally on dividends.

First on the Match group.

So, I wanted to ask a little bit about the strategy around mobile apps.

I think that unlike in the desktop world, like in the mobile apps, the ecosystem is highly fragmented.

Like you see new players like Hinge pretty much going pretty rapidly.

How would you think about this?

Would you think about more acquisitions, or do you have any strategy to organically build more apps?

Catering different needs?

And then, secondly, I think you increased dividends by 40% this quarter.

How do you think about the return in terms of -- I don't think there was any by buybacks?

Would you think of returns going forward in terms of increasing dividends?

Or, what's the philosophy there?

Thank you.

I think again, with the mobile apps -- Tinder has grown and become very significant.

Hinge is still -- and it's a lovely app -- I'm not dissing it.

In terms of user growth, it's not a meaningful thing on the overall marketplace.

And, I think that the mobile store -- people thought back when Facebook came that it would enable all these new competitors to grow rapidly.

And, there were moments where it did.

But, in general, it just doesn't change the landscapes.

I don't think there's anything inherent about mobile that changes that.

Meaning, you still need to have a great product and a great brand, and that's what Tinder has done.

Nothing else -- the mobile world has been around for a few years now.

Nothing has caught on and gained meaningful distribution.

I'm not saying it can't happen.

Every few years something grows and becomes big.

I don't really see the landscape as being meaningfully different.

In some ways it's easier, because if you can afford to spend money on acquisition, that drives you up in the App Store which in turn -- . We think that -- we look at the native app world as an opportunity.

Again, we didn't play aggressively in it in our traditional brands early, but you look at OkCupid's growth there and Twoo's growth there and Tinder's growth there, and it's great.

I don't think it's because the App Store effectively allows for more rapid distribution or a greater democracy.

You still have to have a great product, and if you can put money behind it, you have huge advantages.

So again, we're focused on it, but I don't see it as a meaningful change in the competitive landscape.

In terms of your question on returns of capital.

We instituted the dividend nearly three years ago.

We doubled it after its first three quarters, and at the time, it went from a 1% to a 2% yield.

We didn't raise it last year, and so we are just bringing it up now.

We think an increasing dividend is a good part of a capital return strategy.

We also think opportunistic share buybacks are a good part of a capital return strategy.

So, our position on both really hasn't changed.

The dividend increase this time brings, again, the yield up to around 2%.

Not that that's a perfect benchmark.

But, I think we think we will probably steadily increase it over time.

But, we will do these things opportunistically.

Great.

If I can just squeeze in one more.

On the website, I don't think you called out anything related to Google Panda, but there was a lot of noise during the quarter.

In terms of Ask traffic, do have any comment there?

Did you see any impact?

Thanks.

It was a relatively small impact from Panda.

I think the -- it's actually -- we have for a long time about.com before we owned it.

And, even for the first period we owned it everyone lived in fear of these algorithm updates from Google.

And, probably with good reason, given the history.

We are now at the point where our content is good.

And so, when these algorithm updates happen, they generally -- and, this one in particular did.

Generally, affirm our strategy, which is where we know we have weak outdated content, that's going to get removed.

And, where we have good, updated high-quality content, that's going to get rewarded.

And, we saw that in this most recent update.

So, it had a small impact on some small areas of Ask.

Actually, a small area of Dictionary and About.com netted up in this update.

We're at the point now where we look forward to these because I think that they are generally rewarding where we are investing in the content.

Thank you.

We will hear next from John Blackledge from Cowen and Company.

Great.

Thank you.

I have a couple questions on Tinder and Match.

So, for Tinder, you mentioned MAUs increased 140% year over year, did that accelerate from 1Q 2014 levels?

And then, will you start to monetize Tinder in 3Q or 4Q?

And, can you describe how you expect to monetize the business?

Will it be advertising and/or freemium type of offerings?

And then, also on Match, you mention MAUs grew 60% year over year.

What was the total number of MAUs?

I think in the fourth quarter of 2013 you said Match had 30 million MAUs.

I'm wondering if that growth accelerated from Q1 levels?

Thank you.

The Tinder number was actually not a year-over-year number.

It was actually year to date.

So, much greater on year over year.

From December through now, MAUs are up 140% at Tinder.

I don't want to necessarily say it is accelerating -- it accelerated.

It bounces around a little bit.

There's seasonality, there is events, there's PR, et cetera.

June over -- we don't have the July numbers fully in yet, but the June over May happened to grow 2X May over April.

I'm not saying that's an overall trend of acceleration.

But, I'm saying it bounces around and is still growing very strong.

In terms of the overall MAU number, I imagine we did give that out at some point.

I don't think we're currently giving that out on an aggregate basis.

But, year over year, in total, we are up 60% versus Q2 last year.

And, given the extensive growth of Tinder, I think on of an overall basis that is accelerating.

I think last quarter we said the MAU growth was around 50%, I think, year over year.

This quarter, it's 60%.

So, there is acceleration overall.

A lot of that is Tinder.

We've also got great growth at OkCupid.

Obviously, we've got growth but lower growth than our other businesses where we're much more advanced into the monetization process.

In terms of monetization of Tinder, I think that we are already into August.

I think either late Q3 or early Q4, you will start to see some monetization come.

I think that monetization on Tinder is going to be frankly like our other sites, it's going to be a combination of three things.

There's going to be ad revenue.

There's going to be some form of recurring revenue, and there is going to be some form of a la carte revenue.

That's true of every one of our products.

The mix is different from product to product.

Certainly to the extent there is recurring revenue, it won't be of the Match.com-type where you have a pay-to-communicate subscription.

But, there is certainly -- we know from OkCupid that there are certain user [space] and other things where people pay on a recurring basis for certain features that give them the ability to do certain things.

Some of those things are better monetized on an a la carte transactional basis.

Some are more sustained user states.

The great thing about Tinder is it's really -- because it's primarily used for dating, at least at this point, it has all the direct monetization capabilities of a dating product, which are very high.

Because of its high engagement and the manner of swiping, it's also got big social network advertising capabilities.

So, we're really excited about it.

We're going to play around with all of them and what the exact mix will be.

I can't say at this point.

But, we are highly confident in our ability to monetize Tinder very well.

That's great.

Thanks, Greg.

Can I ask one more question?

You said the $75 million-dollar EBITDA contribution if it was fully monetized right now, similar to OkCupid.

What does that apply for the EBITDA margin?

Thank you so much.

It's -- again, I think the exact math was if you monetize North America and Europe Tinder users at the rate that we monetize OkCupid, and then the rest of the world at 25% of that rate, you'd have about $75 million.

It's a very high margin.

I don't want to get into the specifics of it.

But, it's certainly an over 50% profit margin.

Thank you.

You're welcome.

Thank you.

Moving on to Mark Mahaney from RBC Capital Markets.

Thank you.

Two questions.

Could you provide a little detail on the writedown?

Part of that was due to Aereo, or was that all due to Aereo?

And then, on the HomeAdvisor part of the business, the acceleration and the improvement that you're seeing in service requests.

Any more color as to why that's occurring?

Is it a matter of easing comps?

Or, are there fundamental improvements -- and I think there are -- that are driving that?

Thank you.

First, on the writeoff.

There's about five different investments, a few of them small, a couple of them larger.

Aereo is the largest in that writedown.

Secondly, on HomeAdvisor, I think you're looking at two things.

One, we rebranded last year.

You saw a dip in traffic and monetization, particularly in the first couple of quarters.

So, we do have some good compares.

I think, secondly, our marketing has been very effective, returning on a lifetime value basis nearly a couple hundred percent so far.

So, that's doing very well.

So, we're seeing very good traction with the brand.

We think we have rising satisfaction scores.

We think that business has nice momentum.

Thank you.

Thank you.

Moving on to Heath Terry from Goldman Sachs.

Great, thank you.

I was wondering if you could maybe just -- $75 million in EBITDA for Tinder is a really interesting number.

And, I think implies a level of monetization that we don't normally see at -- or haven't seen at social networks.

So, curious what's involved.

I know you don't want to talk about margins, but what's involved from a revenue perspective in being able to get to that kind of EBITDA?

Or, from a CPM perspective, given that -- or ad load perspective.

Some of the metrics that you're thinking about that's going into the math behind that number.

And then, if you can, just the contribution from the acquisitions on the O&O side.

If you can give us any sort of sense of what growth would have been like without those acquisitions, that would be interesting?

Was the second part of that question a match question or search question?

Sorry, that was more of a search question.

But, I know the acquisitions within Match have been relatively small, but to the extent you want to provide some clarity on that.

Yes, I don't think there's anything meaningful on the Match side.

Just trying to clarify that.

I think -- as I pointed out, I think that OkCupid -- I'm sorry, Tinder will monetize differently than a traditional social network.

The better analogy I think is either a free-to-communicate dating product like OkCupid or a game where there will be a lot of direct monetization in which a small number of the users will pay a fair amount for certain things.

If you look at OkCupid, OkCupid started out as a -- again, OkCupid as a direct analogy.

I'm not saying this will be exactly how it will work.

But, it's just a good way to frame it.

OkCupid started out as a purely ad-driven product.

We bought it -- huge percentage of the revenue was ad.

We've layered in a variety of paid features.

It hasn't affected user growth at all.

Now, a single-digit percentage of the users pay to use certain features.

And, all we did was basically apply similar math to Tinder's user base.

It may be that the direct monetization is a little lower, and the ad revenue is a lot higher.

We don't know.

But, we are certainly confident that if our intent was to simply monetize it as a traditional dating product, like we've done with OkCupid, or maybe not a traditional dating products, but like we've done with OkCupid.

The use case and the user base and their commitment and passion for the product is absolutely can sustain that kind of monetization.

So, it's a hybrid between really a social network, a gaming business, and a dating product.

I think that between those three, the monetization course will take hold.

In terms of the revenue question.

I think that our -- we have obviously had declines based on the changes in Google policy, downloadable applications, guidelines, et cetera.

I think we are run-rating at the level we've been at the last couple of quarters, which is kind of low-double digits in those businesses, excluding the acquisitions.

Great, thank you.

Thank you.

We will hear next from Brian Fitzgerald from Jefferies.

Thank you.

Jeff, Vimeo had nice growth in revenues and subs.

Can you maybe give us a little more granularity on how you're feeling about the engagement there?

Anything around time spent or likes or follows or uploads?

Maybe even what you're seeing in terms of upgrades to plus or Pro?

Or, the subscription breaks there?

And then, again on Vimeo, can you give us a growth rate on that 11,000 videos in the library?

Thanks.

Look, the videos in the library are up something like 50% quarter over quarter on the number we gave last quarter.

Look, we are feeling very good about engagement at Vimeo.

I think views are growing a lot faster even than unique visitors.

So, that is great.

And, that's even better when you consider that mobile unique visitors have been driving a lot of the growth, doubling year over year essentially the whole time.

And, you naturally in any of these businesses get somewhat lower engagement in the mobile form factor and usage patter.

So, I think yes, we're very happy with engagement.

We're very happy with the Vimeo on-demand business.

Was there another part of your question that I missed?

No, I think you got that.

Or, maybe you haven't given breaks on basic, plus, or pro, right?

No, we haven't been breaking that down.

Okay.

And then, maybe one quick one still on media on Electus.

Any particular point driving the project shifts?

Do you have any sense of when they will hit?

Thanks.

Really the shows are just moving into the second half of the year.

It's no particular thing.

I think it's just show business as they say.

These things sometimes move, a number of episodes change.

Again, we're feeling really good about the shows and the production and the pipeline in that business.

Very good, thanks.

Moving on to Peter Stabler from Wells Fargo Securities.

Good morning.

Thanks for taking the question.

A quick one for Greg.

You mentioned a bit of a pivot toward apps away from mobile web.

I was just wondering if that could have a long-term impact on margins for the segment as a whole?

Thank you very much.

Yes.

Look, I think that we've certainly built -- the app monetization has a -- certainly has a fee associated with it.

And, we've built that into our thinking as we've said.

We expect long-term margin expansion.

I think that you've got to look at it as a pocket of distribution.

I don't think it's ever going to be 100% of the business.

But, as you get better at App Store delivery, or app store discovery, and as you optimize your paid spending, you should be able to actually maintain your cost of acquisition.

Meaning, some ways we view it -- we view it like a distribution deal that we might do with Yahoo or that we might do with MSN or AOL.

We've always built in those -- call them rev shares.

So, we think that obviously, it's an incremental expense that affects margin.

But, in the overall mix of the things that drive acquisitions, we still believe that margin overall will expand.

Very helpful, thanks.

Thank you.

Moving to Eric Sheridan, UBS.

Thank you for taking my questions.

Two for Greg.

Greg, you highlighted marketing channels and Match turning the dial up on putting dollars to work on marketing to drive growth.

Maybe you can help us understand some of the channels you are putting money to work?

And, what you see early days from some of the ROIs in the channels?

And, how that might accelerate the shift to mobile?

And then, also, Greg, Match Group continues to allocate incremental capital to deepen certain properties or broaden out your geographic focus.

Maybe help us understand about capital allocation within the Match group?

And, how you think about the M&A landscape long-term?

Thank you.

Your first question -- maybe you could amplify it?

I wasn't quite sure I caught the beginning of it.

Meaning, you were saying we are stepping up -- just could you repeat the first part of it?

I'm sorry.

No problem.

As you increase marketing dollars to drive growth, I was curious what channels you are allocating dollars for marketing?

And, what's the ROI you might be seeing from those channels?

And, what it might mean to the shift to mobile long-term?

Okay.

We're always shifting dollars around.

When I first got involved in the business back in 2008, we built the business on the back of distribution deals with MSN and AOL and then started layering TV on top of that.

Those deals are gone.

We replaced it with a Yahoo deal.

That deal is gone.

Facebook is now meaningful although much smaller than those deals were in terms of our overall [thing].

I think TV is still the biggest.

TV, when it works, continues to be the most powerful marketing out there because it drives productivity across all channels, across everything.

And, you keep waiting for it to become less effective, maybe over time in slow dribs and drabs, it is.

But, somehow people are still watching TV and seeing those commercials.

So, we're always focused on doing that better.

I think the big channels that we are really looking to open up right now are mobile-only channels.

Meaning again, television advertising drives users into both direct [or] main on the Web but also into the App Store and on to mobile web, et cetera.

You get good ROI across that.

But, optimizing mobile advertising, app download to advertising, something we are just starting.

And, we see this huge opportunity.

Again, we lost the Yahoo deal -- or, the Yahoo deal meaningfully reduced last year.

To some extent, we're still digging out of that hole.

But, the good news is that we are at the very beginning on the mobile side, and we think there's huge opportunity.

In terms of ROI, ROI overall tends to be pretty high.

What you try and do is you try and allocate your incremental dollars to breakeven, which keeps your average very high.

That bounces around based on channels.

As we break into new channels, you have negative ROI marketing.

In certain channels, you try and learn your way around.

Overall, our aggregate marketing dollars, they are very high.

Our margins are very high.

And, effectively, all of our advertising drives that in some way.

So, we're excited about the opportunities there, but they are always shifting.

We think Facebook scenario we can exploit more as well especially on the mobile side where we haven't really made a lot of progress.

And, online video, really we're just starting to tackle as well.

So, we've got a lot of opportunities globally we're just beginning to scratch at.

And frankly, we're behind.

There are people who weren't able to do TV in the way we are, and so had to be a little scrappier than we were in certain other channels.

But, we're going to make up that space, we have no doubt.

We have got a lot of resource and expertise to bring to bear, and we are excited about our ability to expand marketing.

In terms of capital allocation, certainly in the dating area, we will continue to look at virtually everything and to do deals where we think there is either real strategic incentive or real value to be had.

Examples of that would be How About We, which was not strategic, but was high-value in terms of price for what you get.

And, FriendScout, where it was really both.

We happened to get it at a great price.

But, it's hard to be the leader in Europe when you're number four in Germany, and we've wanted to get that for a while, and we got it t a price we like.

Certainly dating is something that we continue to see opportunity, and we expect to do deals from time to time.

Beyond dating, I think we're in two other areas really which are the education space and the fitness space.

We just allocated some capital to the education space.

Not that we have a mandate to allocate capital to either of them, but they're areas we like.

So, as we see opportunity, we will go after them.

These are businesses where we're able to integrate marketing expertise throughout the group.

Integrate UI and other analytics across the group.

So we try and look for businesses that have similar characteristics.

And, once we're in them, we will go where opportunity takes us.

And so, I think that it wouldn't surprise me to see more capital, although I don't expect significantly more capital in education any time soon.

But, we will look for strategic things.

And, I think fitness is an area where we think we've got the best product in the area.

We think that fitness will be transformed by streaming video and personalization.

We think we're very early on.

We don't think anyone has broken through yet.

Again, although we expect to be at -- we expect to end the year probably at 100,000-plus subscribers in that business, starting from single digits.

So, it wouldn't surprise me if we found some attractive opportunity and went after it.

But, I don't think these are big capital allocation areas.

I think that we're always looking for -- if there's a fourth area that meets these criteria -- high brand, high consumer value service with recurring revenue streams, we are looking at those.

But, I don't think there's a mandate to do anything.

There's not a mandate to do anything, but we look at lots of things.

We will take one more question, Operator.

Thank you.

Our final question is from Nat Schindler, Bank of America Mayor Lynch.

Thank you for taking my question.

Two things.

One, can you go into a little bit about Tinder's growth recently and the exceptional growth in June?

Was there a lot of that outside of the US, particularly World Cup-related?

And, how you have seen that and whether or not that is continuing post-World Cup?

Additionally, can you -- are there any structural or legal issue precluding you from doing buybacks which you have traditionally done but pulled back from in the last two quarters?

Let me just address the buyback question.

We do buybacks opportunistically.

With any public company, there could be reasons or not at any given time, and obviously, you wouldn't comment on them during, before, or after the fact.

So, we have quarters where we do a lot of buy back, and we have some quarters where we don't do any.

On your -- I'm just doing some quick math here.

So, give me one second.

The June over May growth was effectively the same domestically as it was globally so there was not a big difference there.

As I said, the growth in June over May versus May over April -- I'm not saying is necessarily a trend.

But, I'm saying it bounces around, meaning I don't think it was exceptional either.

Some months have just different bumps.

If I look at this, I'm just eyeballing -- March was a big month.

So, I think it bounces around.

I think we were looking at the metrics in July earlier to make sure that trends were consistent with -- there was overall 140%-ish growth rate.

And, I think there are.

I don't think there's anything -- I'm not planning acceleration, but I don't think there's deceleration either.

It's a nice steady month-over-month growth rate with phenomenal year-over-year growth rates.

And, we're feeling really good about it.

Great.

Thank you.

Thanks, everybody.

Let us know if you have any questions, have a great day.

Bye-bye now.

Thank you.

That does conclude today's presentation.

Thank you for your participation.