Match Group Inc (MTCH) 2015 Q1 法說會逐字稿

Good day, everyone, and welcome to the IAC Reports Q1 2015 Results conference call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Mr. Jeff Kip. Please go ahead, sir.

Thanks, operator. Good morning, everybody, welcome to our first-quarter earnings call. Joining me today is Greg Blatt, Chairman of the Match group, and Joey Levin, CEO of our Search & Applications segment. As a reminder, we won't be reading our prepared remarks on this call. They're currently available on the Investor Relations section of our website.

Before we get to Q&A, 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 fourth-quarter press release and our periodic reports filed with the SEC.

We will also discuss certain non-GAAP measures, which as a reminder, include adjusted EBITDA, which we will refer to today as EBITDA for simplicity during the call. I'll also refer you to our press release and again to the Investor Relations section of our website for all comparable GAAP measures and full reconciliations for all material non-GAAP measures.

Operator, we will go to Q&A now.

Thank you.

(Operator Instructions)

Nat Schindler of Bank of America.

Yes, hello, guys. Thanks. Now that you are monetizing Twitter, I was wondering if you could give us some more detail on the size of the Twitter user base, and --

Wrong call, Nat, I think we're off the Twitter call right now. Just joking with you.

Did I say Twitter? Yes, the Tinder user base, much more important, and probably growing faster.

As I said in the prepared remarks, we are very pleased with penetration rates so far, renewal rates. Again, the data is early, we started a month and a half ago I think. But so far the penetration rates are very solid, renewal rates are higher than in our other products. So we're feeling really good about that.

Obviously, we are very much at the beginning of this journey. If you think about -- we've talked about OkCupid as a sort of analog for this in the past, and let's just say that Tinder has reached this level of penetration certainly much quicker than OkCupid did. Although that's really a false analogy, because OkCupid had been in existence for a long time.

I think the bigger point is that in the time since OkCupid was at this level, it has increased its penetration level multiple, multiple times. Plus 5X over the last couple years, while growing MAUs dramatically during the same period.

So we are very, very bullish as we have been from the beginning about our ability to monetize this product. Both directly and through ad revenue, as we started to do this quarter as well. So very, very pleased on all fronts on the monetization side.

Greg, I don't want to push too much harder on this. But now that you are monetizing it and it doesn't seem to have a massive competitive threat, why can't we get a little bit more detail about just the size of the user base? MAUs, something to that effect, so that we can really get a judgment on how valuable this property could be longer-term.

Look, I understand the question. I think the counter to that is, this is a business that is still two and a half years old. There is new management in. It is really in every other circumstance but this, it would not be subject to the granular quarterly scrutiny that I understand you want.

And I understand that you want it. Think about Facebook, two and half years old and decisions they were making. And it is just my job is to provide as much of a cocoon for them to avoid the pressures and distractions, frankly, that come from that sort of a disclosure.

And I understand that we may pay a price for that. Right now, if that's people's judgment, I can tell you that in aggregate, we have given you our ballpark for the future growth of this business. And that's really the best we can do at this point.

I just don't want to get into with such an early-stage Company the month-to-month disclosure of highly granular amounts. I'll tell you that this quarter, we had more regs than any other quarter. The MAU growth continues to be solid.

I will point out that Tinder unlike -- Tinder is really a cross over between a traditional social network and a traditional dating product in that it has more churn, less engagement, et cetera than a traditional social network. But less than a traditional dating product.

So the new user to MAU relationship isn't going to be as strong as it is in say Facebook. But it's going to be stronger than it is in a regular dating product. And similarly, the ability to monetize is going to be much higher than a traditional social network, probably a little lower than in a traditional dating product. And that's really the best I can do right now.

Obviously, if growth was slowing meaningfully or that sort of thing, I'd tell you that. But we really just don't want to get into that mark-to-mark every quarter at this point.

And that's where we all -- you've got to believe me that for management and everything else the distractions and pressures of that are real. And that's why traditionally, companies at this stage don't have to do it.

And we are lucky enough to have started it, and we understand we have responsibility to the public markets to give as much as we can. But we really don't want to screw up the long-term value creation of this business.

Understand, thank you.

You're welcome.

John Blackledge with Cowen and Company.

Great, thanks, a couple questions. What was the North American Match paid sub growth ex-Tinder? We had 8%, just wondering if you can impact that for us? Similarly, what was the international paid sub growth ex-Tinder?

And then on Tinder, what was the free to paid penetration rate in March? And could you compare that versus OkCupid at a similar stage in their lifecycles? And how that penetration rate may ramp over time, and could it be higher than OkCupid? Thanks. I will give you some of these numbers now, just because it's the first time with Tinder. Going forward, we're really, again, we break down our sub numbers by North America, international and we'll continue to do that going forward.

But because this was a first-time event, the North American numbers ex-Tinder out were a little higher than what you had. It was a high single digits. Very solid.

I think I told you in January that we were at around 6%, and it continued to increase throughout the quarter. So your number is not far off, but it's a little low.

Internationally, the growth ex-Tinder was not as strong. It was more comparable to Q4 levels, Meetic, as I've said before, had a down 14% and now we are building up again.

But I think just the nature of the way new registrations come in and an old subs rolloff, you're in a trough for a little bit. So we expect that to -- the non-Tinder international subs to increase later in the year.

As far as penetration rate, again frankly, we don't give that on any of our businesses, and we are not going to give it on Tinder. There's real competitive issues there. And as I said in the answer to prior question, it is meaningfully smaller than OkCupid's today.

We think that, as we have talked about, we think OkCupid is a good model. Meaning we think there is a long way to go, but there are some differences too. Meaning OkCupid is primarily North America where penetration rates are higher, so we think that in North America and Europe we should be able to hit similar rates as OkCupid, and the rest of the world probably meaningfully lower.

So in aggregate, we don't expect them to have comparable penetration rates. But, frankly we think there is room to grow OkCupid's from where it is as well. So I think we are nowhere near the ceiling on Tinder's penetration rates.

As for the trajectory, I think as I have stressed in my prepared remarks and Q&A for many of the last quarters, it's really hard to predict. And again, it's this weird situation we're in by having this early-stage company housed in a public company.

If you would look at Facebook's monetization or Twitter's monetization in the early days, it was probably choppy and they were making various trade-offs and decisions. And it really wasn't -- hitting any particular trajectory, wasn't really top of mind.

Here, I think we're probably a little more focused on it just by our nature. But the principle holds, which is, we're much more focused on making sure we continue to get product right. And frankly, we've got a lot of product to do, non-monetization product to do over the next year to really make Tinder as strong and as great a user experience as we think it can be.

Obviously, we are monetizing at the same time, but there will be trade-offs along the way. And that's why I've said in all of my prepared remarks that this year's quote, unquote, guidance, is probably a little -- has a smaller degree of certainty than typical. Because we face trade-offs and new facts on Tinder every day.

Unlike a Match, where there is a scheduled product release cycle every two weeks, and it works like clockwork. This is still a startup, and things slip and priorities change. So we expect it to grow meaningfully over the duration of the year, but whether it's on a straight-line basis or not, my guess would be no.

Ross Sandler with Deutsche Bank.

Thanks guys. I had two quick questions on dating, and then one on the buybacks. So just following up on Tinder, can you just -- you guys had called out that there's a 200% year on year growth from Jan to Jan last call. Any update there on MAU growth?

And then I think in the prepared remarks, there was a sentence around, don't be surprised if there is future pivots. So can you just elaborate on what you might mean there?

And then the second question on dating, is there was some one-time expenses in the remarks, $3 million in this first quarter, $9 million for the second quarter. I assume that is related to the replatforming.

So you can you just confirm that? And then on the replatforming, can you talk about what you're going to be able to do once that is completed and some of the new flexibility that that offers?

And then, Jeff, on buybacks. So you guys historically have said that you will do buybacks opportunistically when you feel like the stock is at a certain threshold, or when you're not restricted by any kind of corporate activity.

So this is the first time we have seen in a while. Which best explains the buyback in the quarter, and where is the optimism coming from in terms of kicking this back on? Thanks.

Why don't I take the buyback question first, Ross. As we always say, our policy is that we buyback opportunistically, and that's what we did this quarter.

Our policy hasn't changed. We say it every quarter, there's nothing different, it still hasn't changed. And we just did it this quarter, so with that I will pass it back to Greg.

MAU growth, as I said earlier, Q1 was the highest reg quarter we have had, MAU growth continues to be strong. The lot of large numbers, the rate of MAU growth declining somewhat as we had just huge growth last year, but still very solid MAU growth.

In terms of pivots, I guess what I mean is -- I'll give you an example, and maybe it's more granular than you want but it just gives you some insight. In February, when we launched our new release. There was a feature in the product that put an aggregate limitation on the number of right swipes that someone could do in a day.

And the objective there was to effectively help the ecosystem. Meaning, what we wanted to do was improve the value/quality of any given Match, and the way we did that was by limiting the total number of matches. So what we did is we decreased the volume of matches, while increasing the quality.

And we measured that basically through the number of messages sent per Match and a whole bunch of other things. So we succeeded directionally.

And then along with that came the monetization outcome. Meaning, when you hit that limitation, you had the ability to effectively by additional right swipes.

That's worked very well directionally, but we are testing whether we got the calibration right. Meaning, should we constrain volume more to increase quality of matches, should we constrain it less? All that sort of stuff.

And depending on where that ends up, that could have a positive or negative impact on monetization in the near-term given the existing feature that we have. Long-term it doesn't matter because we have got ten other features that we are going to layer on top, et cetera.

But those are the kind of pivots that I mean which make tracking linearly in the early days difficult. Again, it could be a positive, it could be a negative, neither with any long-term implications. It is just in this world of quarterly reporting, and everyone so hawkishly looking at this at a time when that wouldn't ordinarily happen, I'm just preparing the world for non-linearity. It's really nothing more than that.

In terms of the one-time expenses, yes. Basically we are doing a massive project that includes rebuilding our technology to make it much more nimble, much more able to with a given amount of work to leverage the benefits both within a given product line across multiple devices. Desktop, IOS, Android, also across product lines, People Media, Match, et cetera.

So all that's happening. That will result in a smaller workforce. And simultaneously, we are reducing the number of principal locations in Europe from seven to three all as part of the same process.

So if you look at the $3.3 million of Q1 costs, two-thirds of that was severance. And about one-third was contract labor relating to this project. When you look at the $9 million we talked about for Q2, about 80% of it is severance/related legal, with the balance mostly contract labor.

So it's all related to this process that will leave us both faster and leaner at the end. I think that hit all of them.

Yes, that was it. Thanks for the color. Thanks.

Brian Fitzgerald with Jefferies.

Thanks. Joey, in the letter you mentioned some of the experimental marketing spend at Ask. It drove revenue, but didn't deliver to expectations. Can you opine a bit on what you were trying to do there, and maybe why it didn't hit what you wanted to and how you are adjusting that? And what the implications are for the back half of the year?

Sure. So we talked about the hit that Ask took in terms of its ability to market at the beginning of this year. And so we were doing a bunch of experimental things to figure out where to resume the growth or return the growth.

And some of that stuff worked, and some of that stuff didn't. But the nature of it is, you try out different marketing channels or you try out marketing different experiences. And we put a lot of things out there over the course of the quarter.

And we were able to drive revenue through those things, but not really profits. I think where we came out in the beginning of the year, the impact of the business in the beginning of the year, we bounced back from that bottom a little bit. But I don't see us taking back the volume that we lost.

And just to give a sense of it, probably across the websites revenue or websites revenue/page view is in the 10% to 15% range. And we've gotten back a little bit of that, but we didn't get back the majority of it. And it will take, I think, the course of the year to figure out how to build that back.

So it's still experimental. I mentioned in the remarks, we have been investing in the content and unique or proprietary content at Ask to drive a more unique content experience with real reliable answers. And we're rolling that out and we'll see how that goes over the course of the year, but we will have this year to prove that out or not.

Great. And then maybe a quick follow on. You mentioned -- you had comments around improving yield on programmatic inventory at the various properties like dictionary.com.

We think you are doing a great job in terms of the degree of programmatic baked into About. Would you say, hey we're trying to -- that is the gold standard, and we are trying to take some of our other properties and bring them up to About's level of sophistication and yield on the programmatic side, is that a valid point? And then how should we think about timing in terms of movement to that higher level of yield?

So it's definitely a valid point. It's not just through the execution on the product, it is also pulling the data together. So the more data we have across all the properties, and we have a good range of properties in there.

We have dictionary in there, we have ample shopping properties. And the shopping properties have very good data in terms of what users are interested in, and data that advertisers value in terms of targeting users.

So there is the data component too on top of just simply executing better. And adding more sophisticated processes in terms of what you sell premium, what you put into the programmatic marketplaces, and how you price those things.

So it's a combination of all of those things, and I think that continues to phase in over the course of the year. We have more properties slated for basically the new programmatic technology, and I think we're pretty optimistic about what that will do. But it phases in slowly over the course of the year.

Great, thanks.

Jason Helfstein of Oppenheimer.

Thanks, a few questions. Just back on dating for a second.

So I think Match EBITDA was a bit lower than expected, a bit lower than us in the street were looking for. Can you talk about how much you think that was due to perhaps FX being a little worse than you thought? Did you spend a bit more on marketing because you saw higher or you saw more attractive CPAs, so effectively a bit of a pull forward of marketing spend from the second quarter?

And then also, can you clarify the full-year revenue and EBITDA guidance for Match, and if it is a change from the last quarter? As far as for the full-year guidance. Is that a change from the last guidance? Thanks.

Yes. I'd have to go back and reconcile, but at least excluding FX, Match came in basically where I expected it to come in. So I think about it excluding FX, and I am not sure what the exact intra quarter impacts were.

So I don't know if that made it worse or better than where it was three months ago. But I think I said last quarter that we were going to take EBITDA down meaningfully, due to increased investment in the non-dating businesses, which we did. And a variety of other factors, which we talked about in the release.

So it came on where I expected it, and I don't know exactly where the street landed or anything else or how we did against that. But FX impacts were real and I think called out, but I can't reconcile it against where we were. Certainly nothing unexpected happened in the quarter, things went generally as we expected.

In terms of the guidance, I don't think there was intention to meaningfully move the guidance. Again, I don't remember the exact words that were used last quarter, but I think it is still pretty much the same.

We had lower revenue growth in Q1. We expect that revenue growth to increase pretty meaningfully, and be in that increased ballpark the rest of the year with a return to EBITDA growth in Q2. Although still, we are riding a wave of opportunistic marketing spend in dating, which especially in mobile, we have not seen before. So we are enjoying it.

Obviously, that comes at the expense of current period earnings. But then the back half of the year, we expect to make it up and we expect to be in solid double-digit EBITDA growth for the year. So, I'm pretty sure that's generally where we have been if there was any nuance toward differences, they weren't intentional from my part.

I would just add, there was zero change in guidance, just to --

More definitive.

On the earlier comment, I think we said there would be a significant decline in EBITDA, to Greg's point. We had internal numbers, we were on top of our internal number, the street averaged to a higher number than our internal numbers. So there's nothing really driving a quote, miss there, or anything. It was just the math of the street analysts that drove that.

And was there a follow-up there?

Yes, just a quick follow-up on the platform improvements, consolidations. Is there a chance that you get this done sooner? How is that going relatively?

I think the thought would be, you would be done perhaps sometime early next year or early to mid next year. Is there a chance that you get the platform upgrades done this year?

I would say to my limited knowledge, if we got it done ahead of schedule it would be the first in history to do that. That tends not to happen. But I would say it differently in seriousness.

Which is, it's not going to be a single moment when it's done. Meaning there are parts that -- we get that it fits as it goes. For instance, we have shrunk heads, we get some of that benefit on the cost side on particularly the benefits.

If you think about it this way, there are benefits that -- we will get the benefits that apply directly to the Match US business this year. Then, the ability to export those benefits to our other product lines happens at the beginning of next year, so its like a sequence as we roll things on. It's not like there is a single moment where you flip the switch.

That's helpful, thank you.

Brian Nowak with Morgan Stanley.

Great, thanks for taking my questions. The first one, can you talk a little bit more about the Tinder paying sub characteristics? Are they often also paying subs to other dating sites like Match or OkCupid? So are you seeing people pay for multiple sites, or are they switching from OkCupid toward Tinder?

And then the second one, just on the full-year revenue and EBITDA guidance. Recognizing there's a lot more uncertainty this year, given Tinder. But can you just talk a little bit about what is embedded in the guidance for non-Tinder sub growth versus Tinder sub growth for the year? Thanks.

Sure. I don't have specific data that shows -- again, we are a month and a half into this. And I don't have specific data that shows me the specific crossover characteristics of Tinder paying users and other products.

What I will say is that Tinder, unlike these other products, is a global business. And we are getting very strong payment throughout the world. And what we've seen without regard to payers, but just looking at Tinder users generally, is that there is a fair amount of crossover, but still a huge number of people that Tinder has brought into the category on its own.

So it's always been a characteristic of this space that a fair number of users use multiple products. And I don't expect Tinder to be any different. It's one of the reasons that we pursued and continue to pursue a portfolio strategy in this space.

Tinder is clearly the biggest property, certainly that we have, and I think anywhere it's measured correctly. But I think there are people who use other products, and there are people who use this product and both. So there is no overwhelming -- there is no aha information that we have relating to Tinder in this area that differs meaningfully from our other products.

In terms of PMC growth, I think -- just get the -- I want to look at an exact number here for a second. Before I speak out of school. Yes, I think for the full-year, I think if you exclude Tinder, you think about it on a global basis, we are looking at the high single digits. Is what is embedded in our numbers.

So I said earlier that North America ex-Tinder was already there, and international was behind. And I'm not saying it will be an equal blend between the two. But on a blended basis, we think that we are going to get back to the high single-digit blended rate ex-Tinder.

Great, thanks.

Peter Stabler with Wells Fargo Securities.

Good morning. Thanks for taking the questions. A couple for Joey.

Wondering if you could step back and talk a little bit at a high level on the applications business? How you feel you are navigating the mobile transition, and you talked about some of the success or challenges you are seeing on the mobile side ex-Tinder?

And then maybe some comments on the B2B side. Maybe a little color on trends you are seeing there, and how we should be thinking about that issue on the B2B side. Thanks very much.

Sure. On applications, first I'll start by saying that 300 million PCs shipped this year, somewhere in that ballpark. And that is down maybe -- or will ship this year, and that is down maybe 5% year-over-year. I think in five years, there will be 1 billion PCs if you believe it drops 5% a year, and that's probably an aggressive assumption for how quickly it drops.

And when we look at our data, we don't see the people abandoning their PCs for search. So it's small, it's probably a low single-digit percent. We try and look at it a lot of different ways, and it is probably a low single-digit percentage year-over-year.

So we are not seeing -- it's not that we are not seeing the massive growth to mobile, of course, we're just not seeing a huge hit to users searching on PCs. At least our users and our product. Now our users may lag the market by 6 to 18 months or something like that, but still it is not obvious or pronounced in the numbers.

But all that said, of course, we are trying to embrace mobile. I don't think that the search monetization business translates naturally to mobile. But there is alternatives in mobile that have similar features, which is a relatively easy and quick conversion in terms of payment through the app store or in app purchases or advertising.

And we are very early on that with Applon, but we like the progress we have on Applon. We like the progress we have on dictionary.com in terms of our presence in the app store, our distribution, our MAUs, all those. The issue is outside of games. The monetization on our apps is not huge and not yet comparable to what we are doing in search.

So we've got to make those formulas work. I think we like where we are in the product in terms of mobile, in terms of what we have with Applon and others. But getting the monetization our there is going to take us some time, and we've got to get the monetization up to a level where we think we can market profitably at scale.

And we're seeing some early signs of marketing working nicely on Facebook. We're seeing some early signs of marketing start to work on Google. But we've got a long way to go in terms of reaching the same scale we have reached on the desktop business where we are monetizing primarily with search.

In -- B2B was your next question. The B2B business has -- what we're doing well there is we have a nicely monetizing product that has a within the set of principles where we operate, is I think the best monetizing product. And large downloadable branded software players still very much want that service.

We just renewed one of our biggest deals for a three-year renewal. And that's with a leading brand, and that's very encouraging in the product.

I think that there is a segment of the market that has gotten away from us that we are not chasing. And our existing partners have probably lost some share to that segment of the market.

So that's been the confluence of events that has where led to where we are in B2B. I think we have and will have a sustainable core business there, but it's been a drag and especially in terms of year on year. Not so much sequentially anymore, but in terms of year on year it is a drag on the earnings growth.

Very helpful, thanks.

Kerry Rice with Needham.

Thanks, a couple questions. One, back on Tinder, but related to advertising. I think you had a pretty big ad campaign with Budweiser I think in Q1.

Can you talk a little bit about that, and maybe the strategy going forward? Was that a test, or will we continue to see that grow?

And then back on search, and the websites. With things coming down still in the websites, but the content coming up. How do we think about that stabilizing through 2015?

Do we expect to see some growth in the second half of the year, year-over-year? Or we'll just pretty much through 2015 we will see that continue to come down, even though we will see maybe some sequential uptick there? Those are my questions. Thanks.

Yes, on the Bud campaign, it was a great campaign. It was a test in that we set out to learn a bunch, but they paid us to do the test. So it was also just regular old advertising, and it did great.

And I think it taught us a lot. And we are in the process of formulating that ad strategy.

Nothing really to talk about other than it literally blew away our expectations in terms of user engagement. User experience was actually positive not negative in the way we did it. And so we feel really great about the opportunities there, and I'm sure we will have more to talk about on that front next quarter.

And websites growth year on year, I think you should think about it probably over the course of the year being a decline. Maybe by Q4, we get back to growth, I think it's somewhere between Q4 and next year just given the impact from the Ask changes.

Thank you.

Chris Merwin with Barclays.

Great, thank you. So could you just talk a bit about some of the things that you are doing to improve engagement with the app now that you are eliminating likes? Are there any ways to add some personalization like giving people the option of only seeing profiles of people where there's a friend comment?

And I think Hinge still gets brought up as a competitor. And really I think is the only source of differentiation is to showing people with friends and comments, if you could add that layer personalization in except with a much larger user base.

And then secondly, is there any change to the long-term guidance that you gave for the $500 million in Match EBITDA in 2016? Or is that still the right way to think about the opportunity? Thanks.

On the first question, we do a fair amount with the social graphs behind the scenes and the algorithm, but not nearly as much as we should. And I do think that that will play a larger role. Facebook also is changing some of its rules about access to the graph, which I think ultimately the way those rules changes come benefit people with existing scale far more than not.

So I think we feel pretty good about that. Literally, when you think about the Tinder product, it's genius is its simplicity. So I don't think you'll see it cluttered up with a million things.

But the counter to that is, it really hasn't changed very much from the beginning. And I think we've got new leadership in, and a new push to really do a lot of really clever things. And I'm not going to get into what they are now.

But I think over the course of next year, you'll see both a lot of things improve the core functionality. Which is better matches, more engagement through better matches and through easier means of communication, and then also probably a few what I will call game changers. Meaning things that fundamentally enables some new functionality that will be really exciting. And that's a little further down the road.

But we've got big ambitions on the product side. And really in some ways, it's an untended garden. We launched it, and have been harnessing its growth without really putting in the rigor and discipline on the product side where you are constantly improving.

But I think we are bringing to the experience now. So we are very excited.

I somehow lost the second part of the question. What was it?

Sure. Just following up on --

The $500 million, right. I guess I would put it this way. Which is, when I first talked about it, it was a way to think about the growth as a way that could happen.

Since then, unfortunately, we have lost about $15 million to $20 million from pure FX off that number. Meaning, just FX has worked against us in that way. So if you put that aside, I feel good about it. Meaning it is still very hittable, we maybe missed it, as I said last quarter.

If we missed it, I don't think it will be more than by a quarter or two. But that is certainly the zip code -- we're in that zip code for 2016, and not $400 million is the zip code.

That's much more where we think we are. And I think we are probably two quarters away from giving you real thoughts like this is our real outlook. But in terms of a ballpark way to think of where we should land, I think it's still very solid.

All right, thank you.

Mark Mahaney with RBC Capital Markets.

Thanks. Just a question about Home Advisor. Could you just remind us, this $350 million in total revenue this year, what kind of profitability, what kind of EBITDA margins can you get against that?

Either, where you think long-term EBITDA margins for that segment can go, or where they have hit in the past? And then just in terms of the sustainability of growth at Home Advisor, you talk about the instant booking and instant connect. So sounds like there's still some interesting exciting new product developments coming out.

Do you think that of all of the changes and the adjustments you have made to restimulate growth there, you've got most of them out except for maybe those two? Or do you think there's still a lot of new product innovations there, and that gives you a lot of confidence that this kind of growth is relatively sustainable, not just for a couple of quarters but for a couple of years? Thanks.

A couple things. One is, I think at its peak, Home Advisor's EBITDA margins were in the high teens. It right now a little bit below that. And we think that longer-term, the margins can certainly exceed that number as it gets more scale and potentially get materially higher.

If you think about the characteristics of a two-sided marketplace that gets scale. If we drive retention appropriately and the sales force becomes a smaller percentage of the revenue, you can get very high margins.

I think secondly, in terms of new products, we're in the middle of rolling out the direct booking. We think that's a very exciting product, and it will gain traction through liquidity on both sides -- with both the consumers and the service professionals using it. We will have a consumer facing product. We also are rolling a service provider facing product, which is management software that includes calendaring and CRM.

And so we think that both products on both sides of the marketplace are the real key to establishing leadership in the segment. And look, we think -- I don't know what inning we are in, but we think that there is a great deal of innovation yet to be done. We are not done with just these products, and we are going to continue to look at improving the user experience and the quality of the technology on both sides of the marketplace.

It's a pretty significant marketplace. I think there are estimates that $7 billion to $10 billion is spent by service professionals on advertising or home services annually. And I think if you look at the leading players in this space, we are talking about maybe 10% penetration of that.

Of course, then when you involve all of online advertising, I think it gets bigger. But it's been a space that has been slower to move online than other professional categories, given the sophistication of the professionals with technologies. So I think we really can sustain these growth rates longer than the acceleration we've seen over the last three plus quarters in the over 20% range, up to now the over 30% range.

(Operator Instructions)

John Blackledge with Cowen and Company.

Great, thanks. Just a couple follow-ups.

The search deal with Google is up in Q1 2016. Could you give us an update on how discussions are going, either for a renewal or a potentially new deal with new partners? And how would the new deal compare to the current deal?

And then on Home Advisor, Amazon and Google are getting into the local services business, which may validate the size of the market or opportunity. How do think Home Advisor is competitively positioned with some of these larger players getting into the market? Thank you.

On a search deal, we are not going to comment on negotiations. I'll say we have active discussions with all the players in the market, and we will certainly report when we have something to report in there.

Can you repeat the question?

Yes, in Home Advisor. With Amazon and Google getting into the local services business, how do you think Home Advisor is competitively positioned with those players entering the market? Thanks.

Listen, Amazon and Google, obviously, have tremendous reach in traffic and pose a threat any time they decide to enter a business. At the same time, they are also incredibly broad and have a lot of real estate dedicated to a lot of businesses whereas Home Advisor brings a singular brand and focus that they don't. So we will have to respect the reach focus and obviously the technological and operational acumen they bring as a real threats. We do think that Home Advisor's focus is an advantage.

I think secondly, Home Advisor has a network of engaged paying professionals that may hit 100,000 service professionals this year, which is almost double the second largest network that we know of that is public, which is Angie's list. Building a two-sided marketplace with engagement on both sides is a little bit of a different job than Google and Amazon have performed in their core businesses to date. And it's hard.

We know its hard because we have been doing it for a long time, and we haven't always been highly successful. But we do think that having built it, it's something of a moat that we want to keep building, with the obvious risk that the other large players present. So we think we are in a good position.

Thank you.

Victor Anthony of Axiom Capital.

Thanks for taking the call. Just one quick question on Tinder.

I believe you have two pricing schemas. So I wanted to know what the, as far as the sub growth, the subscribers on Tinder, what is the mix between those two pricing cohorts?

And second, on the core Match.com business. Hoping that you could shed some light on churn rates and the direction or the trend of ARPU over the course of the year? Thanks.

There was a little feedback in your question. So I got the second one, the first one had to do with Tinder pricing. But I couldn't quite get the words. Can you try again on the first one?

Well let me take the ARPU one first. Which is, as I said before, I think in virtually all of our businesses, putting aside quarter to quarter seasonal variations, I think pricing is going up over time, year-to-year. I think that there are mix issues though that especially when you -- Tinder is now in the number, that's a little lower-priced, OkCupid is a bigger part, that's a little lower price.

So on average, I think that the rates will come down. The reported aggregate rates will come down slightly over time, but within each -- but that is net. Each product line is holding or increasing its price. With respect to Tinder, I think you're asking about two pricing levels. I think that the two pricing levels are pretty basic. They are different from country to country, where we test things all the time.

But it is sort of a -- there's a general price. And then in general, for younger people, there is a discounted price. Think of it like a student membership or junior membership or whatever analog you want to do, it is the relatively common construct. And we've employed that pretty will.

Right now, we do no discounting or special offers. But over time, that could come as well as the product gets more sophisticated. If that didn't answer your question, please elaborate.

Yes, I was actually more focused on the subs that you attracted in North America. Are they -- what is the mix in terms of the pricing plans?

I don't get into that direct mix. I think that you've got pretty good balance between -- across the age groups from a subs perspective. Obviously, the people in the higher price group are more likely to pay for the product. But there is also a higher price, so they sort of normalize against each other to some extent.

Okay. And how should we think about the churn rates on the core Match business?

They are relatively unchanged over time. They've really been pretty consistent. It's a periodic consumption business.

People come, they use of for while. And then they stop using it, and then many of them come back and use it again. So you've got people coming in and out of the system all the time.

So at any given time, just taking the Match US product as an example, at any given time about 50% of the people are paying have paid previously, stopped paying, and then come back to pay it again. So you've got people coming in and out of the system all the time, which just makes it, I won't say unique, but it's certainly got its own characteristics.

Thank you.

Okay, operator, I think we are going to wrap it up there. Thanks, everybody, for joining the call, and we are obviously available if you have additional questions.

Thanks everybody.

Thank you.

Thank you. And that does conclude today's conference. Thank you for your participation.