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Executives

Thomas J. McInerney - Executive Vice President and Chief Financial Officer

Barry Diller - Chairmen and Chief Executive Officer

Analysts

Jennifer Watson - Goldman Sachs & Co

Ross Sandler - RBC Capital Markets

Jeetil J. Patel - Deutsche Bank North America

Mark Mahaney - Citigroup

Douglas Anmuth - Barclays Capital

Justin Post - Banc of America Merrill Lynch

Jeffrey Lindsay - Stanford Bernstein

Bridget Weishaar - JP Morgan

Scott Kessler - S&P Equity Research

Alan Gould - Natexis Bleichroeder Inc.

Jeff Rath - Canaccord Adams

IAC/InterActiveCorp. (IACI) Q4 2008 Earnings Call February 3, 2008 11:00 AM ET

Operator: Good morning. My name is Christie and I will be your conference operator today. At this time, I would like to welcome everyone to the IAC Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. (Operator Instructions)

Now I turn the call over to Tom McInerney, Executive Vice President and Chief Financial Officer. Please go ahead sir.

Thomas J. McInerney

Thanks operator and everyone for joining us this morning for our fourth quarter earnings call. Barry will make some brief remarks, after which I will come back to quickly take through some housekeeping issues.

But first, I'll remind you that during this call, we may discuss our outlook for future performance. These forward-looking statements typically are preceded by words such as 'we expect', 'we believe', 'we anticipate', or similar statements. These forward-looking statements are subject to risks and uncertainties and our actual results could differ materially from the views expressed today. Some of these risks have been set forth in our Q4 2008 press release and our periodic reports filed with the SEC.

We will also discuss certain non-GAAP measures and I refer you to our press release and the 'Investor Relations' section of our website for all comparable GAAP measures and full reconciliations.

With that I will turn it over to Barry.

Barry Diller

Thank you, Tom. Good morning, everybody. We're going to follow our... I guess its our second time maybe third in terms of trying to get the questions as quickly as possible, and not take long with the speeches, with lots of this versus that etcetera figures.

I got only a couple of things of say. First on our cash, I know cash is... should be certainly with this company where 80% of our value is in cash. So its more than appropriate topic of interest, concern whatever opportunity.

First, I don't think its exactly gathering cobwebs yet. We have made few small acquisitions in the single and low teens of million. All of these are... further extend are current business. And we have probably four, five, six different transactions in various stages that if we did them all, which I doubt we do, totaled may be $100 million.

Now the truth is that nothing is the news on the cash, other than to say again. But I can't imagine that we're going to spend anywhere near half our capital on the inline acquisition. And that borrowing anything transformational that of course you can't predict. We'll repay trade cash to the shareholders.

But there is no timeline to this and we feel no anxiety to begin this process before certainly the next month tell us what known... what unknown opportunities might present themselves. Right now I say that I've looked to the latter half of the year for us doing anything specific in regard to repatriating the cash.

And on Ask and Thomas going to talk bit about Ask and I think talk a bit about first quarter trends. Correct?

Thomas J. McInerney

Correct. Yes.

Barry Diller

I feel that most of the issues not everything that has been self inflicted. Not out of mistakes but out of aspirations for getting that to real and consistent growth. And for real and consistent growth, we're going to have to wait a little more quarters and it is of course speculative. Our problems had been both in the speed of the service and in less than great results. And that, in spite of the large increases that we got in queries from large marketing efforts, they failed to retain users and they failed to increase frequency of use and this was the pattern of last year.

In October, we launched a new product which was a great improvement in speed and in getting to the right answers. But the initial consequence that's where I stay self inflicted. Was we got less queries because we were making the product more efficient.

However the testing in the fourth quarter showed us fast retention and frequency were rising which is what we'd hope. That was our theory. And that together with spending very little marketing money in the fourth quarter lead to the decline.

Now as to the future, we've changed our tactics on marketing. We're now going after vertical sites that gives us both traffic and gives users then a taste of a better experience so that they'll come back. Our Dictionary.com purchase last year was an example of that. It really taught us that that was an excellent way to grow. We just announced our deal with NASCAR which has the widely dedicated audience of 75 million and we are going to back up with a very focused marketing campaign over the next three months. Then we're going to add between 8 to 10 other verticals as the year rolls out.

That's the strategy for Ask, if we are right, we'll see query growth begin to increase significantly by the beginning... by the probably middle of the year. Now, I invite of course all questions about this and I just wanted to give a slight overview to the Ask question, and the cash question, because I know it's certainly topmost on everyone's mind. So, with that Tom you want to?

Let me just marry that with some insight into current trends as we see them and highlight them, material items specific to Q1 that will impact results. In the media and advertising segment which includes our search businesses of course, for the first quarter we expect revenue to decline in the low to mid 20% range year-over-year. The anticipated revenue decline is due to a variety of factors both at Ask and in our two of our business that range from the purely external economic issues to the elective decisions we made in the product and marketing area that we feel best drive long term growth but are hurting us in this short term to a difficult environment and this is Barry just alluded to.

While complicated confluence of factors, the headline is that during the fourth quarter, we saw increasingly negative volume in modernization trends and in January these trends largely continued. Most of this revenue decline will fall through to the bottom line to the naturally high operating leverage in the search business as well as an anticipated and strategic increase in marketing and Ask associated with the NASCAR partnership.

So we'll see little to no profit in this segment in Q1. We'll discuss current analysis and plans here more fully in Q&A as it's probably more fluid and effective way to discuss the topic than a long scripted recitation of metrics and plans.

Beyond media and advertising, Match continues to perform well and we see no discernible impact from the economy. ServiceMagic is still growing revenue at a double digit rate while Q4 year-on-year OIBA trends continue at flattish to last year as we invest in our international business.

And in emerging businesses, in recent months we have taken action to rationalize our efforts here. Selling to third parties or otherwise folding certain efforts into other of our operations and reducing costs. In 2008, emerging business negatively impacted OIBA by $35 million and in 2009 we expect this number to be reduced to approximately half of that, although there is a degree of seasonality in this with Q1 being a more than proportional amount of this.

Only InstantAction, our significant effort at online gaming and the very successful The Daily Beast are efforts now requiring material investments and other businesses including Pronto are generating profits. While we remain opened to opportunities always, we expect to remain focus and do not expect to widen our scope here going forward.

With respect to taxes, I mentioned last quarter that we would expect cash flow in 2009 to exceed OIBA due to some tax benefits related to the EPI sale and certain other items. This remains the case. These items will offset any taxes owed on the shop proceeds which are already reflected in the year-end balance sheet and we should be roughly net positive another 75 million in cash taxes over the course of the year. Note, this receivable is reflected in the year-end balance sheet and is expected to be realized in Q4. With that, operator, lets get the questions.

Question-and-Answer Session

Operator

(Operator Instructions). Our first question comes from Jennifer Watson with Goldman Sachs. Your line is open.

Jennifer Watson - Goldman Sachs & Co

Great. Thank you for taking in my question. Can you talk a little bit about the cost of the NASCAR marketing campaign and why that campaign you think will be better served and targeted than the campaigns that Ask have run in the past?

Barry Diller

Sure. Well first of all, I don't think we are going to disclose the costs for NASCAR, though I will tell you that the marketing plans for the first quarter which includes all of the NASCAR costs within their total which includes costs, I think it does Tom, doesn't it. (inaudible).

Thomas McInerney

Yeah, it's a material percentage but we will... because if they year long rate... we will advertise some of that over the course.

Barry Diller

It is not... and as you all know when the old sponsorships probably have come down, it is not in the scheme of things an expensive proposition. And the reason that we are doing this rather than having a marketing campaign that essentially says we are better than Google, is the real change in our tactics. This is an audience of 75 million, NASCAR. What we are doing is designing a NASCAR search site that will knock the socks off anybody who has any interest in NASCAR and these people are tremendously interested in every detail.

And that centrally that vertical search site, we think is going to generate traffic to us that we also think because we think the experience based upon all of our testament, the experience, the positive one that that will increase our queries in a targeted way and this is what we're doing in terms of the... really the strategy for Ask is to vertical by vertical, to not go frontly against the larger player, Google. But in fact, to go for audiences that will come to us because the search results we deliver are manifestly better than anybody else could deliver because of the structured content we're able to put in. Now that is our strategy. That's what it is.

Jennifer Watson - Goldman Sachs & Co

Great. Thank you.

Operator

Our next question comes from Ross Sandler with RBC Capital Markets. Your line is open.

Ross Sandler - RBC Capital Markets

Hey guys, thanks for taking the question. Just wondering if you can get a little bit more granular on the 1Q trends you're seeing in media and advertising. So, if we assume kind of a similar decline for the network side, I would get something kind of like a down 10 to 15 year-over-year for the proprietary revenue. Can you just talk a little bit about the difference between query and pricing trends, revenue per query trend and then may be also the differences you are seeing between ask.com and Fun Web within media and advertising? And I've got one follow up. Thanks.

Thomas McInerney

Sure Ross, there is a lot in there but let me make couple of comments. One is, the trends we saw which you remember sitting barely a year ago, we told this was going to happen on course of '08 where the network business declined on revenue side as the percentage of the total and you saw that each and every quarter tracking through was largely as a results of changes we made in businesses we emphasized, de-emphasized as a result of the Google arrangement.

In Q1, we still see a little bit of that effect. Because we had a little bit of that business in Q1 '08. But really after Q1 it will start to mitigate. So I don't think you are going to see these dramatic differences in growth rates between network and proprietary going forward. Although all of these businesses are very dynamic, so we'll see. In general what we've seen kind of trend wise in really both of these businesses aside from that fact is that in a CPC performance weakened really over the course of Q4 and into January. So, for Q4 we may have seen raw CPCs to us kind of absent to other effect changes to the products, our deal etcetera, kind of down low single digits and changes in coverage were able to offset that. So kind of on a pure revenue per query basis, we were probably up in the low single digits again, absent changes we made to the products of the deal etcetera.

And in the first quarter of this year we're probably down high single-digit, low double-digits in that regard. So it's been a... it's kind of marked deterioration in that environment and then you couple that with some of the changes Barry alluded to in terms of the product which impacts both raw queries as well as the modernization of those queries and you get that kind of composite revenue effect I mentioned. And I think you have to Ask versus Fun Web, I think in general everything I have said applies to both economic impact etcetera. I think there is some difference, business specific issues that might spark in terms of the two of our business and pressure on CPA, marketing and stuff. But in general those trends are the same across both businesses.

Ross Sandler - RBC Capital Markets

Okay. Great and then the margin on the media and advertising side, we're running kind of 19-20% middle of the '08 and a tick down to 15% in the fourth quarter. What are you guys think as the... the way to think about long-term margins within media and advertising, somewhere between 15 to 20% range or should be revert back to closer to 20, where we were for most of the 2008?

Thomas McInerney

I think it's really honestly impossible to answer in this environment and at this moment in time. I'd say this, we have learned how through the use of the technology and a variety of other things, how to operate the business without massive investment via capital or people or anything like that in the business. So, there is no reason from kind of a structural perspective, the business shouldn't have the types of margins it once had, which were as you alluded to up in the 20% range. Clearly though that depends on getting volume growth going into the right direction and getting at least of the nine (ph) if not favorable pricing environment and we don't have either of those right now. Given both of those, which are obviously a big to do and some of which is out of our hands, some of which is not, the margin characteristics of the business remain intact.

Barry Diller

If our strategy works and query grows.

Thomas McInerney

And the environment improves.

Barry Diller

Well, the environment is going to improve. The question is only when. But if our strategy works and queries go up, we're going to have fine margins. It's a business where of course, like all of these internet businesses where scale is the tale. Next question please.

Operator

Our next question comes from the line of Jeetil Patel from Deutsche Bank. Your line is open.

Jeetil Patel - Deutsche Bank North America

Hey guys, a couple of questions. First of all, I guess, you... the changes you made in October on the Ask in turn (ph) that had an impact on queries and frequency. I guess, is there any way you can quantify what type of improvement you're seeing, is it on the order of a let say 0 to 10% or 10% or greater in terms of the uptick as it relates to general queries and kind loyalty?

Second, I guess when you look at the verticals out there that you are targeting, this kind of this segment and modeling strategy, I guess any sort of flavors that we should be thinking about in terms of verticals or demographics that you're looking to address? And then I have a quick follow up?

Thomas McInerney

The... Jeetil on that, first on the product impact, we measured... its obviously a moving target but when we tested the new products before it launched and we continue to test it against the limited deploy of people using the old product. The revenue per... the revenue difference, let me answer it that way, on the new product versus the old was initially as wide as about 15-16% and that's because people are finding what they are looking for in the algorithmic results quicker; they are not clicking through to the sponsored links; they are not having to surf around as much and obviously we think that's a great thing for the consumer experience and our testing shows that really over the course of this year and as Barry said probably by the second half of this year, we will earn that back because we'll start to see and we've started to see but its early as days kind of frequency and retention. So, if you think of that 15 to 16% negative effect evening out to kind of flat just on the old product versus the new over the course of roughly three quarters, you get a sense of how much better is on the frequency and retention side.

On the verticals, I'll kick it off and then Barry may want to add to it, but the focus I am not going to discuss specifics today but the focus is to look at being areas where there's a lot of audience, a lot of passionate audience, like NASCAR, that's not a small audience where we can really differentiate on the product side. So it's not so much a demographic play as where can we do a compellingly better job than the competition by integrating structured data, Q&A data, and Ask natural technology and where we have ideas to market it, because obviously you got to go out and tell people about it.

Barry Diller

Lifestyle and rather than so to speak demographics where there are large audiences helps certainly in area of the vertical that we are going to attack on a vertical basis. We've got actually... we've got many more in the 8 to 10 we've identified. We think that this is an area that is not particular limited and that's what where we're going to pursue.

Jeetil Patel - Deutsche Bank North America

Just a follow-up but I know the environment is pretty challenging right now and seems like more than norm out there is defined 5, 10, 15% kind of bodies are cast out there in the model to take out. I guess have you guys looked at the cost structure of the business in light of the economic environment, kind of the business at hand and are there opportunities to maybe shed some headcount in different business areas or just take down cost by about 5 to 10% across the Board?

Thomas McInerney

Well, Jeetil, there is always that opportunity and obviously we're looking at this constantly. I think we've not yet taken the type of action, not to take it too literally but that I think you are alluding to which is one of this across the Board big swags. Going into this year with the environment being what it was, we just quite frankly did not think it was the right thing to do because we thought it was counter to our own interest given the resources we have and given our long term aspiration.

Obviously we've done something, we've done... I'll say some of the normal things, we have a higher increase, we have a no salary increase freeze, we've combined some of our smaller operations, I alluded to that in the emerging business, rationalization. So, we're attacking it so far on a case-by-case other than those kind of across the Board freezes. But in terms of outright reduction, a case-by-case business... a case-by-case where we don't think investing is the right thing to do. Obviously, this is fluid, this is dynamic. We'll evaluate it over the course of the year and the minute we stop believing in the long-term growth of the business, we'll look at it much more aggressively.

Barry Diller

Yeah, that's the right way to think of it. We don't have... some companies have extreme short-term issue. We have no short-term issues. Our issues are, is the strategy right in both our search business, our local business and in the one or two other things that we are pursuing, certainly our Match business, personals business. But is the strategy right? In this period, the purpose for us is to make that strategy during times when other people may have short-term issues but make that strategy come whole in the most moment we can bring to it. That does not mean we want to also or we are not mindful that we should not be splurging money around and we... I think we've taken the proper actions now to deal with that. But that's really what we are going to do, what we're going to do, unless of course conditions completely change. But as much as I can say that I don't think we're having any turnaround in the economy soon. I don't think its going to affect us in that regard.

Jeetil Patel - Deutsche Bank North America

Thank you.

Operator

Our next question comes from the line of Mark Mahaney from Citi. Your line is open.

Mark Mahaney - Citigroup

Thank you very much, two questions please. Barry, in terms of M&A priorities, you've talked generally in the past about being interested in the local and the search advertising place sectors. Is that largely... would that largely continue to be the focus of M&A priorities? And then Tom, you made a comment about search seeing high single-digit, low double-digit declines in Q1 so far. Could you just clarify, were you referring to CPCs or RPS with that statement or both? Thank you.

Barry Diller

Yeah you're correct. The areas for us and acquisitions are to expand our own businesses in the primary areas of search and local.

Thomas McInerney

And Mark on your second question, that's high single to low double-digit was a reference specifically to CPCs. What we call RPQs or others call RPS, is wider than that in Ask business which is roughly half our search volume because of the aforementioned product changes. So, that's kind of high single, low double-digit will be just environmental and then the product changes we've made add... maybe double that. In the other half of our search business which is the Fun Web products business, or as I referred to it earlier, Mindspark which is internal nomenclature we use. That is, RPS is roughly equivalent to CPC because we don't have those comparable product changes which are adding to the declines.

Mark Mahaney - Citigroup

Thank you Tom. Thank you Barry.

Barry Diller

Next question please.

Operator

Our next question comes from Doug Anmuth from Barclays Capital. Your line is open.

Douglas Anmuth - Barclays Capital

Thanks for taking my questions. The first one is also on Ask and I was hoping if you could provide some details on the length of the Symantec deal that you announced this morning? Then also on it's economics and in particular, are there any upfront cost involved or is it more a rep share as the toolbars generate searches for Ask? And then how should we think about the costs here relative to the NASCAR deal? Then I have a follow up as well.

Thomas McInerney

Let me take the, let me take the NASCAR one the first. We're not going to discuss the specifics but I think as Barry alluded to, our Q1... to do this right, out Q1 marketing plan for Ask is a couple to few million more than Q1 was a year ago. And last year was not a big advertising year at Ask to begin with and while the marketing plan for Ask for the full year is not set, the '08 figures were probably less than half they were in '07 and by virtue of the NASCAR arrangement or anything else we are not locked into anything close to '07 figures. So we have lot of flexibility between where we were last year and where we were the prior year which is a big $50 million difference. To see what happens in Q1, see how the test goes, see how volume trends and adjust accordingly. This is not a big locked in amount that's going to be dragging on our P&L all year unless we electively decide to spend more behind it and we'll keep you posted on that. On the Symantec length, let me check on that, because I don't know the answer to that one off the top of my head, the economic arrangement, I think one of your question was, the economics on that. It's a pure rep (ph) share, so again there is no...

Barry Diller

No commitment.

Thomas McInerney

Yeah there is no commitment other than as we earn revenues we give them a portion.

Barry Diller

Do you want to follow up.

Douglas Anmuth - Barclays Capital

Yeah my follow up Barry. Just curious if you have any thoughts or insight into Liberty selling its shares.

Barry Diller

None.

Douglas Anmuth - Barclays Capital

Thank you.

Barry Diller

Next question please.

Operator

Our next question comes from Justin Post with Merrill Lynch. Your line is open.

Justin Post - Banc of America Merrill Lynch

Thanks. First I would like start with the Match margins. It looks like subscribers increased but in the release you said that you've cut marketing. Is that a temporary thing, are you seeing some efficiencies in that business?

Thomas McInerney

I think it's largely timing and temporary, the marketing mix is a worldwide mix across multiple geographies, 70% domestic, 30% international and the full gamut of offline to online and we've said, I think long periods of time that we did not knew Match; the real margin expansion opportunity. Over the last couple of years, I've been proven wrong on that and we have gotten some margin. So, I guess I'll say tactically we are going to always look to optimize that marketing mix but strategically I wouldn't think there is a lot of margin opportunities long term from doing so.

Justin Post - Banc of America Merrill Lynch

And are you... last year it looks like OIBA was around 25%, is that kind of where you think a good long term number is or can you comment on that at all?

Thomas McInerney

Again, I think we are not looking at it as a margin expansion we are certainly not going into this year or beyond looking for it to decline. It will play out as it plays out; the business is off to a good start, it's been I think probably the one truly recession proof knock wood so far business we have and we'll see what the year brings.

Justin Post - Banc of America Merrill Lynch

And then on the cash, given such a meaningful portion of the stock value, how do you plan to invest that? What kind of returns are you targeting this year for that balance?

Thomas McInerney

Very conservatively and low, respectively. We've opted for prudence over anything else here and so 99% of the cash is in either government money market funds or with banks that have half a dozen names you would completely approve of and there is only a couple of minor exceptions to that for tax reasons and some various other things. And we're going to continue to do that. So we are getting the kinds of rate you would expect from that strategy which is a point or less or whatever it may be and we are going to continue to be very prudent there.

Justin Post - Banc of America Merrill Lynch

And last one. Maybe you can help us with the book tax rate and then, it looks like you're going to be paying less cash taxes than the book tax rate. What balance sheet account should be getting the benefit of not paying of those taxes?

Thomas McInerney

Longer term the booked tax rate on the adjusted EPS side is still going to be up in the high thirties, all other factors that have gone into that, we've talked about that before, remain the case. We had a better rate than that this quarter because we were able to utilize some foreign tax credits, and we'll continue to look for those opportunities. But I think long-term, it will be in the high thirties. The cash deposit impulse we expect from cash... taxes over the course of this year will come out of the current asset side on the income tax receivable line.

Justin Post - Banc of America Merrill Lynch

Great. Thank you.

Thomas McInerney

And I did get an answer to the earlier question. The Symantec deal is two years.

Barry Diller

Next question please.

Operator: Our next question comes from Jeffrey Lindsay with Stanford Bernstein. Your line is open.

Jeffrey Lindsay - Stanford Bernstein

Thank you. And could I ask a couple of questions. Is the de-emphasis of partnerships process in Ask.com that drove down the revenues. Is that process still on going or should we think of it now as being finished? And then could you give us an indication, just what percentage of Ask.com's revenues and from overseas might be subject to the same currency effects as the Match.com revenues? Then I had one follow on.

Thomas McInerney

Sure. The distribution... distribution is a funny word because it gets used by us and others in a variety of different context but the lines... the references you are pulling out from the release and our remarks, there was one specific activity we were engaged in where we were distributing Google sponsored listing kind of outside of the Ask product if you will, and when renewed that deal effective 1/1/'08, we basically got out of that business with a couple of small exceptions. The deal was effective 1/1/'08, but we still had material revenues from it in Q1 '08. So, I think this is the last quarter that we're currently in, that you'll see a negative variance from that and then that effect will essentially be gone. And I am sorry your second question?

Jeffrey Lindsay - Stanford Bernstein

Just... Ask.com how significant overseas revenues and would they be subject to the same currency headwinds, if you will that Match.com saw?

Thomas McInerney

Yeah, I mean significant, it's a minority of their business, primarily in the U.K. for FX is a factor but relative to the revenue changes either for Q4 or Q1 we've been talking about, it's not a large factor.

Jeffrey Lindsay - Stanford Bernstein

Okay, I had one follow on. We just wanted to ask basically, would your success in the free dating website DownToEarth, would that potentially be cannibalistic for Match.com revenues?

Thomas McInerney

No, we don't think so. It's a bit of an experiment. We just, we launched it in beta form, and Match is sweet spot, obviously, it appeals to a broad cross section of demographics, but its sweet spot is late 20s and older and this site is really targeted at that kind of late teens, early 20s, people that don't have the money generally to pay for a subscription site. We refer to kind of the on ramp to dating. It's an experiment, it will be ad supported.

Barry Diller

You could call it kind of a overnight dating.

Thomas McInerney

We'll see how it goes, it's very early stage and really targeted at different piece of the market.

Jeffrey Lindsay - Stanford Bernstein

Thank you.

Barry Diller

Next question please.

Operator

Our next question comes from the line Imran Khan with JP Morgan. Your line is open.

Bridget Weishaar - JP Morgan

Hi this Bridget Weishaar, in for Imran. We have two questions, one is can you just discuss in general what you're seeing in terms of advertisers spend trends and the timing of those spend? And second if you could discuss your acquisition of Sendori and how it fits with the overall strategy and if you could give us any idea of historical revenues there?

Thomas McInerney

On the advertiser spend trends, I mean as I alluded to earlier, I think this is raw CPC is kind of absent, our own effects are down, call it 8 to 12, I said high or low, high single, low double. So call it, maybe 8% to 12% in January which is lower and worse than it was in Q4, but we will see. This historically has proven to be very dynamic. People can adjust these spending patterns through search multiple times per day. Some of our businesses adjust their spend. So, it's hard to talk about trends other than what you see at the moment. We've not talk about, and I'll also add that on the display side, it's probably more challenged, which is not a surprise given the nature of display relative to search, and January got off to a very slow start and kind of almost up to 50% down, that was a small percentage of our overall business, but again, I think kind of indicative of the broader environment.

Sendori added very, very low revenues kind of not material to IAC, historically but a business we bought for a small amount of money, just to extend our Ask sponsored listings business which has been quite successful off of a small base. Operating an ad network akin to Google sponsored listings network, just much smaller. And they have a very interesting product and strategy to monetize directly traffic off of domain parks. And we think it will be a great source of network traffic and ad budget for our Ask sponsored listing business which continues to grow very nicely and very profitably.

Bridget Weishaar - JP Morgan

Right. Thanks.

Barry Diller

Next question please.

Operator

Our next question comes from Scott Kessler with Standard & Poor’s. Your line is open.

Scott Kessler - S&P Equity Research

Thanks a lot. Barry referenced the notion of repatriating some of your capital potential in the second half of his year. Could you be more specific in terms of what do you mean, are you talking about repurchases, are you talking about potential dividends, whether a recurring one, a special one? What did you have in mind, thanks?

Barry Diller

The truth is, we have all of it in mind. And I would think, and again just think that the weight would probably be on repurchases, but it may not be. We really will look at all of it and see what's the best instrument for the utilization of the cash for the shareholders benefit and, so I can't be more specific than that.

Scott Kessler - S&P Equity Research

Right. That's fair enough. Thanks

Barry Diller

You're welcome. Next question please.

Operator

(Operator Instructions) Our next question comes from Alan Gould with Natexis. Your line is open.

Alan Gould - Natexis Bleichroeder Inc.

Thank you. First, a couple of operational questions and one-follow up on the cash. Operationally, is the first quarter OIBDA a good run rate for '09?

Thomas McInerney

No, I mean if you...

Alan Gould - Natexis Bleichroeder Inc.

In corporate OIBDA?

Thomas McInerney

Oh, I'm sorry, corporate expense, I thought you meant consolidated.

Alan Gould - Natexis Bleichroeder Inc.

No corporate, I am sorry.

Thomas McInerney

Close, we had a couple of million dollars of items that were in effects reserve reversals in a clean up at year end. But, I think we're on track for kind of 60, 80ish for the full year. I think that would imply a quarterly that's slightly above where we were in Q4. But we've gotten those expenses down from this spin-off and we're watching them pretty closely.

Alan Gould - Natexis Bleichroeder Inc.

And Tom I know it's early, but with the 1Q media OIBA breakeven versus 37 million last year, is it fair to assume the full year media will be down at least 25%?

Thomas McInerney

I think it's too early. I think as we said, there is... the external environment is a big unknown. We've slung from plus five on the kind of absent our own FX RPS, RPQ from in late in Q4 to minus 8 to 12 in a matter of a few weeks. That type of activity and that's just one piece of it, but that's in a sense, we are all profit depending on what you do on the cost side in reaction to it. So, I think we're certainly looking, I mean Barry alluded to the actions we're taking with an eye towards resuming growth and in terms of the things we control in the second half. And I think that that will play out the way it plays out. Obviously, if that happens the real question will be run rate as opposed to what it adds up to for the year, but it's really premature.

Alan Gould - Natexis Bleichroeder Inc.

And Barry given, as you said cash is 80% of your value and your comments that borrowing a transformational acquisition, which I don't think you've used that terminology before. How married are you to searching related? Would you look back at your old media businesses again given how low those evaluations have become?

Barry Diller

No, I don't think so. It's unlikely. I think all of, so to speak, new media has its challenges too but I think old media particularly the distribution side of it is very challenged, it has nothing to do with macroeconomics, it has to do with technology, so I mean I don't really have any interest in that.

Alan Gould - Natexis Bleichroeder Inc.

Okay. Thank you.

Barry Diller

You're welcome. Next question, I think this is... we'll do one more question.

Thomas McInerney

Yeah I think that's...

Barry Diller

Okay, that's good.

Operator: Okay, our last question comes from the line of Jeff Rath with Canaccord Adams. Your line is open.

Jeff Rath - Canaccord Adams

Can you hear me?

Thomas McInerney

Yes we can.

Barry Diller

Oh yeah, yes.

Jeff Rath - Canaccord Adams

Yes. Great. There is bit of a debate there around the economic sensitivity of serve local advertising, local search if you will in an economic downturn. I mean you've given us a lot of granularity on sort of on a divisional basis, but can you talk a little bit I guess, your CitySearch business, how is that performing in this difficult time? Is it underperforming? Is it proving to be more economically sensitive any color there? I have follow up.

Thomas McInerney

Yeah, good question Jeff. It's certainly softened a bit in Q4 and into Q1, not to the degree we've seen on the search side and I think it's an unknown, I mean no one's obliviously been through anything like this in particularly in a web era, so its unknown at this point whether its impact is less recession prone or impacted than on some of the other types of advertising, or is it just a slower lag, it makes sense that it's a slower lag to a degree because we have small business, I mean compare the search marketing where people are adjusting pricing four times a day to a local business operator who maybe one's a month there's something like that is thinking about what he is doing on the marketing side. So, there is clearly a lag there, but I'd say kind of Q4, Q1 flat to down slightly but it has softened so we'll have to see it.

Barry Diller

If you took count, you'd say it's actually the strongest sector. If you took it up until

Thomas McInerney

Only advertising (inaudible).

Barry Diller

(inaudible) in advertising. It may of course as Tom said, it maybe, there maybe a lag there but certainly as it relates to display advertising which has been really affected by this and I do not see it certainly changing anytime soon. And probably search is down anywhere from 7 or 8% to 15% and I think that's kind of holding. So, it is for the moment, the local part is better than anything else.

Thomas McInerney

Yeah.

Jeff Rath - Canaccord Adams

Great, just to follow up I if could, just to attack the search question the broader search question in a different way. Again you provided us lots of color there, it seems though if I could color it a little bit, it seems like you saw a weakness kind of mid-fourth quarter and then overall CPC trends seems to stabilize a little bit and now we've seen a pretty material decline say since early in the year till now. Is that a good way to think about the overall CPC trends excluding the company specific initiatives that you're currently undertaking?

Thomas McInerney

Jeff, I don't think we're back and look at Q4 in terms of... I didn't look by week-by-week in terms of where it hit and everything else. I know it got weaker late in the quarter.

Jeff Rath - Canaccord Adams

Right.

Thomas McInerney

I can't speak to mid versus late whatever. I also know it got materially weaker on the CPC side in January and that's perhaps not a surprise, right. I mean in tough times the last time you cut is in your peak period and Q4 still has a seasonality for a lot of web spenders and then you come back from the year and everybody says let's see how this plays out. And so January has been the most, more pronounced effect.

Great that's it. Thanks very much.

Barry Diller

Thank you all. Thanks for spending some time with us. This is skeptic... are separate in a side from economic world, the depressing economic world that we live under. It's a bit of a wait and see for the operating businesses of this company. The strategies that we have are clear, they haven't come through yet and the indications are good but they are not determinative. So, I think we'll be probably have a good deal more information on our next call and I think we'll have fairly conclusive on the call after that about certainly the strategy in Ask and how it's working. Other than that, thank you and have good day.

Operator

This concludes the conference call for today. You may now disconnect your lines.

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Source: IAC/InterActiveCorp. Q4 2008 Earnings Call Transcript
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