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IAC/InterActiveCorp (NASDAQ:IACI)

Q3 2012 Earnings Call

October 24, 2012 11:00 am ET

Executives

Jeffrey W. Kip – Executive Vice President and Chief Financial Officer

Barry Diller – Chairman and Senior Executive

Gregory R. Blatt – Chief Executive Officer

Analysts

Mark Mahaney – Citigroup

Ross Sandler – Deutsche Bank AG

Peter C. Stabler – Wells Fargo Securities LLC

Jason Helfstein – Oppenheimer & Company

Kerry Rice – Needham & Company

Brian P. Fitzgerald – Jefferies & Co., Inc.

Stephen Ju – Credit Suisse

Mark Alan May – Barclays Capital, Inc.

Nat Schindler – Bank Of America Merrill Lynch

Operator

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

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

Jeffrey W. Kip

Thanks. Good morning, everyone. Welcome to our third quarter 2012 earnings call. Barry and Greg will make some brief remarks, after which I’ll return with some detail on each of our businesses and then we’ll go to Q&A.

But first, let me remind you that, during this call, we may discuss our outlook and future performance. These forward-looking statements typically proceeds by words such as we expect, we believe, we anticipate or similar statements. These forward-looking comments are subject to risks and uncertainties and our actual results could differ materially from the views expressed today. Some of these risks have been set forth in our third quarter 2012 press release and our periodic reports filed with the SEC. We will also discuss certain non-GAAP measures today. I refer you to our press release in the Investor Relations section of our website for all comparable GAAP measures and full reconciliations.

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

Barry Diller

Thank you. The figures kind of speak for themselves. I guess that should mean goodbye, but we are here for a while to answer questions et cetera, but it might be interesting simply to highlight the consistency of the company, which is that for 11 quarters our average growth is about 28%. We are a solid dividend paying company. We return cash to shareholders. Over 50% of the stock is repurchased over the last several years and this year-to-date repurchased about 9 million shares over $400 million.

We are acquiring and investing, acquiring in this quarter $350 million of acquisitions and investing in our businesses and creating new businesses. All these are consistent actions; I think they are fairly rare in terms of just box up these attributes of this somewhat unique enterprise. And I think that this consistency has a lot of runway in front of it. So I think now what we do is I turn it over to Mr. Blatt and he will tell you details about what’s happened and what will happen.

Gregory R. Blatt

Thanks, Barry. Actually we’re going to focus on sort of following up on what Barry said, I’m going to focus on sort of the two biggest acquisitions that we’ve done in recent times and that’s About and Meetic. About, we obviously, I think announced and closed during this quarter and About really is one of those rare acquisitions where there is a two-way mutual synergies. I know people like to tout that all the time, I’m not sure it’s usually true, here it really is an strict value to, you will be talking about our search strategy for a while, the Ask is really differentiating itself based on its search attributes, but also its characteristics of the Q&A content provider.

And About is a rare collection of very wide breath high quality content, and what that enables is that we can actually through distributing about content on the Ask experience. We improve the quality of the user experience on Ask, which is obviously very important, and we also increased the distribution of About, in doing so we sort of increased the returns on both products.

Going the other way, we’ve obviously become pretty good at distributing content across the web. As you’ve seen from the Ask results, and we know bring that expertise to About, which again will lift those results.

Finally, here is a small acquisition that we did; I’m actually not sure whether it was this last quarter and quarter before called nRelate, which is a small product that we bought relatively cheap. What that product does is it effectively, if you go to a site like CBSNews.com, which is one of our clients and you go to the bottom of the page, it would typically have something that says something like more stories from CBS, more stories from the web. And it’s a widget that we provide and it enables publishers to redirect people to other pages on their own site, but also to effectively direct people to paid content from other sites.

And as such it needs both publishers and content distributors and About now along with Ask become O&O publishers and advertisers on that network. And together with CBS interactive, which we sort of did the deal with this quarter, becomes three real anchor tenants to give us the scale to play in this area, which we think is exciting for us. So together these attributes drive near term incremental profits, which are exciting, but also serve long-term strategic initiatives, and that’s really just the kind of acquisition we want to be doing at the kind of multiple that we paid.

Meetic is obviously the biggest deal we’ve done prior to that in a while. And going into this year, I said that the goal for the year was pretty clear, we wanted to resurrect growth, while holding EBITDA flat to 2011. And I guess 10 months in we are ready to clear victory on that those objectives. In 2011 Meetic lost over a 100,000 subscribers, but we will end the year up in subscribers year-over-year.

We will also hold the EBITDA flat for the year as against last year despite the meaningful revenue decline, and so really those two objectives have been met. That’s really hard, I think in a subscriber business once it started to go down meaningfully to stop that flow and turn it around, and it’s really been great work both in the part of the Meetic team in France and the Match team in Dallas.

Looking forward while I’m on it, why don’t know I hit the Match segment, which is Meetic will be down EBITDA wise Q4 over Q4, because as I say the objective was for it to be flat year-over-year. We took out a lot of marketing in Q1, moved it to Q4, so we are up through nine months meaningfully over last year, but the goal throughout has been to hold it flat. And if we’ve said all along as conversion and other things improve will increase investment in marketing in the back half of the year, so very much on target.

Going into 2013, we expect solid single-digit revenue growth and sub-growth and double-digit profit growth in Meetic. So really coming of the 2011 year in which we bought it the 2012 transition year, we head into 2013 with solid growth; we are very excited about it.

Rest of Match, while I’m on it, I think the core business, which is the big subscription site in the U.S. certainly dragged have more than we had expected. We had some technology hiccups along the way that hurt our product roadmap, and it’s a general drag on the performance of the site. And the big product initiatives that we did get out this year, while they’ve been very successful in driving increased customer satisfaction and other things, which through payoff on LTV and that sort of thing. They haven’t moved the needle meaningfully on the volume side, but we are very confident in the plan. We got just like we did at Meetic, a whole host of things that we will now do. And I’m highly confident that core after some further declines modestly in Q4 will rebound to healthy levels throughout 2013.

Further the developing growth rates in 2013, which has been negative for a while and going to turn positive so those become meaningful contributors next year, and all in I think to the Match segment next year, we expect a high single low double-digit revenue growth and high teen profit growth with solid margins and overall very good performance.

Just before I turn it over to Jeff, we are in the midst of our 2013 planning process. The lawyer and me like to say that the future is always made up. But we are feeling very, very good about prospects, solid double-digit revenue and profit growth in 2013 on a consolidated basis. So we see a lot good. And with that I’ll turn it over to Jeff.

Jeffrey W. Kip

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

Let me now give a little detail on our segment results for the third quarter and our expectations looking forward. Our Search & Applications revenue was up 43% in the quarter over last year. Our Websites’ revenue growth was up 49% driven by 52% query growth at Ask. And our applications revenue growth was 38% built on 20% query growth in year-over-year monetization gains driven by both optimizations and favorable partner mix in our B2B business. Our segment OIBA margins in the quarter were up year-over-year consistent with our expectations on the last call.

Looking forward, we have no real change in our thinking on revenue for the fourth quarter excluding the impact of the About.com acquisition. We are expecting modest sequential growth versus the third quarter; maybe a little lower than third quarter versus second quarter sequential growth. However, we are now expecting segment OIBA margin in the fourth quarter to expand year-over-year given stronger direct domain in algorithmic traffic than anticipated, and some shifts in our off-line advertising spend from the fourth quarter this year into the first quarter of next year to better optimize our marketing impact.

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

We’ll get about one quarter’s worth of about OIBA in the fourth quarter impacted by some transition expense. We expect to start realizing synergies and grow full year OIBA in 2013 to more than $40 million, roughly the same margin or modestly lower than we’re looking at in 2012. For the rest of the segment in 2013, excluding About of course, we expect to see double-digit revenue growth in modest OIBA margin leverage as we have seen in the past. We really always expect solid revenue growth in Search & Applications over time, but realized that, that growth can be move volatile quarter-to-quarter in this segment than in many of our other businesses.

I’m now going to move on to local, because Greg really already provided color on Match. As in the second quarter, local segment revenue growth in the third quarter was modest as growth is little slower than expected at CityGrid and HomeAdvisor formally known as ServiceMagic has continue to optimize its marketing spend generating greater profitability at lower revenue growth.

OIBA for the segment was roughly flat to the prior year in the quarter. However, HomeAdvisor generated nearly 30% OIBA growth on its optimized marketing spend offset by CityGrid, which going to loss from profit in the prior year. For the fourth quarter in local we’re expecting similar revenue growth to the third and flattish to modestly down OIBA before the expected re-structuring charge we’ll have at CityGrid.

HomeAdvisor’s OIBA will see reduced growth based on investment, spending and support, the re-branding and new site roll out, we recall also that historically, HomeAdviser generates lower revenue and OIBA in the fourth quarter as service request at a seasonal low.

Further, like the third quarter, CityGrid will swing year-on-year from an operating profit to an operating loss and on top of that, we expect the restructuring charge in that business to be in excess of $2 million, which will bring reported OIBA for this segment to low single-digit millions for the quarter. However, we expect that the result of the change in CityGrid will be to make that business significantly more profitable in 2013.

Barry Diller

It’s one of the strength – sorry, of our business that we can invest in these areas; invest in these businesses to make them grow, while still showing very high overall growth for the company. That is something we’re always ready to do and we can do it without adversely affecting the overall results. I think it’s the strength of the company.

Jeffrey W. Kip

Right. And we think that not only will we significantly improve OIBA next year, but we’re going to set ourselves up with improved focus to drive solid revenue and OIBA growth with CityGrid going forward. Further, we anticipate that the HomeAdvisor rebrand and site redesign will lift both volume and quality of traffic and result in accelerated revenue and OIBA growth in 2013.

Wrapping up with the media segment, revenue excluding Newsweek, The Daily Beast, which contributed about $23 million to the segment revenue in the quarter, grew approximately 55% and we expect similar results in the fourth quarter. Revenue growth was driven primarily by Vimeo and Electus with more than 100% and 200% revenue growth respectively.

In terms of our overall level of investment in the media segment, we previously guided to an OIBA loss of approximately $33 million to $38 million for the full year. We now expect incremental operating losses at Newsweek, The Daily Beast as we go through the transition there and currently project an OIBA loss in the media segment before restructuring charges to be a little over the high-end of that loss range for the full year.

Restructuring charges in total at Newsweek will probably be in the range of $5 million to $10 million, we’re still sorting that out, which will be incremental to the operating loss. The restructuring however will materially reduce by close to 80% of the OIBA loss in 2013 versus 2012 for that business, while creating the focus on the digital product needed to drive feature growth.

Looking forward to next year for the media and other segments together, we expect now to materially reduce our OIBA loss overall into the $25 million to $30 million range, while still investing in our promising earlier stage businesses including Vimeo, Electus and newer ventures such as DailyBurn, our online fitness business and Brightline, our e-book publishing startup. As you know with such early stage businesses these numbers can move up or down as we make decisions throughout the course of the year consistence with what Barry just said.

We are now ready to take your questions.

Question-and-Answer Session

Operator

(Operator Instructions) And your first question comes from the line of Mark Mahaney from Citi. Your line is open.

Mark Mahaney – Citigroup

Great. Thanks. So can we talk a little bit about the – could you please talk a little bit about search business is an old question, but as mobile becomes more momentary across the Internet sector, how you think IACI’s search assets are positioned for that? And then could you just briefly comment on the CPR – the CPCs and CPR trends you are seeing in that segment? Thank you.

Gregory R. Blatt

A little trouble hearing you, but I’m going to do my best to answer what I think your question was. On the search side mobile, if you look at our business, we’d sort of break it into two categories, that’s sort of our branded product; we call them Ask, Dictionary, About. And there are mobile strategies very consistent with our desktop strategy. Meaning we’ve got applications where they make sense, certainly, on Ask and Dictionary, we’ve got applications both IOs, Android, plus web-based products. And we are gaining distribution there; queries are up, everything is moving. The problem is like everything on mobile monetization is still lagging behind desktop. But we are there, we are making progress, and I think Q&A wise which is our focus, I think is especially relevant to the web – I mean to the mobile web, which is people searches tend to be more Q&A in that area.

So we are there, monetization for us like everybody else is slower in mobile than it is in desktop. And we are probably not going to be the ones to solve mobile monetization, but we will benefit from those who solve it. Mobile monetization is going to get better over time, there is no question about it.

The applications business is a little different, which is there we don’t have branded products. So unlike Ask or About or sort of you need to be there even when the monetization is in grave, because you’re building up a user base. Our sort of willingness to invest in mobile and the application business is somewhat dependent on the economics. Right now the economics of mobile aren’t ideal, the runway in desktop continues to be huge on the application side.

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

So that has not been a big focus us, although we do think there’s lots of opportunities as monetization improves. That said, we are in mobile, meaning our search products are powering the Symantec sort of mobile browser application of it. So we have things there, but it’s not a big focus for us yet, because to mark the economics aren’t yet great and the opportunity on desktop is still very robust. I think there was a second part of your question, but I really couldn’t make it out through the static.

Mark Mahaney – Citigroup

That’s all I had. Thank you, Greg.

Gregory R. Blatt

Next question.

Operator

Your next question comes from the line of Ross Sandler from Deutsche Bank. Your line is open.

Ross Sandler – Deutsche Bank AG

Thanks guys, I have two questions, first on search and then on personal. So just a follow-up on the search revenue growth, it look like it was strong in both websites and applications, but you have like kind of diverging dynamics between volume growth and revenue per query in each of those two segments.

So can you just talk about what’s going on and what’s driving the divergence in price and volume in search? And then, on the personal side, Greg you guys have always said that online penetration in personal is still very low. What do you think the long-term CAGR is for this category and giving the valuation for IAC, the parent company some would argue that either personal research is being undervalued or not fully captured, so any update on the idea of potentially spinning one of these assets out to unlock additional value? Thanks

Gregory R. Blatt

So, just to walk back through your questions on search. The monetization issue you get – you are getting stronger growth in applications because of; a) partner mix in the B2B business; and then b) some optimizations that we’ve been able to do on the pages there that have driven better monetization. Overall, what you see is with websites, we’ve seen it closer to flat, but that’s because we’ve had slightly stronger international growth than domestic not dramatically, but somewhat, that’s average the growth in RPQ back down towards flat.

Overall, in terms of what you call divergence in volume, like we see the whole business together in a way and we’re growing the whole business 30%, Ask happens to have seen stronger query growth in this quarter and this year, and it’s mainly tied to the ability to market at a positive ROI, we mark it out best where we have a positive ROI, and we’ve had more opportunities in the Ask businesses this year. But we won’t see it as a problematic divergence, I think we’re growing both businesses 20% plus.

So the application business by definition is lumpier, because you have new partners, you have new products, and so you like to have a steady flow in all time hits, sometimes two of them come together sometimes two of them come for their part. So I don't think it's some macro trend into Jeff’s point, its all about getting queries through various forms of marketing and distribution and in one quarter the mix maybe skewed towards one more than the other.

On the personal side, it’s a global business, right, and each market is so different. I think if you look back historically our business, and I haven't done this so this, I will say this maybe factoring incorrect, but I’m pretty sure it’s not. We’ve grown profit, 15% plus a year, every year for like 12 years. I mean, for as long as I’ve been here, I believe we have. And sometimes revenue growth is higher, sometimes its lower, but the business is such that it allows you to sort of continually grow profits while revenue can be a little choppier.

I think that domestically, I think there is still a lot of run rate. If you think about our business in the United States alone, I think we do something like 500,000 to 600,000 people sign up for our sites every week. Globally it’s over a million. We monetize very small portion of those people. So there is clear interest in these products across the way, we are constantly getting better at improving the nature of the product, getting more people to pay, as payment means become easier in places like Latin America, Asia et cetera that modernization would just go up and up and up.

So I am willing to sort of say the CAGR is 17% for the next five years. But I would say that in my mind that sort of how I think about, and I think about it as sort of a overtime a teen profit CAGR, a high-teen profit CAGR into sort of what I call the foreseeable web future, but that’s just a fine point I can put on it. In terms of – just in terms of splitting up, I think, Barry and I’ve answered this question the same for a long time, which is, we like our hand, we think these assets at this moment in time are better off together than apart.

We think this will actually add value to each other and operationally and sort of from talent distribution to know-how distribution to competencies, we think its working really well. As Barry said, there has been this model of consistency in terms of delivering operating results for long time; I don’t think that’s an accident. I think with different mixes of assets that could be not the same thing and I think that – we like the results that this thing is producing. Now we’re also IAC and we think about ever thing from time-to-time. Barry, do you want to amplify that.

Barry Diller

No, I don’t think so. I mean, I agree with you that as a discount that – I think we’ve always suffered. I’d hoped, continue to hope that such consistent performance would narrow that discount. I still think there is a huge discount. But our work is to continue to be consistent at a certain point depending upon this, that and other obvious things. But we would consider spinning off any of our assets, we’ve already spun off. So it’s not like we’re not adapted that, but at this stage we see no reason to do so. Thank you. Next question please.

Operator

Your next question comes from the line of Peter Stabler from Wells Fargo Securities. Your line is open.

Peter C. Stabler – Wells Fargo Securities LLC

Good morning, thanks. A couple of quick questions on the HomeAdvisor rebrand. I am wondering, Greg can you give us a little bit more color about I am thinking there, I know you’ve guided to not spending a lot of money behind this, but nonetheless there are costs involved and we’ve seen that you’ve added some functionality reviews are more prominent, there is an advisory service in here. And then you guided the better profitability, so I'm wondering if we should expect an acceleration on request and expects that’s kind of commensurate with the kind of traffic gains that we think this kind of brand would probably give you over 2013? Thank you.

Gregory R. Blatt

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

And I think for various testing, we just weren’t – neither the marketing nor the product experience was optimized for sort of repeat usage, branded experience, it was highly, highly transactional and there is math behind all this and you think of repeat usage and what's the value of repeat customers and everything else, we do surveys, and you evaluate the brand equity and service magic versus other things and that's what’s Chris’ expertise is.

We think we’ve created a brand that has broader appeal. We certainly think we’ve created a broader product experience that is not just for coming, using it, leaving and forgetting what the hell you did. But it actually had some resonance and real added value and by definition, that will payoff in improved marketing economics, et cetera.

In terms of SRs and everything else, that is a mix. We expect them to grow next year. Obviously, Jeff, indicated sort of what our expectations were, we think it will obviously be a positive contributor or we wouldn’t have done it and we have high hopes for this business. We think it’s a really good experience now.

Barry Diller

I'm really impressed with the work that has been done particularly in the thinking behind the re-branding and most particularly about the added services that are in this site. I think it was not a very good consumer experience before and this is a radical change in terms of really benefiting people who are looking for all sorts of home services and have an inefficient and gnarly process to access them. So I am very impressed thus far and I will have to see but I can't imagine, I shouldn’t say it that way – I have big expectations for the growth of HomeAdvisor over the next years.

Gregory R. Blatt

Also sad that I saw some speculation about how hard it is do sort of a re-brand on the fly with a high volume website and I guess that’s theoretically true but these guys pulled it off without nary a hiccup so, really, really well done in that regard.

Barry Diller

Next question please.

Peter C. Stabler – Wells Fargo Securities LLC

Thank you.

Operator

Your next question comes from the line of Jason Helfstein from Oppenheimer & Company. Your line is open.

Jason Helfstein – Oppenheimer & Company

Two questions. I guess I want to start off just asking I guess Mark’s question a little bit differently. So in the quarter, we saw application queries slow from 26% last quarter to 20% this quarter and I think there is an overall concern that over the next x number of years as people shift to tablets and perhaps those become their primary computers at home, that there won’t be an opportunity for toolbars and presumably the value added to toolbars provide could be recreated in an app, however the monetization of that would be on mobile display, presumably and not search. So I mean can you just talk about how you think about that, I think it’s something that people try to think about what’s the terminal value of the business.

My second question, can you give us any color on Meetic with respect to currency? If it had any impact on the third quarter and then what impact currency might have on the fourth quarter and then one follow-up after that.

Gregory R. Blatt

Just on the mobile issue, look I, the answer is sort of pretty much been the same for a while, which is, we are very, very small and desktop search is very, very big. And while the shift to mobile will impact sort of Google and other very large players in the immediate future, although desktop is still growing, despite uncertainty, the mobile search growth has been incremental to desktop search growth.

We are so small that we grow through adding partners, adding products et cetera. The impacts off of mobile on our business negative. We believe on the application side is years away, meaning there is so much untapped potential in terms of product development and everything else that I don’t believe the mobile issue is affecting our applications business negatively today in anyway. I think that the growth is slowed to still a very healthy number. And I think, we’ve been pretty straight sort of all long, but our long-term expectation mobile aside is not for continued 40% plus growth rates in this business.

We think that, I think Jeff gave you our sort of thoughts for next year. And that’s reflective of sort of just the natural evolution of product development and distribution, partnership development and distribution, we sort of hit them great range. We expect that to continue to go forward and to have solid growth, but I think reading into sort of the slowing from the 40s to the 20s some big macro shift, I just don’t believe that’s what’s behind it at all. Then there was a…

Jason Helfstein – Oppenheimer & Company

Currency question on Meetic third quarter and fourth quarter…

Barry Diller

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

Jason Helfstein – Oppenheimer & Company

And then just a follow-up. So with respect to that guidance you put out there which – it looks like the tape is misinterpreting. Somebody just hit that said, you guided overall OIBA to a loss of the $25 million to $35 million as opposed to say not just the media segment, so I guess that it will get worked out in the tape over the next few hours or so. But to an extent that number is…

Barry Diller

We are not interrupted.

Gregory R. Blatt

We don’t know what you’re talking about.

Jason Helfstein – Oppenheimer & Company

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

Gregory R. Blatt

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

Jason Helfstein – Oppenheimer & Company

Correct. And that hit about 10:30 and that is when the stock started to fall apart. So…

Gregory R. Blatt

People thought that that…

Jason Helfstein – Oppenheimer & Company

I just got an alert from one of these tape services that we use that that was your overall company guidance. So just throwing that out there, but anyway, so I want to actually ask about that…

Barry Diller

We would like to have a broadcast to the world.

Jason Helfstein – Oppenheimer & Company

This is the Twitter generation right?

Gregory R. Blatt

That’s media and other and it’s again, it’s a significant improvement in those two segments over this year and I think that whoever was reading the 8-K would see that it talk about media and other.

Barry Diller

It’s starting right now, it’s buying opportunity.

Jeffrey W. Kip

To buy, yeah.

Jason Helfstein – Oppenheimer & Company

So I’m just asking that question, so that’s about $5 million less than we had in our model, we had a $20 million loss and that’s not a big deal, but to the extent that that is your – is it fair to say your first brush at those numbers before you put this restructuring in place and would that be kind of a conservative estimate if you have to characterize it?

Gregory R. Blatt

That’s our current projection for next year all in across both segments versus this year.

Jeffrey W. Kip

That’s for everything?

Gregory R. Blatt

Yes.

Barry Diller

For everything in media and others.

Gregory R. Blatt

Everything in media and others.

Barry Diller

Yeah, so I should say when everything could be began this construed.

Gregory R. Blatt

But I also, I want to reiterate with that I was said at the beginning, which is this is a category where against our overall was up $25 million to $30 million is a tiny number. And net of that number, we’re delivering solid, solid profit, revenue growth and these are things we believe in. And so, if we start to believe in some of the things little less that the number will come down, and if there are new exciting things will come and talk to you about them, but…

Barry Diller

Always been…

Gregory R. Blatt

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

Barry Diller

I have always on my life. I lived under the thing of the world saying, you lost money. And I said yes, we’ve invested money and starting Fox Network and we are not on the other side of it. I’ve had it said in endless numbers of situations where, why are you losing money? And I say no, no, we are investing money. There is a big difference. It is not as if we are taking the money out, dropping it in the ocean and seeing it sink. I’ve recognized that there is always going to be an issue, I’m kind of mostly amused by it, because I know that investing is the only way to creating. So it lives in my metabolism quite easily.

Jason Helfstein – Oppenheimer & Company

So FYI as we’ve been talking, the stock has rebounded [3.5%], so it looks like we’ll get resolved and et cetera, so any way I’ll let the next person.

Gregory R. Blatt

I’m glad, you got the flash.

Jason Helfstein – Oppenheimer & Company

Yes, thank you.

Gregory R. Blatt

I would only say also about just for a second on mobile. The media and we all know that there is so many different areas. The media is a giant mall, more giant than it’s ever been, so much essentially vacuum out there, with not essentially that much the fact there is no question that we are that mobile is growing, of course it’s growing. Smartphones have just been around for relatively a short period of time, and they’re just getting real functionality. That does not mean that life is over by any stretch. People will use form factors for different purposes. We see screens getting smaller, and we see screens getting bigger. So I think more is made of this in dramatic terms, and I mean not just for today, I mean for many-many years from today. So that’s maybe right. Piece of needless commentary, next question please.

Operator

Your next question comes from the line of Kerry Rice from Needham & Company. Your line is open.

Kerry Rice – Needham & Company

Really most of my questions have been asked, but kind of going back to maybe a housekeeping question as it relates to a Newsweek Daily Beast and the consolidation of that business on the financials, it’s my understanding that InterActive owned the 50% out in the JV, you’ve taken control of that. So was the $23 million, was that the total consolidations of the $23 million was incremental on top of the 50% you owned or in total did Newsweek Daily Beast contribute $23 million to revenue total figure?

Barry Diller

We owned currently around 80% of Newsweek, the Harman Trust owned balance. We have made I think the tough and right decision to cease printing. We know that the results of that are going to dramatically decrease losses in the future, dramatically. And we have a very, very solidly growing Daily Beast and there is some prospect, excuse me, who knows, but some prospect whoever knows when you are making such a dramatic change, but there is real enthusiasm for Newsweek Global, of all digital product.

But, we have no stars in any of our eyes and our plans for next year do not in any – plans for next year for any yield powered are not going to relate in anyway any material way to the results from Newsweek. So it’s not like we’re projecting that this digital product is going to have X or Y subscribers et cetera.

Nevertheless, I mean it’s a painful process as you can imagine. We are having to downsize considerably just appropriate enough, that’s difficult. We are doing it as fair and positively as we can, but you can’t set that aside except to say that the prospects for the enterprise are much improved by this tough, difficult, but necessary action.

Kerry Rice – Needham & Company

Just I guess a clarification. Last quarter in Q2, did you own 50% than of the The Daily Beast, or Newsweek Daily Beast is at the right way to think about the previous ownership?

Barry Diller

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

Kerry Rice – Needham & Company

Okay, thank you.

Gregory R. Blatt

Next question.

Operator

Your next question comes from the line of Brian Fitzgerald from Jeffries. Your line is open.

Brian P. Fitzgerald – Jefferies & Co., Inc.

It’s the integration of About and maybe if you give a little bit color on how you plan to integrate About and drive traffic and content between the interactive sites, and then to the extent that you would use great kind of About content to answer Ask queries. Is it a potential optimization exercise where you would be substituting Ask, core Ask revenue Google generated [tack] revenue with organic display revenue from About. Thanks.

Gregory R. Blatt

We are going to do it in a whole bunch of ways, Ask is a pretty dynamic experience and it really is a land of search results, Q&A sort of pairings from answer forums, community as well as what has typically been sort of licensed or outsourced third party content. About is a good source of that and now that we own About we can use it even more prominently in that regard, I will give you just an example.

Literally, last week, I went to Ask and I typed in a query about what kind of bike should I buy for riding in the city and I typed it and the first thing that came up on the page was a smart answer from About.com followed which were some Q&A parings of ads and some links and I emailed the Head of Ask and said, oh this is the result of the acquisition? He said, no this we were actually doing anyway, but we normally do a lot more of it. So it’s about using About for content on the page, it’s not really negative – something we’re placing other things. But it’s other third party content with what is now an O&O content and the economic benefit of that is obvious, which is if instead of About – today About is on that page and we don’t get any revenue when somebody clicks through it, and now when somebody clicks through it and then clicks on an ad, we get all the revenue.

So it’s incremental distribution in that regard and then as I said there will be incremental distribution the other way as well where we can just bring some techniques to About distribute it beyond Ask.

Barry Diller

That the Q&A process of Ask the natural language question and answer that Ask is pursued over the last year and a half or so. Like that maybe two years at the most A, is a really value added and took a while of course to get enough answers out there both from community and from content. But now the thing the damn thing works, and it’s a very good experience and now you add this incredible amount of content that comes from About. And I don’t want to get heady here be about Ask.com, but I think that its brand promise is now being answered in the product. And I think that has a real chance to create a long-term valuable brand.

Gregory R. Blatt

I think so as well, all the signs are good, we market the product in a variety of ways offline marketing, online marketing, SDO, direct domain, et cetera. And really over the last year the trends have been really good across all of the channels meeting the direct domain is up so the online marketing is up, the SCO is up, everything is up, and that’s driven by brand recognition, VP usage higher quick through rates, et cetera all of which are invariably related to sort of the good customer experience that people are having.

Barry Diller

And with voice recognition, mobile Q&A is going to drive I would think. Anyway, thank you.

Brian P. Fitzgerald – Jefferies & Co., Inc.

Thank you. Thanks guys.

Operator

Your next question comes from the line of Stephen Ju from Credit Suisse. Your line is open.

Stephen Ju – Credit Suisse

Hi, good morning guys. So wondering if we should be reading anything into the move to rebrand the ServiceMagic platform in terms of its longer term positioning because it seems like to us that the platform could also be used for other verticals outside these specific home improvement sector it is now. And further is there any appetite on your end to move the business into more of a CRM based platform which will help manage a contractor schedule, handle payments as well as back end functions to increase stickiness with your supply base? Thank you.

Gregory R. Blatt

With respect to the first question about verticals, I think it’s interesting one of the big things that this new management team did was, they stopped looking at home services as a vertical and recognized that it’s actually multiple verticals meaning an architect is a vertical and a plumber is very different vertical. So I think we are always looking to add verticals where we can do so profitably. We’ve got lot of works during the verticals we have right now. I think that’s unrelated to the name change but I do think we are always looking to add good verticals.

In terms of the CRM, what I think you are saying is, are we looking to create a suite of tools that creates better value add and stickiness for the service providers associated with the business and CRM will be a part of that with closed loops sort of payments and all the rest. The answer is, by God, yes. They are hard to develop, the service professionals in this area. So you have to do it through mobile, you’ve to do it through ease-of-use things, we are working on it. But we do think that really is the – certainly that’s the key to explosive, explosive transformative growth when you can really nail those sorts of things, and we're certainly focused on, but don't have anything dramatic to show for at the moment.

Stephen Ju – Credit Suisse

Understood, thank you.

Barry Diller

Next question please.

Operator

Your next question comes from the line of Mark May from Barclays. Your line is open.

Mark Alan May – Barclays Capital, Inc.

Hi, thanks for taking my questions. I had a couple please. So the core Match business I believe revenues grew something like 8% year-on-year and that's a really respectable number. I think it was a slowdown there from the last couple of quarters growth and you mentioned some things that you're disappointed. And can you, so you are suggesting that growth should be higher than that.

Can you give us a sense of when we should expect to see a better revenue growth number, are we talking next quarter or the initiatives that you put into place take longer to play out? And then secondly on use of cash and buybacks, there were a number of questions during the quarter when the About.com deal was announced, is there a change in the company’s plans here, and we did see that the company did only purchase $60 million worth of cash in the quarter. Can you talk about was that purely because you were blacked out during part of the quarter or is there a new way that we should be thinking about use of cash going forward.

Gregory R. Blatt

On the Match side, I think let me put my comments in a little bit of context, which is I think 8% core revenue growth in and out of itself is not bad, I'm not disappointed in that long-term. I think with the mix of business that we have going forward and obviously the core number keeps getting bigger and bigger within the United States sort of a double-digit and high double-digit growth becomes harder. So, I think we've got a very, very healthy business, if you stay in core revenue growth in the high single digits going forward you can grow profits meaningfully into the high teens and even 20s with growth we’re developing is going to come et cetera.

What I was commenting on was really the trend, which is it’s been trending down, as I highlighted I expected to trend down a little bit further in fourth quarter, which is just the nature of sort of the cycle it takes to reverse it, and I think that was again we had some technology hiccups. We did some product things, which I think are great long term, and are having a meaningful impact on the consumer experience, but aren’t necessarily impacting the number of consumers we have to begin with, and so that’s a long term investments, which doesn’t pay off in immediate returns.

So I think my comment on disappointment was that it’s come down quicker than I’d like, It’s going to go down a little bit more, it’s then going to reverse itself over the course of next year, and I think 8%, 10% whatever those are healthy long term core subscriber growth numbers, and obviously rather have more. But my ability to predict the different long term in core U.S. subscriber growth between 8% and 10% is beyond my abilities and 8%, 10%, 12% whatever I think it will get healthy again and have robust trend, and then as I mentioned the developing business is now going to start to become a meaningful contributor. Meetic is a meaningful contributor and so overall we feel really good about the prospects of the business.

Mark Alan May – Barclays Capital, Inc.

Okay that’s great. Our model by the way is 8.4% in Q2 of next year, but …

Gregory R. Blatt

Thank you for that. We will try to live up to your aspirations.

Barry Diller

On the cash again I used over dues mandate of the word consistent, we’ve used all the verities just acquisitions, dividends, repatriation in terms of share repurchases, we’re going to continue that. There is nothing to say – we have nothing to say about a quarter in which we do not buy stock. We have always said, we are opportunistic and we may go for a quarter or two quarters or whatever. Doesn’t have any change in our cash philosophy which have been very, very consistent. And I think reading anything into a lack of purchase in a quarter as a trend or a direction is just incorrect. Thank you.

One final question please. Hello? We seem to – is there anybody out there?

Operator

And your next question is…

Barry Diller

Did you take a nap?

Operator

Sorry, your next question comes from the line of Nat Schindler from Bank of America Merrill Lynch. Your line is open.

Barry Diller

Thank you.

Nat Schindler – Bank Of America Merrill Lynch

Yes, hi guys, thank you for taking my question. Just for modeling purposes now that you are giving us more detail on websites versus applications, is there any fundamental margin differential between those two businesses?

Barry Diller

They are really pretty comparable in the same general range.

Gregory R. Blatt

It can bounce around because you have different mixes of things, but I don’t think its right to model any meaningful difference between the two.

Nat Schindler – Bank Of America Merrill Lynch

Okay, great. Thank you.

Gregory R. Blatt

So Jeff, can you tell us anymore about this then we’ll end the call, but I think it is a headline.

Jeffrey W. Kip

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

Barry Diller

Well of course it’s incorrect but how could they do that?

Jeffrey W. Kip

I believe the term would be clerical error.

Barry Diller

In a way where information spreads quickly, the old kind of thing.

Nat Schindler – Bank Of America Merrill Lynch

What is the source?

Gregory R. Blatt

Consider this one.

Jeffrey W. Kip

We’re going to filing it anyway.

Barry Diller

Rumors get out there while truth is putting its boots on. So hopefully, we can get this information out. So at least, if you can make the judgments to our operating results, which we’re happy for them to do, it’s hard when there is a factual misreporting that says we are going to be at a loss.

Nat Schindler – Bank Of America Merrill Lynch

So anyway, this helps and…

Barry Diller

Thanks for pointing that out.

Gregory R. Blatt

Yeah, we really appreciate you are pointing that out. We were sitting here thinking we can’t be talking this badly and conceivable that we are that blank in terms of answering your questions. Anyway it’s nice to be with you all again and we look forward to, you are having a good holiday season and we will be back with you after the first of the year.

Barry Diller

Thanks very much.

Gregory R. Blatt

Thanks everybody.

Operator

This concludes today’s conference call. You may now disconnect.

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