IAC Declines After Extending Lower-Margin Deal With Google

  • Pact involves users going to sites through search giant
  • IAC properties include Ask, Dictionary.com and Investopedia

IAC/InterActiveCorp. dropped after saying it had extended a search and advertising deal for mobile platforms with Google Inc. that will be less lucrative than their previous arrangement.

IAC, which is controlled by billionaire Barry Diller, declined 4.4 percent to $64.57 at the close Tuesday in New York, the sharpest one-day loss in two months. The stock has climbed 6.2 percent this year.

New York-based IAC said in a statement late Monday that Google will continue to provide sponsored listings and other search-related services for desktop and mobile platforms through March 2020. The company expects to generate $4 billion in revenue over the term of the deal. On mobile platforms, the Google deal will become nonexclusive at a lower revenue share for IAC.

Revenue gained from consumers accessing IAC properties such as Ask, About.com, Dictionary.com and Investopedia through Google is at a lower margin than revenue gained from consumers accessing the platforms directly or through other sources, according to IAC.

“About 85 percent of revenue from the search and apps segment comes from Google,” IAC Chief Executive Officer Joey Levin said on a conference call Tuesday. “That’s gone down a bit over time, and the non-Google revenue is higher margin than Google revenue.”

The Google relationship for desktop users will be largely exclusive, and IAC said that the search giant’s products “remain the strongest in the world.”

The arrangement with Google will have the most impact on IAC’s search and applications, the company’s largest division. Google mobile revenue as part of search and applications currently makes up about 15 percent of the segment’s revenue, Levin said. Revenue from that segment fell about 4.5 percent in the latest quarter, the third straight decline.

The company on Monday reported third-quarter sales of $838.56 million. Analysts on average had expected $805.36 million, according to data compiled by Bloomberg. Profit excluding some items was $1.01 a share, beating the 78 cents projected by analysts.

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