IAC Misses Sales Estimate on Declines in Publishing, Search

  • New Match customers lured by lower-cost online dating sites
  • Dividend canceled to focus on buybacks, deals, deleveraging

IAC/InterActiveCorp, the online media company controlled by Barry Diller, reported fourth-quarter revenue that missed estimates as sales declined in the newly reorganized publishing and applications units.

Revenue increased 2.2 percent to $848.7 million, the company said Tuesday in a statement, trailing the average analysts’ estimate of $866.1 million. Profit, excluding some items, was 75 cents a share compared with 92 cents projected by analysts, according to data compiled by Bloomberg.

The company has reorganized its segments into home services marketplace HomeAdvisor, a video group led by Vimeo, publishing such as About.com and Ask.com, applications and Match Group Inc., the dating websites partially spun out in a November initial public offering. HomeAdvisor and video are new focuses for IAC and areas where the company is pushing for long-term growth.

Combined, revenue from the publishing and applications segments -- previously reported as one group under search and applications -- declined 11 percent from a year earlier, compared with a 4.5 percent drop in the previous quarter.

Publishing Weakness

Changes at Google have pressured sales of Ask.com and other direct marketing brands, which hurt the publishing unit, Joey Levin, IAC chief executive officer, said in a statement. Meanwhile, IAC has been working to change its approach on search browsers, a move that has led some businesses to end their partnerships with the company, he said. That caused a 31 percent decline in applications revenue from partnerships.

“We continued to deal with changes in Google’s ecosystem over the course of 2015 that have impacted our ability to market,” Levin said of the Ask.com and direct marketing brands business. “We expect these trends to continue in 2016 as the mobile impact rolls in under the new contract.”

IAC fell last quarter after announcing an extended search and advertising deal for mobile platforms with Google that was less lucrative than the previous arrangement. Diller, the chairman who controls about 43.6 percent of the voting power as of April, said this month on “Bloomberg Go” that the new deal took almost two years to complete.

Dating Sites

IAC still owns 85 percent of Match Group, which accounted for the biggest portion of the company’s sales. Match Group sales of $267.6 million also missed the average estimate of $275.9 million. Average revenue per paying user fell 15 percent to 53 cents -- much of the decline was attributed to an increase in the proportion of paying customers at the group’s lower-cost websites such as Tinder, PlentyOfFish and OkCupid, Match said in a statement. Some analysts have cited concerns about Tinder cannibalizing other Match properties. 

IAC shares have declined 18 percent since Match Group’s IPO, “to the point where Match now accounts for the entire value,” Dan Kurnos, an analyst at Benchmark Co., wrote in a note before the results.

IAC shares fell as much as 1.7 percent in extended trading, after tumbling 2.1 percent to $50.87 at Tuesday’s close in New York. Match dropped as much as 9.8 percent after the earnings were released. Earlier, it declined 4.7 percent to $12.19.

IAC’s publishing unit sales declined 13 percent in the quarter to $179.5 million while applications revenue fell 7.7 percent to $179.2, the company said. While HomeAdvisor sales climbed 27 percent to $91.8 million, the segment still makes up only about 11 percent of the company’s revenue.

The company reported a net loss of $31.8 million, or 38 cents a share, from a profit of $70.2 million, or 78 cents, a year earlier. IAC also is suspending dividends for itself and Match Group to focus on acquisitions and buybacks for the parent company and deleveraging for the dating sites, Levin said.

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