IAC

Type	Public
Traded as	NASDAQ: IACI
Industry	Internet
Founded	1995
Headquarters	IAC HQ New York, NY USA
Area served	Worldwide
Key people	Barry Diller (Chairman) & (Senior Executive) Greg Blatt (CEO)
Products	Interactive Online
Revenue	$1.64 billion as of 2010
Operating income	$ 169.20 million as of 2010
Net income	$ 99.36 million as of 2010
Total assets	$ 3.44 billion as of 2010
Total equity	$ 2.43 billion as of 2010
Employees	3,200 as of March 2011
Website	http://www.iac.com

New York headquarters

InterActiveCorp (legal name: IAC/InterActiveCorp) is an American internet company with over 50 brands across 40 countries headquartered in New York City.^[1] The Chairman and Senior Executive is Barry Diller,^[2][3] who was previously head of Paramount Pictures, Fox Broadcasting and USA Broadcasting. On August 2008, IAC launched a divestiture and spun-off four of its bigger segments - HSN, Interval Leisure Group (IILG), Ticketmaster, |Interval Leisure Group (ILG) and Tree.com due to deteriorating financial performances in these operations.^[4] Following this restructuring, IAC recorded total revenues of $1.4 billion in 2008 and had been posting net profits for the four quarters ended in 31 October 2009. The new IAC includes its media and subscription-related businesses such as Ask.com search engine, Match.com dating service, fun web products, gaming site iWon.com, web portal Excite.com and myWay.com, online video site Vimeo and virtual world Zwinky. IAC plans to expand its emerging Internet businesses and invest part of its $1.8 billion cash pile in new media production segment in the face of fierce competition in the search business.^[5]

Overview[link]

IAC operates in the internet businesses that focuses on the following segments - media & advertising, online dating services, online matching services for consumers and home service professionals and other emerging businesses that provide online content/services.^[6] Since inception, IAC has grown from a media and electronic retailing company into an internet conglomerate through a series of acquisitions. In August 2008, IAC spun-off HSN, TicketMaster, Interval Leisure Group and Tree.com in hope to refocus on its core business. After the divestiture, IAC re-categorizes its business segments to media & advertising, Match, ServiceMagic and emerging businesses. Under the media & advertising segment, IAC operates Ask.com that provide search and related advertising services plus toolbars and applications. Other sites include Citysearch, an online local city guide and Evite, an online social planning website. For the Match segment, the company offers subscription-based online dating services through company-owned websites like Match.com. ServiceMagic provides services by matching consumers' home service requests with home service professionals. Other emerging businesses consist of Pronto.com, a comparison search engine that allows users to compare prices for various products offered by online retailers and Shoebuy.com, an online footwear and related apparel and accessories retail.^[7]

History[link]

Start[link]

IAC was incorporated in 1986 under the name Silver King Broadcasting Company as a subsidiary of Home Shopping Network. In 1992, Silver King was spun-off to Home Shopping Network shareholders as a separately traded public company.

The company has undergone several name changes. February 1998: HSN, Inc. was renamed USA Networks, Inc. May 2002: USA Networks, Inc. was renamed USA Interactive June 2003: USA Interactive was renamed InterActiveCorp July 2004: InterActiveCorp was renamed IAC/InterActiveCorp

Internet Empire[link]

In 2003, USA Interactive (USAI), announced a string of takeovers that are transforming it into an Internet superpower. "We want to be the largest and most profitable e-commerce company utilizing multiple brands," Diller, chief executive officer of USAI, said in an interview. Since early 2002, USA Interactive has announced it will acquire LendingTree, which pairs home buyers with lenders and real-estate agents online; travel agent Expedia, which lets consumers make travel reservations online; British UDate.com, an online personals site; the outstanding shares of Hotels.com, an online provider of discount lodging bookings; and the remaining shares of Ticketmaster, the electronic-ticketing agency in which USAI first took a 50 percent stake in 1997. In the past year, the company snapped up a string of offline travel-related companies, including the Entertainment discount-coupon book, the vacation-exchange network Interval International and Britain's TV Travel Group. USAI already owned various "back office" services, thanks to acquisitions made a few years ago. In 1999, for example, it bought one of the world's biggest customer call-center operations, Precision Response, which also conducts e-mail marketing campaigns and database services. USAI still owns the Home Shopping Network. As a result of its takeovers, USA Interactive appears poised to take in more than $6 billion in revenue in 2003 — more than Amazon.com, eBay, Yahoo! or any other Internet company except America Online. Diller said his Internet binge is not over. He intends to buy more Net gems and hinted that LendingTree points in the direction he is headed.

Split Up[link]

Tough times in IAC's larger operations such as HSN, TicketMaster, Lending Tree and Interval led to a divestiture by the company in 2008. Diller's plan to meld an array of online assets into a cohesive Internet-based business never quite happened. HSN had been suffering from poor merchandising decisions - it ordered too many products which led to excess inventory and larger shipping and handling costs. Ticketmaster also encountered rising ticketing royalty rates and advertising expenses. The situation worsened when the ticketing service provider lost one of its biggest customers, Live Nation (LYV). LendingTree.com was hit badly by the slumping US market. By shrinking the company down to a core of Internet businesses, IAC hopes to better capitalize its resources on the Web media and services.^[8]

Sales breakdown in 2007 among the five segments were as follows: HSN 48% 'New' IAC 25% Ticket Master 19% Lending Tree 3% Interval 5%

In August 2008, IAC was split into five publicly traded companies: home shopping network HSN Inc., time-share business Interval Leisure Group Inc. (NASDAQ: IILG), ticketing service Ticketmaster, real estate business Tree.com Inc (NASDAQ: TREE) and the New IAC.^[9]

"The mistake we made was to think that we could tame this in a relatively short period of time - five years," Diller said. The experience taught him the perils of too much complexity, he said "I think agglomeration is not only no longer on, I don't think it's ever going to be on again,". By then, the pared-down IAC consists of Web properties that fall broadly under what Diller refers to as search, match, emerging business and local categories, like Ask and online guide Citysearch.

Surging Back[link]

In December, 2010, Greg Blatt was put in place as Barry Diller’s successor. Since then, IAC' revenues increase year-over-year. Search revenue accelerated further on a year-over-year basis to 47% growth during Q1 2012, up from 31% growth in fourth-quarter 2011. The Search business is strong across all three product units, destination, consumer and distribution, which was operated by Ask.com, Mindspark, Dictionary.com and Pronto.com. Match was $6 million above expectations and earnings before interest, taxes, depreciation and amortization (Ebitda) of $103 million increased 41% year-over-year during Q1 2012, including Meetic. Ebitda margin at Match was 16%, flat year-over-year. IAC has designed toolbars to work with Chrome [a product of Google (GOOG)] and will launch its first Mindspark mobile app in the second quarter of 2012. Paid subscribers to the core-Match dating sites increased 12% year-over-year to 1.8 million during Q1 2012, excluding Meetic and smaller ad-supported dating sites. Additionally, IAC restructured some business units, combining CityGrid and ServiceMagic into a Local segment. This is a comparable business unit against recent initial public offerings such as Angie's List and Yelp, which could unlock value as the segment grows.

In February 2011, IAC acquired the free-to-contact dating site, OkCupid, for $50 million.^[10]

In April 2011, IAC extended the deal with Google to hand over all search advertising on Ask.com and other IAC search products to the search giant, which was worth $3.5 billion in 2007, to end on March 31, 2016.^[11]

On February 14, 2012, Barry Diller introduced Aereo, an Internet television service. In March 2012 in New York City, Aereo will stream all of the broadcast networks to smartphones, tablets and televisions with Internet capability.^[12]

IAC continues to repurchase stock, buying 5.1 million shares since the 2011 Q4. IAC authorized an additional 10 million share-repurchase plan after May 2012.

Business[link]

Financials[link]

IAC's revenues were approximately $1.45 billion in 2008, recording an increase of 5% from 2007. Operating income in 2008 stood at $100,098 million, a 24% increase as compared to $80,484 million in 2007. The increase in revenues is primarily attributable to strong revenue growth at Pronto and Shoebuy in the emerging businesses. On top of that, revenues in Media & Advertising also improved due to improved revenue per query on proprietary search properties. ICA's search engines' results are powered by Google through a paid listing supply agreement. ServiceMatch also received a 27% increase in search requests driven by its marketing effort throughout the year.

However, the 24% growth in operating income before amortization in 2008 is much lesser versus in 2007, where operating income increased by 127% from 2006.^[13] This is due to the operating expenses IAC incurred in the restructuring of its Emerging Businesses, as well as operating expenses associated with a number of nascent businesses like InstantAction.com, RushmoreDrive.com and Connected Ventures. The result was further impacted by an additional $37.9 million expenses associated with the Spin-off in August 2008.^[14]

Segments[link]

Media & Advertising(53.2% of 2008 revenues, 63% of 2008 operating income before amortization[link]

IAC's Media & Advertising segment consists of IAC Search & Media, Citysearch, and Evite. The Search & Media division is the focus of this segment, as it includes Ask.com, Mindspark Interactive Network, Dictionary.com which provides information search services, consumer applications, and targeted advertising. A substantial amount of its search business revenues are derived from paid listings like advertisements powered by Google.

In 2008, ICA's search business earned $778,809, only a 2.7% increase compared to the prior year. Despite the small growth in revenue in this segment, operating income before amortization increased 58% to $139.6 million, primarily due to the drop in traffic acquisition costs that amounted $43.7 million.^[15]

Since its acquisition of Ask.com in 2005, the company has significantly increased its focus - and spending - on its information searching and online advertising businesses. Despite heavy investment in its younger businesses, IAC faces strong competition from established providers such as Google (GOOG), Yahoo! (YHOO), and MSN, and is running Ask.com at a loss to gain market share and awareness amongst consumers.

Match (8% of 2008 revenue, 41% of 2008 operating income before amortization)[link]

This segment serves 1.3 million customers through its subscription-based online personal services that provides a private and convenient environment for single adults to meet other singles. The brands and businesses within our Match segment are dating sites such as Match.com, uDate.com, and Chemistry.com.^[16] Revenues for this segment in 2008 were $365.5 million, recording an increase of 5% from 2007. However, operating income before amortization grew 16% to $91.3 million, increasing at a faster rate than revenue due to lower traffic acquisition costs.

Service Magic (4% of revenue, 12% of 2008 operating income before amortization)[link]

Service Magic is an online marketplace that helps connect consumers with pre-screened and customer-rated home service professionals. Revenues contribution to IAC from this segment was up by 33% to $123.9 million. The growth is mainly attributable to a more active service provider and a 27% increase in service requests.^[17] As of December 31, 2008, Service Magic has more than 56,000 home service professionals providing home services in more than 500 categories.

Emerging Businesses (13% of revenue, -16% of 2008 operating income before amortization)[link]

Emerging Businesses segment consists mainly of Shoebuy, an Internet retailer of footwear and related apparel and accessories and Pronto, a merchandise price comparison search engine. Other sites include Gifts.com, Connected Ventures, InstantAction.com, VeryShortList.com, RushmoreDrive.com, Life123.com and The Daily Beast, among other nascent businesses that provide online content and/or services.^[18] Emerging Businesses recorded total revenue of $196.6 million in 2008, up by 35% since 2007. Shoebuy and Pronto contribute majority of the revenue growth, primarily due to improved customer acquisitions and monetization. On the contrary, operating loss before amortization increased to -$35.5 million in 2008, which is up 348% compared to the prior year. The increased in losses was caused by an increased in expenditures in relation to the company's decision to restructure its interests in its business ventures. Also, the jump in operating losses was also due to an increased in expenses associated with various early state businesses like InstantAction.com, RushmoreDrive.com and Connected Ventures.

Trends and Forces[link]

Spinning off major segments in a return to its core business[link]

Since Barry Diller spun off hiss Expedia travel business into a separate company, figuring that was the reason why investors were confused by the ungainly IAC. Judging from the stock price, investors were just as confused as ever, even as IAC said it was "proud to have so many great brands under one roof." In 2008, Diller split up IAC into five separate publicly traded companies. As envisioned, IAC would be more or less a media and entertainment company, maintaining businesses including Ask.com, Citysearch, Evite, CollegeHumor and Bloglines. The other companies would be centered around HSN, TicketMaster, and Interval International. "We've been a complex enterprise almost from the very beginning 12 years ago, with hundreds of transactions over those years," he said in 2008. "And while we've created a lot of value, I've always believed our complexity and many mouthfuls of sentences to explain who we are and what our strategy is have hampered clarity and understanding with all our constituencies, particularly investors." After the split-up into five units, IAC becomes a more Web-focused company, returning to its core business - Internet and advertising business

Acquisitions continue to capitalize the growth of online markets[link]

IAC operates in a variety of markets online. In most of these markets, such as online retailing, the internet is already widely accepted as a means for commerce. However, the company has also made investments in developing markets, which are in their early stages of growth. In April 2009, IAC bought UrbanSpoon, a restaurant recommendation service. Although terms of the deal were not disclosed, it is believed that the acquisition was worth within the millions of dollars range.^[19]

Integrating Around Ask.com[link]

After acquiring Ask.com in 2005, IAC has started to integrate its other offerings around the search site. By adding Ask.com toolbars and applications to other sites owned by IAC, it can drive higher search volumes and generate more revenues from targeted advertisements. Also, Ask.com can use its targeted results to help push traffic to other IAC sites. While this strategy depends on Ask.com gaining popularity and market share, it will help expose the site to users of IAC's other products, which are often already strong brands. A distribution partner of Google, Ask.com is ranked the fourth largest search engine and has a market share of approximately 4%, despite Google's dominance.^[20]

Internet Advertising and E-commerce Strong During a Recession[link]

Even though total advertising spending had declined due to the US economic slow down, internet advertising and e-commerce have proven to be surprisingly robust. Online sales went up 17% in the first quarter of 2008, driven by targeted search ads that have helped online stores outperform their physical counterparts.^[21] Online ad prices are believed to be moving to an upward trend after it bottomed in January 2009. Rebounding ad-prices, together with its partnership with Google will benefit IAC in terms of revenue growth and search traffics.^[22]

Properties[link]

IAC owns several companies and websites, among these are:^[23]

Notes[link]

External links[link]

Companies portal

• InterActiveCorp's Official website