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Web 3.0 & IAC (Part 1)

Posted on Monday, Sep 17th 2007

Introduction

IAC (Nasdaq: IACI) is an interactive conglomerate operating more than 60 diversified brands in sectors being transformed by the Internet, online and offline. The Company’s business can be classified into five segments:

* Retailing (HSN, Cornerstone Brands, Shoebuy.com)
* Membership & Subscriptions (Interval International, Match.com, Entertainment Publications)
* Transactions (Ticketmaster, LendingTree, RealEstate.com, ServiceMagic)
* Emerging Businesses (Gifts.com, Pronto, CollegeHumor, Very Short List)
* Media & Advertising (Ask.com, Citysearch, Evite).

IAC’s mission is “to harness the power of interactivity to make daily life easier and more productive for people all over the world”. According to comScore, IAC had 153 million worldwide unique monthly users and its sites are visited approximately 680 million times each month.

2Q07 results of the Company were below the market expectations. The Company saw its revenues rise by a meager 5.6% y-o-y to $1.5 billion. (Operating Income Before Adjustments) OIBA fell to $136 million in 2Q07 from $165 million in the same period a year ago. Adjusted EPS was down one cent from a year ago period to $0.31 (vs. $0.33 consensus).

OIBA declined at in the Ticketmaster, HSN and Lending Tree segments. Ticketmaster’s revenue growth was only 3% y-o-y due to weaker domestic concert schedule. Lending Tree continues to operate in a difficult home loan market and lower margins on conforming loans. The Media & Advertising segment saw revenues increase by 33% y-o-y. However, marketing spending on ASK resulted in OIBA rising by only 9% y-o-y.

Operating income declined in the second quarter to $54 million, due in part to an increase in selling and marketing expense. GAAP Diluted EPS for the quarter was $0.32, compared to $0.17 in the prior year period. Free cash flow generated during the first six months of 2007 was $194 million, with $407 million in net cash provided by operating activities.

Growth from syndicated search and Fun Web Products drove strong revenue growth in Media & Advertising, while increased transaction volume and membership at Interval and worldwide growth in subscribers at Match.com drove revenue in Membership & Subscriptions.

IAC has reshuffled the top management in a number of its businesses. Recently the Company has appointed Jonathan L. Sanchez Senior Vice President and Chief Communications Officer. The Company appointed C.D. Davies as CEO of LendingTree, LLC, and Bob Harris as the company’s President and COO in May.

Recently, IAC added social features to its online comparison-shopping site Pronto.com. The Company’s Home Shopping Network (HSN) has been struggling and IAC has been looking at ways to popularize and pull up the under performing HSN business, especially by leveraging online shopping which is a $116 billion market place. The Company is bullish on online-shopping in the long-term. The new social networking features are cool and will definitely give Pronto.com a leg up but it will still take time for IAC to replicate the HSN success online.

The Company entered the personal finance category in late August by launching FiLife in partnership with Dow Jones. The Company had launched Ask® Mobile GPS™ in May 2007, a GPS-enabled lifestyle application featuring the best of Ask.com, Citysearch, and Evite.com, along with instant location finder and turn-by-turn navigation.

(To Be Continued)

This segment is part 1 in the series : Web 3.0 & IAC
1 2 3 4 5

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