Rough Q2 for IAC

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Rough Q2 For IAC

By: Jordan McCollum
2007-08-01

I wonder if Asks parent company is regretting spending the big bucks on Crispin, Bogusky + Porter yet"increased advertising costs for Ask.com was one of the many factors...

...cited in contributing to poor results in this years Q2, as reported today.

Overall, InterActiveCorps revenue rose 5.6% over last years Q2, to $1.51 billion (after adjusting for special items and one-time gains, as Reuters put it). Their net profit nearly doubled to $95.97 million, up from $53.8 million last year. However, this growth only represents a one-cent increase in earnings per share over last years (and falls one cent short of analysts expectations).

Of course, in a business that includes everything from Ask.com to Match.com, from Ticketmaster to LendingTree to the Home Shopping Network, there are a lot of bills to pay"and a lot of businesses that can really undermine the companys performance. Reuters attributes most of these fluctuations to IACs biggest businesses: the Home Shopping Network and Ticketmaster, both of which have seen some rough times lately. (However, the new Home Shopping Europe helped contribute to the upside, as well.)

As for specifics on Ask.coms performance, Ask.com is part of their Media & Advertising business. That business, which is also home to Citysearch and Evite, saw revenues of $174 million, up from $131 million in Q2 2006. However, due primarily to increased marketing costs and higher revenue share payments to third parties, the business ended up operating at a loss of $10.7 million (better than last years $11.3 million loss, resulting in 6% growth).

The official earnings report acknowledges a few key points from this business:

Media & Advertising revenue growth was driven by an increase in queries from syndicated search and increased queries and revenue per query at Fun Web Products, partially offset by lower revenue per query across most other properties. As expected, users need fewer clicks to find what they are looking for on the new Ask.com, resulting in lower revenue per query since the launch in June but higher frequency and retention. Within IAC Search & Media, network revenue growth outpaced that of proprietary revenue, primarily due to an increase in syndicated sponsored listings. Proprietary revenue grew on the strength of Fun Web Products, partially offset by declines at Ask.com.

Media & Advertising Operating Income Before Amortization benefited from a reduction in the current year expense of $7 million resulting from the capitalization and amortization of costs related to the distribution of toolbars which began on April 1, 2007. These costs had previously been expensed as incurred. Absent this benefit, profits would have declined year-over-year due primarily to increased marketing costs and higher revenue share payments to third parties.

With at least some people disappointed with the results from every major search engine, will this negatively impact search marketing? Has search really begun to level out?

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About the Author:
Jordan McCollum is a staff writer for the popular marketing blog Marketing Pilgrim. She has worked in search engine optimization with clients including 3M, Little Giant Ladders and ADP. After graduating from Brigham Young University, Jordan joined the SEO copywriting team at the Internet marketing firm 10x Marketing. After 10x closed its doors in December 2006, Jordan became a freelance writer and Internet marketing consultant specializing in SEO. She also has extensive experience with web analytics, conversion rate enhancement and e-mail marketing.


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