Commentary

IAC Revenue Rose On Stronger Search: A Repeat Story Lacking Lasting Results

Magnifying GlassMarketers were tuned into a little surprise Wednesday when they discovered that IAC/InterActiveCorp expects strong momentum in its search business to continue through 2011. It appears that toolbars are the key. Toolbars -- browser add-ons that help people search directly without visiting any Web site -- drove a majority of the company's quarterly search revenue in the fourth quarter of 2010. Who would have guessed?

We've heard this before -- toolbars helping to boost revenue. Barclays Capital Analyst Douglas Anmuth wrote in 2010 that search drove up revenue by more than 18.4% on "solid query growth and toolbar strength." That took place in the second quarter of 2010.

This time around, IAC reported that revenue rose from $355.7 million to $451.4 million during the fourth quarter of 2010 compared with the year-ago quarter, and an adjusted EPS of $0.26 -- the increase driven primarily in search. Adjusted earnings were $0.40, excluding $14.8 million in expenses from the Ask.com restructuring and the Liberty Media deal. Net income came in at $87 million, compared with the same quarter in the prior year when the company posted a $1.012 billion loss because of a one-time $991 million write-down charge for the Ask.com search business.

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This quarter IAC's search unit rose 29%, while sales rose 28% across its media units, which include the Daily Beast, College Humor and Vimeo.

Those who read Search Marketing Daily regularly know Deutsche Bank picked IAC among the top stock Internet picks for 2011. IAC should gain this year from CitySearch revenue as the focus turns toward local businesses and mobile. Deutsche Bank estimates that mobile will become a billion-dollar segment this year. The report notes: "According to our media buyers, mobile will represent roughly 5-7% of online budgets in 2011, implying $1.0-$1.5bn+ of spend assuming the total US online market is $28bn, compared to probably $400-$500mn of spend last year."

The Deutsche Bank report released in January also highlights IAC's ability to clean house and shed non-core and lower-margin businesses to emerge as a pure-play media business. The investment firm views IAC as a strong play on the growth in Internet advertising throughout 2011, given its strength in search and leadership in personal-type social sites.

Those social sites include Chemistry.com, Match.com and now, just in time for Valentine's Day, OkCupid, which Barry Diller shelled out a whooping $50 million to acquire. While 16-year-old Match and newly launched Chemistry.com charge membership fees, seven-year old OkCupid attracts younger singles and generates income through advertising.

IAC reported with earnings that Match.com takes responsibility for a 27% increase in its fourth-quarter profit. Sam Yagan, OKCupid's co-founder and CEO, will stay on.

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