IAC Reports Q3 2014 Results

Finances
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IAC has released third quarter 2014 results. Revenue for the quarter totaled $782.2 million, up from $756.9 million in Q3 2013.

In the third quarter of 2014, consolidated revenue for IAC increased 3% year-over-year driven by solid growth at The Match Group and strong growth at Vimeo and HomeAdvisor. The Match Group revenue increased 12%, driven by 9% growth in paid subscribers to its dating websites. They now number over 3.6 million globally. Contributions from The Princeton Review and FriendScout24 – acquired on August 1, 2014 and August 31, 2014, respectively – also played large roles in The Match Group's success in Q3 2014.

Several other important segments also ended in the green, making Consolidated Adjusted EBITDA the dark spot in an otherwise-bright quarter. Third quarter adjusted-EBITDA was $135 million, down 18% from the third quarter of 2013. However, it was down only 1% when excluding approximately $14 million in net gains related to asset sales and the impact of around $13 million of acquisition-related differed revenue write-downs for the Princeton Review, FriendScout 24, and Slimwear.

Greg Blatt, Chairman of The Match Group, says there's plenty to be thankful for in 2014 and plenty to look forward to in 2015. “When we look back 2014 is clearly going to be transformative for the Dating business,” he said in a conference call. “User growth has been phenomenal, MAUs up 60% year-over-year and looking back over a longer period, 600% since 2010. So really just great expansion of the category.”

The Match Group has especially seen success with younger users and mobile users – two of the most important markets in the industry – on OkCupid and Tinder. With youth adoption comes a “trickle up” effect – when youth culture takes to a product, it tends to lose its stigma and become popular across age groups.

And there's another major benefit to nabbing the youth market. Dating sites are Life Time Value businesses – so when young people engage early-on with the product, it leads to a longer lifetime of use. People who have used one dating service are also more likely to use other dating services, which is especially important for businesses like IAC who own several of them.

Looking forward, Blatt foresees a few challenges for The Match Group. Number one is mobile. In 2010, only 8% of North American users accessed products via mobile. In 2014, it's 81%. Even if you take Tinder out of the equation, that number is still 67%. Although the market has exploded, actual acquisition and conversion can't keep up and it's a huge missed opportunity for the company. As we head into the end of 2014, expect a greater focus on mobile to become a priority for IAC.