IAC reports 3rd-qtr profit, helped by one-time gains as ad revenue still slumps

Tuesday, October 27, 2009

IAC reports 3Q profit but ad revenue still slips

SAN FRANCISCO — IAC/InterActiveCorp, which runs Match.com, Ask.com and other Web sites, said Tuesday that asset sales helped it profit in the third quarter while advertising revenue continued to slump.

The results for IAC, which is led by media mogul Barry Diller, come after other Internet companies indicated in their third-quarter reports that the online advertising market remains uneven. Google Inc. reported a 7 percent increase in revenue in the period, but Yahoo Inc. said its revenue dropped 12 percent.

The period was tough for IAC, whose revenue fell 9 percent.

Counting one-time events such as a large gain on a stock sale and the sale of Match’s European operations, IAC earned $21.7 million, or 16 cents per share, on $337 million in revenue. In the same period a year ago it lost $14.8 million, or 11 cents per share.

Revenue in IAC’s media and advertising unit, which includes the Ask search engine and online city guide Citysearch, dropped 11 percent to $172.3 million. For the third straight quarter, the company said the difficult ad climate — which is hurting media on and off the Web — lowered revenue at Citysearch.

IAC also said for the second quarter in a row that Citysearch was hindered by the relaunch of its site and the use of a new ad-delivery system.

During a conference call with analysts, Diller said that IAC is open to “consolidating transactions in the area of search,” but that it is not likely to be the consolidator. Analysts took that to mean IAC is open to selling Ask, which ranks fourth after Google, Yahoo and Microsoft Corp., handling about 5 percent of U.S. Web searches, according to comScore.

“I think they’re sort of feeling that it’s going to be difficult to ever really gain share and to grow that business in a material way,” said Clayton Moran, an analyst at The Benchmark Co.

Moran believes Ask generates about $450 million in annual revenue. Much of it comes through a deal with Google, which sells ads on Ask and other IAC sites.

Revenue from IAC’s Match unit, which includes Match.com, Chemistry.com and other dating sites, fell 13 percent to $81 million. IAC attributed the drop to the absence of Match Europe, which was sold to a French company in June.

Match’s number of paid subscribers rose nearly 5 percent to 1.4 million.

The only IAC unit that reported revenue growth during the quarter was ServiceMagic, which operates Web sites that connect homeowners with home-improvement contractors. ServiceMagic’s revenue rose 30 percent to $43.9 million. IAC said the number of service requests rose 22 percent.

IAC shares slipped 11 cents to close at $19.24 Tuesday.

IAC did not give a substantive update on its new media venture with former NBC Entertainment co-chairman Ben Silverman, other than to say it will be called “Electus.” The venture was announced in July and will let advertisers have a say in the development process for TV shows and Web videos.

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