IAC reports 2nd-qtr profit though revenue is hurt by weakness in Internet ad sales

IAC has 2Q profit; revenue falls in weak ad market

SAN FRANCISCO — IAC/InterActiveCorp, the company behind such Internet properties as Match.com, Ask and Citysearch, posted a second-quarter profit that fell short of analyst expectations Wednesday and indicated the online ad market is still weak.

IAC, which is led by media mogul Barry Diller, said it earned $40.8 million, or 28 cents per share in the quarter that ended June 30. During the same period last year IAC booked a big loss — $422 million, or $3.02 per share — largely because it wrote down the value of a catalog business.

Excluding certain one-time items, such as a $64.3 million boost from the sale of Match.com’s European assets, IAC said it earned 7 cents per share. Analysts polled by Thomson Reuters, who generally exclude items from estimates, expected 9 cents per share.

Revenue dipped 4 percent to $340 million, although that beat the $334.6 million analysts expected.

IAC said revenue in its media and advertising unit, which includes search engine Ask.com and online city guide Citysearch, fell 10 percent to $168.6 million. As in the previous quarter, the company said the difficult advertising climate — which is hurting media on and off the Web — lowered revenue at Citysearch. IAC also said Citysearch’s results were hampered by the recent relaunch of its site and the use of a new ad serving system. Citysearch’s user registrations and reviews rose during the quarter, though.

Other companies that depend heavily on online advertising have reported similar slowdowns. Last week, Yahoo Inc. showed its steepest decline in advertising revenue since the dot-com bust. Google Inc. fared better, but it reported only slight growth.

Revenue from IAC’s Match unit, which includes Match.com, Chemistry.com and other dating sites, fell 5 percent to $88.3 million. Match’s number of paid subscribers fell 13 percent to 1.2 million. Excluding Match Europe, subscribers actually rose 9 percent.

During a conference call with analysts, Chief Financial Officer Tom McInerney said there is plenty of room for growth in online dating. He said there are 80 million to 100 million Americans who are likely users of online dating services, but fewer than half are signed up.

The only IAC unit that reported growth during the quarter was ServiceMagic, which operates Web sites that connect homeowners with home-improvement contractors. ServiceMagic’s revenue climbed 18 percent to $42.4 million. IAC said the number of service requests rose 5 percent, helped by increased marketing.

Diller offered no new details about IAC’s plans for a media venture with Ben Silverman, who is leaving his post as co-chairman of NBC Entertainment. The venture, which aims to bring advertisers into the development process for TV shows and Web videos, was announced Monday, but few specifics were given.

“It’s all very prospective right now. The release that was made was a statement of intent, and we’re hopeful in the next month it will result in a completely worked through … agreement,” Diller said.

He also said the Internet search partnership between competitors Microsoft Corp. and Yahoo Inc. would be a good thing for all parties — including IAC.

“The best is the ‘will they, won’t they’ is over and it’s clear now what Yahoo’s going to pursue, and it’s very clear that Microsoft is going to continue to put investments and put care and all sorts of other things into their search efforts. That’s a good thing for us and for the industry, I think,” he said.

IAC is tied to Google Inc. through a partnership in which Google sells ads on Ask.com and other IAC Web sites.

Also Wednesday, IAC said it spent $281.6 million buying 17.4 million shares of its stock between April 27 and July 24. The company has authorized the buyback of 20 million more shares.

Brigantine Advisors analyst Colin Gillis called the buybacks aggressive, but cautioned investors about IAC’s prospects. “It doesn’t change the fact that none of their products outside online dating are in a leadership position,” Gillis said.

IAC shares rose 10 cents to close at $18.01.