Heat Stays On IAC/InterActiveCorp

The company's LendingTree loan unit also continued to struggle amid extended difficulties in the credit markets. Revenue dropped 9% to $98.6 million, while operating income before amortization tanked 89% to $1.7 million.

IAC management said there had been substantial layoffs at LendingTree and HSN in order to cut costs.

But perhaps it was the lackluster performance of the company's Ask.com search engine that should be the biggest cause of concern to investors. Previously touted as the glue that would bind IAC's far-flung Internet properties together, the company continues to struggle to gain market share against major players like Google(GOOG - Cramer's Take - Stockpickr), Yahoo!(YHOO - Cramer's Take - Stockpickr) and Microsoft(MSFT - Cramer's Take - Stockpickr).

As of June, Ask.com's share of the search market remained flat month over month at only 5%, according to researcher Comscore. And a high-profile marketing campaign that management had previously talked up as a key to gaining traffic last quarter seems to have fallen short, forcing IAC to have to change gears.

"We are not seeing the same impact with this marketing campaign as we have seen with ones in the past," IAC President and Chief Operating Officer Doug Lebda said in a conference call. "We are going to be retooling marketing with a much more call to action and product demo orientation."

IAC also said that revenue-per-query declined during the quarter, but the company attributed the slip to users clicking on search results over paid ads. Lebda said the trend would bode well for the company over the long run as the increasing mix of search results means the engine is yielding better results.

Revenue for IAC's media and advertising category, which includes Ask.com, grew 33% to $174 million year over year. But its operating loss narrowed just 6% to $10.7 million, in part because of Ask.com's marketing spending.