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Care.com, Beware: Barry Diller Has Entered the Babysitter Wars

NEW YORK (TheStreet) -- Care.com (CRCM) has been whipsawed over the past week after Match Group, a unit of Barry Diller's IAC/InterActiveCorp  (IACI - Get Report), joined a group that invested $15 million to help another babysitting service, UrbanSitter, expand nationally.

The UrbanSitter funding was led by DBL Investors, a venture-capital firm spun off from JPMorgan Chase  (JPM), along with Aspect Ventures and existing investors Canaan Partners, First Round Capital, Menlo Ventures and Rustic Canyon Partners. 

Diller, of course, is no stranger to Internet start-ups having built IACI into a conglomeration of some 50 brands including About.com and Ask.com. Shares of New York-based IAC have surged 79% over the past 12 months.

For Care.com, Diller's entrance into the babysitter market has sent the Waltham, Mass.-based company on a volatility roller coaster. Shares have dropped 12% since Feb. 11 even as they rose 9.5% on Thursday. Nonetheless, Care.com has gained 40% since its initial public offering on Jan. 23. 

The recent pullback has been jarring but Care.com has a sizable head start over UrbanSitter. Care.com went public with a user base of 9.7 million members, consisting of 5.2 million families and 4.5 million caregivers. For the nine months ended in September, its revenue rose 79% to $59 million from a year earlier, but it is losing money and the rate of its paying users is declining.

By comparison, UrbanSitter has 70,000 members and gets more than 10,000 monthly users to use its mobile application. The Web site charges parents $15 for the first time they use a babysitter. Caregivers can then create an account for free but have to pay to appear higher in the search results and also have to demonstrate they have completed a background check.

UrbanSitter is led by former Pandora (P) executive Jessica Steel as president, who left the music streaming service in 2012. Steel was hired at UrbanSitter in October, reported AllThingsD.

UrbanSitter uses Facebook  (FB) and a mobile application to connect parents with potential employees. It has a presence in Boston, Chicago, Denver, Los Angeles, New York, San Diego, Seattle and Washington, D.C. The site started, and still has its strongest user base, in San Francisco and New York.

UrbanSitter could easily take away customers from Care.com with its link to Facebook. Look for Diller's IAC to invest more in this company and possibly acquire UrbanSitter.

In the meantime, tread carefully with Care.com.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Chris Katje is a freelance writer who follows the stock market and whose work appears on several notable Web sites.

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