In the eyes of its leadership, IAC/InterActiveCorp (IAC) - Get Report shouldn't be viewed as a mere holding company, but as a firm that has a long history of making promising Internet businesses more successful with the help of its resources and decades of experience.
IAC is the parent company of Tinder/Match.com owner Match Group (MTCH) - Get Report and Angie's List/HomeAdvisor owner ANGI Homeservices (ANGI) - Get Report (interviews of ANGI CEO Brandon Ridenour and CFO Jamie Cohen can be found here and here). The company also owns video platform Vimeo, temp jobs marketplace BlueCrew and a host of other websites and apps. Its revenue rose 29% in 2018 to $4.26 billion, and is forecast on average by analysts to grow 12% this year to $4.78 billion.
I recently had a chance to talk with Glenn Schiffman, who has been IAC's CFO since 2016, about a number of these businesses as well as IAC's broader strategic thinking. Here's a recap of noteworthy things mentioned during the talk.
Match's Asian Efforts and Addressable Market
Echoing recent comments made by Match execs, who recently disclosed a goal of getting 25% of the company's revenue from the Asia-Pacific region by 2023, Schiffman said growing Match's Asian footprint is a priority. "Our penetration in the U.S. is dramatically higher than our penetration in Europe, which is dramatically higher than our penetration in Asia. And if there's one market in particular that I think we've been highlighting, it's India," he said.
Schiffman also said Match hasn't seen any change in its competitive environment, as it battles upstarts such as Bumble and deals with Facebook's (FB) - Get Report nascent efforts to enter the online dating market. And he argued Match's current penetration rates leave it with a lot of room to grow.
"The total addressable market here is massive and growing," he said. "We make what is a common use case across a lot of our businesses better using technology, using great products, and then we market it. And that's what we're doing in online dating...[There are] about 600 million singles globally, and we have less than 10 million paying singles on our platforms."
Vimeo's Competitive Strengths
When asked about Vimeo's competitive environment, Schiffman noted Vimeo competed to an extent with everyone from Adobe to Dropbox to Disney's BAMTech unit, and that the breadth of its offerings for video producers, which include solutions for creating, editing, hosting, distribution, monetizing and measuring the performance of content, was a major strength.
"Along your journey from your video being an idea in your mind to the success of a view, we do a half-dozen things or so," he said. Schiffman also asserted Vimeo, which recently spent $200 million to buy video-editing startup Magisto, has a lot of room to grow uptake among small businesses. "[We] think every business that has a website needs video," he said.
IAC expects its Dotdash unit, which owns educational and how-to websites such as Verywell, Investopedia, Brides and TripSavvy, to deliver 20%-plus annual revenue growth in Q2, after seeing a temporary growth slowdown related to efforts to integrate Investopedia (previously part of another IAC unit). Schiffman noted that while Dotdash has been seeing strong growth in its affiliate e-commerce business, the vast majority of its revenue still comes from display ads.
And at a time when many online publishers are trying hard to grow their subscription revenue, Schiffman indicated Dotdash currently has no plans to follow suit, given that its 'need to know' content has been optimized to be ranked highly by search algorithms and doesn't necessarily lend itself well to subscriptions.
The Mobile App Business (Mosaic)
Schiffman was upbeat about the growth potential for IAC's mobile app unit, which it now calls Mosaic. This business, which has about three dozen apps and gets about 95% of its revenue from subscriptions, officially saw 230% revenue growth in Q1, with growth clocking in at 69% after backing out the impact of recent acquisitions.
Schiffman admitted Q1's organic growth rate isn't sustainable, but added IAC expects a "healthy double-digit" growth rate going forward. He also highlighted the traction seen by products such as translation app iTranslate and robocall-killing app RoboKiller, along with IAC's history of building successful apps. "We create 'em, we roll 'em out, we market 'em, and we optimize 'em, and our team is really, really good at it," he said.
App Store Transaction Fees
When asked about whether Match -- like firms such as Netflix (NFLX) - Get Report and Spotify (SPOT) - Get Report -- is looking for ways to lower the now-substantial transaction fees it has to pay for subscription revenue going through the App Store and Google Play, Schiffman declined to share anything specific, but did suggest Match is weighing its options. "We are thinking about that," he said.
IAC had $2.2 billion in cash and 8 million shares on its buyback authorization at the end of Q1, and though no buybacks happened in Q1, Schiffman said the company is open to making additional repurchases and mentioned it has bought back 9.5% of its shares since he became CFO. He added, however, that IAC's buyback activity will be "opportunistic" and won't "follow a pattern."
When asked about how IAC, which has bought plenty of companies over its history, is thinking about future acquisitions, Schiffman said the firm is open to making purchases to strengthen all 6 of its "growth engines" -- specifically, Match, ANGI, Vimeo, Dotdash, Mosaic and BlueCrew -- as well as to expand into new verticals.
Schiffman did caution that elevated valuations have made it harder to find businesses at attractive prices, but added that this didn't mean no worthwhile targets exist. "We think there are opportunities irrespective of the market cycle, and we are ready to take advantage of those opportunities and desirous of taking advantage of those opportunities," he said.