IAC/InterActive Corp., the parent of search engine Ask Jeeves, online services Match.com and CitySearch and such merchant Web sites as Ticketmaster, LendingTree.com, Gifts.com and HSN.com, reported today that its earnings for third-quarter 2005 declined 24%, due mostly to costs related to the spin-off of online travel broker Expedia and other corporate transactions.
IAC posted net income of $68.1 million for the quarter, compared to $89.5 million for the same quarter 2004. Q3 2005 sales of $957.3 million were up 55% year-over-year, due primarily to the acquisitions in April of both Ask Jeeves and Cornerstone Brands, a holding company for numerous catalog retailers including Ballard Designs, Frontgate, The Territory Ahead and TravelSmith Outfitters.
Despite the earnings falloff, IAC still managed to exceed analysts’ expectations, and the stock price closed up 3.3% following the announcement.
Barry Diller, IAC president and CEO, called the company’s quarterly results “excellent” and warned that coming quarters might not post such strong revenue growth in the coming year because of increased capital investment in its lines of business.
“Their prospects are great, and they deserve to be pushed aggressively,” he told an analysts’ conference. “That may produce short- term anomalies quarter to quarter, but we don’t want to run our businesses quarter to quarter. We’re in this for the long term, and we won’t sacrifice a nickel of appropriate investment in order to make a number.”
Diller said each of IAC’s sectors performed well and most expanded margins. He said the strategy of building a complex of sites and channels both online and offline to offer products, content, information, services and search was proving scalable and sustainable. “The results today validate our multi-business concept,” he said, citing recent data from Web monitor comScore that IAC’s collected Web sites had an audience of 258,866,072 visitors in September.
In that same month of September, Ask Jeeves saw its share of the search market reach 6.4%, a 25% increase since January, Diller said. That constituted the largest annual and sequential gain in query share among the major search engines for the month, he said.
“One month is hardly indicative of much, but we’ll take it, each month, until we reach parity with the larger players,” he said.
Asked whether Ask’s market share initiative could stand up to an increase in ad prices, which currently are below the level of the other major search engines, Diller said that the recent policy of reducing the number of “above the fold” paid search ads would increase user queries and thus support price increases in time.
IAC announced in October that it would eventually re-brand its search engine as Ask.com. Diller said yesterday that re-branding effort will shift into high gear in the first and second quarters of 2006. “That’s when we would expect to make a real run for market share,” he said, adding that it might take a year for Ask.com to reach search usage parity with Google, Yahoo! and MSN.
