Overview: Third Point Partners' positions in 2Q14 (Part 4 of 8)
Third Point Partners and IAC/InterActivCorp
Dan Loeb’s Third Point Partners added new positions in Ally Financial (ALLY-B), Rackspace Hosting (RAX), IAC/InterActiveCorp (IAC), and FMC Corp. (FMC) last quarter. Notable exits included Verizon Communications (VZ), Cabot Oil & Gas (or COG), and International Paper (or IP).
Third Point Partners initiated a new position in IAC/InterActiveCorp (IAC) last quarter. It accounts for 1.7% of the fund’s total second quarter portfolio.
IAC is a media and internet company controlled by billionaire Barry Diller. It’s comprised of more than 150 brands and products including Ask.com, About.com, Dictionary.com, Match.com, HomeAdvisor, and Vimeo. Its websites focus on search, applications, online dating, local, and media.
Its websites business also includes the results of CityGrid—an advertising network that integrates local content and advertising for distribution to both affiliated and third party publishers across web and mobile platforms. IAC’s applications include direct to consumer downloadable applications operations (or B2C) and partnership operations (or B2B). It works closely with partners in software, media, and other industries to design and develop customized browser‑based search applications.
The company owns Match.com, OKCupid, Tinder. It gets its revenue from advertising, media production, subscriptions, and other fees. The company gets a substantial portion of its revenue from online advertising through its services agreement with Google. It agreement with Google expires on March 31, 2016. For 2013, it earned $1.5 billion of revenue from Google.
Realigns reporting segments
IAC’s various businesses were reported within five segments—search and applications, match, local, media, and other. During 1Q14, IAC realigned its segments after reports in December said that its dating business—Match.com—could be spun off.
A segment called “The Match Group” was created in the first quarter. It includes Match, DailyBurn, and Tutor. These businesses were previously in the Media and Other segments, respectively.
Greg Blatt, IAC’s chief executive, became chairman of the new business. The businesses within the Local segment—HomeAdvisor, Felix, and CityGrid Media—were moved to the eCommerce segment, formerly called the Other segment.
Ask.com and Tutor.com pursue acquisitions
In July, IAC’s Tutor.com business agreed to acquire The Princeton Review—a leading test preparation and college admission services company from Charlesbank Capital Partners.
In August, Ask.com—a brand for online questions and answers with more than 100 million global users—acquired Ask.fm. Ask.fm is the world’s largest question and answer social network. It facilitates question and answer exchanges.
A release said Ask.fm has grown organically since it started four years ago. It has 180 million monthly unique users in more than 150 countries around the world. Its largest user base in the U.S.
Ask.fm is available on the web and as a mobile application (or app). It generates an estimated 20,000 questions per minute with ~45% of its mobile monthly active users logging in daily. The mobile app has been downloaded more than 40 million times, the release said.
IAC swings to a loss on Aereo write down
The company saw its first loss for 2Q14 in four years. The loss was due to a $68.4 million of certain investment write-downs. The loss included Aereo—an online video service. The service had to be suspended after the Supreme Court ruled in June that Aereo was violating TV broadcasters’ rights. Aereo captured live and recorded programs through cloud-based antennas. It transmitted the programs to subscribers. The write-downs negatively impacted generally accepted accounting principles’ (or GAAP) diluted earnings per share (or EPS)—they fell to 0.22.
Revenue driven by dating website growth
IAC said its consolidated revenue declined 5% year-over-year (or YoY) to $756.3 million. Solid growth at The Match Group, HomeAdvisor, and Vimeo were offset by declines at search and applications. IAC’s core Search and Applications segment posted a 7.4% decrease in revenue to $395.7 million—driven by a decline in applications revenue.
The Match Group revenue increased 8% to $214.3 million—driven by a 7% increase in dating revenue. Dating North America—which includes Match.com, Chemistry, People Media, OkCupid and other dating businesses operating within the United States and Canada—and Dating International saw an increase in revenue.
Non-dating revenue—consisting of DailyBurn and Tutor—increased 84%. The growth in revenue was driven by increased subscribers across the segment. IAC said it plans to monetize its Tinder dating app this year. The app could generate “about $75 million of additional EBITDA this year.”
Media revenue fell 36% to $36.7 million. This was impacted by Newsweek’s print business closure. It was also impacted by Newsweek’s digital business sale in August, 2013 and the timing of Electus projects. However, Vimeo saw continued strong growth.
Revenue for eCommerce decreased 6% to $109.9 million. This was primarily due to CityGrid Media’s move from the eCommerce segment to the Search and Applications segment. However, revenue in the segment saw growth from HomeAdvisor and Shoebuy.
Browse this series on Market Realist:
- Part 1 - Must-know: Third Point Partners’ positions in 2Q14
- Part 2 - Why Third Point Partners buys a large stake in Ally Financial
- Part 3 - Third Point Partners starts new position in Rackspace Hosting
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- Investment & Company Information