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IAC/InterActiveCorp  (NASDAQ:IAC)
Q2 2019 Earnings Call
Aug. 08, 2019, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day and welcome to the ANGI Homeservices Report's Second Quarter 2019 results at this time, I would now like to turn the conference over to our CFO of IAC, Glenn Schiffman.

Please go ahead, sir.

Glenn Schiffman -- Chief Financial Officer

Thank you operator. Good morning everyone. Glenn Schiffman here and welcome to the ANGI Homeservices Second Quarter Earnings Call. Joining me today is Joey Levin Chairman of ANGI Homeservices and CEO of IAC, and Brandon Ridenour, our CEO of ANGI Homeservices, and Joey and I will also address any questions you may have on IAC's second quarter results.

Similar to last quarter supplemental to our quarterly earnings releases, IAC has also published its quarterly shareholder letter. We will not be reading the shareholder letter on this call. It is currently available on the Investor Relations section of our website. I will shortly turn the call over to Joey to make a few brief introductory remarks and then we'll open it up to Q&A.

Before we get to that, I'd like to remind you that during this call, we may discuss our outlook and future performance. These forward-looking statements typically may be preceded by words such as we expect, we believe, we anticipate or similar such statements.

These forward-looking views are subject to risks and uncertainties, and our actual results could differ materially from the views expressed here today. Some of the risks that have been set forth in both IAC's and ANGI Homeservices' second quarter press releases and our reports filed with the SEC. We will also discuss certain non-GAAP measures, which as a reminder include adjusted EBITDA which we'll refer to today as EBITDA for simplicity during the call.

I'll also refer you to our press releases, the IAC shareholder letter and again to the Investor Relations section of our website for all comparable GAAP measures and full reconciliations for all material non-GAAP measures. We also may conclude the call a bit early, we've heard from a lot of you that it's a busy morning with a lot of potentially conflicting reports out there. Of course, the management team is available today, tomorrow and thereafter to address any other questions.

With that, I'll turn it over to, Joey.

Joey Levin -- Chief Executive Officer

Thanks Glenn. Thanks everybody for joining us again in aggregate. Another good quarter for IAC, although not flawless this time. Everyone saw the Match results, I'm sure, you can see it's just absolute rocket ship there and it's not just the stock price reaction yesterday, which was of course very strong but really what's exciting to us is what's underlying Match right now. They're really delivering in almost every area we hope.

The team has really come together, but just the product is doing a phenomenal thing for the world, which is making people happy, and when there is so much going on, so many forces it feels like pulling people apart, it's nice to be part of the business that's really bringing people together and doing that globally, and you saw for the first time this quarter Match had more subs internationally than domestically and that's I think a harbinger of things to come.

In terms of the underlying metrics, I mean there are accelerating revenues, there are expanding margins, they're turning everything into true free cash flow and best part is they're still investing for the future. So, Match is really in a phenomenal place. In terms of ANGI while we didn't [Indecipherable] quarter, we still love the business. There are some things to fix, but I think our biggest problem there might have been just forecasting the business is growing 20% year-over-year.

We're adding service professionals, we're adding homeowners. We got to get customer acquisition costs in mind, which I think is a problem that we've addressed before in many of our businesses and I'm confident we will address going forward. And we're really excited about these pre-priced services and the promising future there. Dotdash had another fantastic quarter. I would challenge anyone to find a digital publisher, who is doing what Dotdash is doing right now; really growing, accelerating margin, building brands also investing for the future.

It's an exciting place to be with, and an exciting team. Vimeo also saw accelerating revenues and the rest of the businesses are stable and feeling good. The -- of course, the news that was also in our release here which you've said, is also [Indecipherable] news is that we've begun to more seriously consider spins of both Match and ANGI.

As you know, we talk about this every quarter, and we think about this all the time, but we have advanced our thinking a little bit above the perpetual consideration and we're going to start evaluating that more seriously from here and just wanted to let everybody know that that's where we are in our process.

I suspect we'll get a bunch of questions on that, we won't be able to answer all the questions because it's early and it's a work in progress, but we'll do the best we can on questions there. So, let's start with the first. Operator?

Questions and Answers:

Operator

Thank you. And at this time, we'll open the floor for questions. [Operator Instructions]. Our first question will come from Eric Sheridan with UBS.

Eric Sheridan -- UBS Investment Bank -- Analyst

Thanks so much for taking the question, and of course, I'll follow up on the potential spin off, hopefully. But I'll try to come at it from a different angle. I know you're not going to tell us sort of, the end result. But, can you just walk us through what the thought process might be, what are you looking for, when you examine the businesses that are ready to be spun-off from IAC, just so we can better understand maybe some of the guardrails you'll be going through as the Board thinks through the process.

And then second, I thought it was really interesting in the letter, Joey that you laid out the framework by which you invested in Turo and you also took a minority interest, without necessarily a path to control, that seemed like a pretty big sea change for the company, want to know if I get a lot more granularity there on whether that's a shift in your investment strategy and how we should think about that versus your broader investment approach, especially given the cash on the balance sheet, now after all the recent corporate actions? Thanks everyone.

Joey Levin -- Chief Executive Officer

Thanks Eric. On the Spin, I think we always say that there is not one particular formula, there's not one particular moment. I think one thing that has historically been a catalyst among others, and is -- well a bit now is the size of Match relative to IAC that one starts to look like a proxy for the other, and in a very good and healthy way but casts a shadow over the rest of IAC and that really was sort of the starting point of our recent thinking, and of course you start thinking about the management and then that leads to, OK well then, do you also think about managing spend.

And, as we were thinking about those, and as we were preparing for earnings and said, given that these are both public companies and such we could, cross some disclosure thresholds in one way or another -- we're better off just disclosing that now that we're thinking about those things.

I do think that, as I said in the letter anything is possible from here. I think that Match was perhaps the original catalyst and is probably the more obvious candidate on typical metrics that one might consider. The other thing that factors into the thinking is the focus of the team, how -- where to put your energy, how to make smaller best matter -- how to make -- how to focus on building little things bigger and all those things will go into the mix, but again I think important to convey that any of the alternatives are possible from here.

As it relates to Turo, it is a shift -- sorry, it is different from what we've done historically. I would say it is not a fundamental shift in philosophy. It is a -- perhaps a new openness. In other words I wouldn't expect us to use our cash balance from here exclusively or significantly or majority-wise on minority investments.

But, we're open to it, and we're open to it in ways where we think that we can impact the outcome of the business, where we think that we can be really helpful and where we believe we have a chance to increase our ownership over time, and that may not be through an explicit right to control, but it would be with, again desire to just aggregate ownership and aggregate shares when we think there is an opportunity and when things are working.

And Turo was just when we looked at it, a really interesting business in terms of having lots of analogies to things we've seen in the past, dis-aggregated supply, dis-aggregated demand. A marketplace in the middle that solves the problem for why the supply and demand can't come together and make those things -- make those things much easier. It's an asset light business and it had those sort of general thing that appeal to us, and at the same time and within this category that's fundamentally transforming which is urban mobility, and if you look at all the ways that's happening, and all the companies that are playing in there, and most of them are very expensive and less clear in terms of margin and profitability potential, and we just saw Turo there as this kind of hidden gem, and got really excited about getting involved, and this was the way can do it.

Glenn Schiffman -- Chief Financial Officer

In terms of Turo don't forget to put some of the parts. But, just to put some numbers around the size, and what Joey said around the sizing of our businesses relative to IAC as a whole, we've talked about this in shareholder letters. But again, just to get real granular we own 226 million shares of Match, so for every IAC share, based on the share price last night, Match represents $240 odd up an IAC share and then ANGI we own $422 million shares of ANGI so for every IAC share, you get about 4.8 shares embedded in that -- in your share of IAC of ANGI and even in the aftermarket trading on the ANGI -- with the ANGI stock price movement, that's another $50 of value. So between the two pieces, you're at $290 per share of IAC and that ignores all the other businesses that Joey mentioned and our excess cash net of debt.

Eric Sheridan -- UBS Investment Bank -- Analyst

Thanks so much guys.

Operator

Thank you. Our next question will be from Jason Helfstein from Oppenheimer.

Jason Helfstein -- Oppenheimer & Co. -- Analyst

Thanks. I wanted to ask too about ANGI and I'll go back in the queue, for maybe another strategic question. So at ANGI, it seems missing a Google algo and pricing change is a rookie mistake, and your team is not rookie. So I guess, what have you done from either a head count or systems change to prevent it doesn't happen in the future. And then, in the letter, you're talking about moving into managed fulfillment at ANGI, similar to the porch [Phonetic] model where a consumer purchases and schedule a job for you, then you hire the pro and the package is different. Can you talk about how the economics differs in that model versus the traditional lead model that you've had. And then, how deep go because it doesn't really work for biddable projects, which have been a big part of the, the HomeAdvisor model. Thanks.

Joey Levin -- Chief Executive Officer

Sure. I'll start and then I'll turn it to Brandon on some of that. In terms of how this happened, I agree and it was a mistake I think start by saying that Brandon certainly and team has the full support of IAC in working through this issue, and we have absolute confidence that they will deliver that. I think what happened here as we did a significant acquisition and a significant integration, and we really focus on the things that we needed to get done in that acquisition and integration, and other things got ignored that's not a good excuse.

It is probably the most likely thing, and in particular on customer acquisition where we had so much demand coming into the business that we took our eye off that ball and demand, and we were focused on things like the supply side and other components around integration.

So, we didn't naturally foresee the issues at the top, or had to. But, I think the good news is they ought to be fixable. And, as it relates to the business model I think you're right this will not apply to all of the service requests in our network. HomeAdvisor I think there is still a significant portion of the business that will continue for [Phonetic] fitted jobs and things like that where the model can help.

But there is a lot of jobs that we both see today and match, a lot of jobs we see today and don't match and a lot of jobs we don't see today because the profit is too low, and that's what we're trying to solve here with pre-priced services and I think we can.

It is a different take rate, so to speak in the sense, and you take the money off. The really exciting part about that is, is instead the service professionals paying us, we pay the service professionals and I think that works. I'd say it's different than maybe some of the other things you've mentioned or referred to in the sense that we have a marketplace today, we have a marketplace of service professionals and we're still operating in the middle of that marketplace, bringing those things together. We're just simplifying some of the tools, so that both sides don't need to heckle in the say same that they may have heckled historically. But, I'll go to Brandon.

Brandon Ridenour -- Chief Executive Officer

Yeah, I think on the first question, I mean I would agree to Joey that with the focus on the merger and integration last year, we probably had decreased focus on customer acquisition and didn't make some of the investments that we should have made. Separately on the managed fulfillments, and then the question of how far can you go and where does it work and what does it not. I think the first thing you have to realize is we have tens of billions of dollars of unfulfilled demand in categories and project types that you would think of as both easy to fit in this model -- maybe a little more difficult to fit in this model, and some that perhaps won't fit in this model in the long run.

There is a lot of room to grow and provide fulfilled services, where it makes sense. And I think in some of the categories where you might think it's harder because they're traditionally bidded projects, I think you might be surprised at what the future could look like there, and the ability to actually calculate a real time bid and offer somebody a fixed price upfront. People more and more are moving toward a desire for extremely low friction, digitally fulfilled solutions in ways that wouldn't have made sense traditionally, and I think our move in this direction offers near term, high confidence, growth in the project types where we have a tremendous amount of unfulfilled demand and where this works, as well as the opportunity to evolve like I said in ways that -- they may be surprising in terms of where this might apply.

Glenn Schiffman -- Chief Financial Officer

Yeah. And just, we talked about in the letter and Brandon alluded to it, but we're starting out with our pre-priced services on the 40% of our SRs that go on monetized. We've already paid for them, they're already coming through the system, so that obviously would be accretive to margins for sure and accretive to unit economics. And then as Joey said, the take rate is a little better and with all the product things that we're doing here, we're attacking three very important things for the health of the business and the go forward revenue and EBITDA margin. One, repeat rate try and increase it. Two, zero accepts trying to decrease it, and three SP retention, obviously trying to increase it.

Our solution works for hundreds of thousands of SPs extraordinarily well and tens of millions of consumers extraordinarily well, and this is about making it work better for those people and work for more and more homeowners and SPs.

Jason Helfstein -- Oppenheimer & Co. -- Analyst

Thanks. I'll go back in queue.

Operator

Thank you. Our next question will come from John Blackledge from Cowen.

John Blackledge -- Cowen and Company -- Analyst

Great thanks. So, just two questions on ANGI. First for the top line, could you just further explain how the marketing issues impacted 2Q revenue shortfall and how we should think about top line trajectory in 2020 and beyond, just relative to your prior comments about ability to do 20% to 25% annual top line growth. And then second, given the lower 2Q EBITDA and lower fiscal 2019 EBITDA guide will the higher Google marketing cost persist into 2020, and more broadly, how should we think about 2020 margin profile? And then longer term can you adjust to kind of mitigate some or all of the Google pricing impact over time? Thank you.

Joey Levin -- Chief Executive Officer

Yeah, thanks. So in Q2, we actually started out the quarter well and consistent with our expectations. I think April came in at 23% year-over-year growth. However, in May, we began to see significant cost acceleration or a continuation of the pattern, significant cost acceleration and in our efforts to rein that in, applying some of the tactics that we used last year to optimize margin, we lost volume temporarily. And overall May ended up coming in quite disappointing I think 15% year-over-year.

Subsequent to that, we sort of undid those changes and drew the conclusion that in fact, if you will, the entire environment has seen cost inflation -- in other words, the price of doing business there in home services has simply gone up. And so, we have a lot of activities under way that obviously intend to fix that and then there are a number ways we can do that, including promising technologies on the sort of bidding engine front for SEM. In terms of the rest of the year July was I think our best month of the year so far, and we still expect growth to accelerate from the first half to the back half.

Glenn Schiffman -- Chief Financial Officer

In terms of the margin, we do still standby and expect the 35% long-term margin target that we articulated at the -- when we announced the Angie's List deal. We think that will probably take longer and we have to get this marketing under control which as Brandon said, we are -- as we said in the letter marketing has stabilized here, and our guide obviously reflects that. Even this year, just to talk about the margin profile of this business, even this year we create -- if you put Marking aside and you put our discrete investments that we made, we've talked about them before, its Handy, it's Fixd, it's discrete investments in product of which Brandon spoke about, we created incremental margin in everything but marketing.

We created incremental margin in G&A and product, in operations and in sales, and it's that incremental margin that allowed us to grow on marketing. And marketing as a percentage of revenue was a lot higher this year obviously than it was last year, but actually it was the same as it was in 2017. So, we have obviously skipped the year in terms of our progress on margin.

In terms of 2020, obviously, we're working through this marketing issue. We think we have it scoped out, we think it's stabilized and we think we're -- we have a clear path to getting that under control, but I wouldn't expect material margin improvement next year either. As we continue to work through the marketing issues, and as we continue to roll-out our pre-priced or pre-priced offering here, and you like we always do -- you may see us invest into success here, which we're excited to do.

I talked earlier about repeat rate, zero accepts and SP retention. And just to give you a good heuristic around it, if we increase and -- if we increase those 10% and that's our repeat rate going from 1.8 to 2.0 and if we increase our zero -- we get better on our zero accepts by 10% going from 40% to 36% and we increased our SP retention 10% that alone drives six margin points in terms of long-term margin.

So, these are very powerful levers that we have at our disposal and everything we're doing on product is to get there.

John Blackledge -- Cowen and Company -- Analyst

Thank you.

Operator

Thank you. Our next question will be from Doug Anmuth with JPMorgan.

Cory Carpenter -- JPMorgan -- Analyst

Hi, this is Cory Carpenter on for Doug. Thanks for the question. Two, if I can, maybe first on ANGI. Could you talk a bit about the service pro supply issue that you saw in the quarter, maybe your level of confidence and being able to address, and how it could impact SP growth in the second half of the year. And then on Dotdash and Vimeo, could you talk about just what's driving the revenue acceleration at those businesses and Vimeo specifically, any update on the integration with Magisto. Thanks.

Joey Levin -- Chief Executive Officer

Sure. Thanks. I'll address the service pro question. First of all, we made a change I would say close to a year ago that really incentivizes our sales force to focus on higher value, and higher capacity service providers, and you've seen that decision and the resulting actions flow through in the form of decelerating sort of nominal growth, but accelerating spend per SP, over the last several quarters.

We are -- we are interested in SPs with higher capacity, but of course, we also want nominal growth, and we are in the midst of making additional changes that will hopefully give us both sides of that and will reignite nominal growth, particularly as we head into the remainder of the year, next year. We will be focusing on bringing in small SPs and large SPs those with higher capacity and those that tend to operate in some of the categories where the businesses are smaller.

The reason for that is that we have -- we have customers coming to us for a broad range of services, including things like handyman services, cleaning services and these tend to be smaller companies in general and we don't want to neglect them.

Glenn Schiffman -- Chief Financial Officer

And you're seeing -- obviously on the -- some of the metrics around our SP population. Revenue per SP was up 14% to a record 1,161 this quarter. So, our migration to quality and our focus on bigger budget SP obviously is coming through. I think I mentioned once before that our 2018 cohort of SPs were the highest from a lifetime value perspective and it looks like 2019, we're beating that.

Joey Levin -- Chief Executive Officer

I'll cover Dotdash and Vimeo revenue acceleration. On Dotdash, it's a lot of things that we've been working on for a long time, optimizing monetization. So again, staying -- the lowest ad density on the page and relative to competition, but having more effective ads, and we're seeing that play out with repeat rate among advertisers, spending more and spent each of them spending more individually because of the ad perform.

We have a really simple, but I think somewhat unique thing among publishers at Dotdash right now, which is we say to the advertisers just come and try the product, and if the product works spend more money, and if it doesn't, don't. And we find that that's a very effective way to get people onto our platform and get people to stay on our platform, because we encourage them to evaluate us, as a publisher, against any other publisher where they want to put ads and just look at the relative performance against the metrics that they want, and it works.

And the reason it works is, because the content that we have has intents embedded into it -- it's not just news. We don't really do news there, it's content with intent, and therefore that is going to end up performing the advertisers provided we understand that intent, we can share that intent with the advertiser and by the way that delivers a more compelling experience for the reader because they're getting something that's consistent with what they're trying to accomplish at that time.

So, the more content we now put in there, the more we can grow that business and we're continuing to grow the content base, continuing to grow that and invest more into that business, which shows up on the revenue acceleration set. On Vimeo, Magisto is going well. I think we're only two months into that. So, we haven't really done the integration, meaning, where we're actually cross-selling to a Vimeo user. Magisto or Magisto user Vimeo that will happen I think relatively soon. Right now, the only thing that's happening is Magisto on its own is growing very nicely. It's going according to planning again, two months in I would hope so, but it's going according to plan.

The biggest driver of revenue growth and Vimeo, excluding the acquisition is the enterprise business that continues to grow very nicely and accelerate, and we have big hopes for the enterprise business there, we just rolled out a new product on that side, we're really starting to integrate some of the things that we've purchased previously like Livestream and VHX that's now in a very neat product for Vimeo Enterprise, and we have salespeople there that of course helps drive growth. But, really the product is resonating, and it seems to be bringing in bigger customers, spending more money and happier.

So, it's a combination of things. But all the things that we think have a lot more gas in the tank. Thank you Cory.

Cory Carpenter -- JPMorgan -- Analyst

Thank you.

Operator

Your next question will be from Ben Schachter with Macquarie.

Ben Schachter -- Macquarie -- Analyst

Yes, a couple on ANGI, and then one on Match. Can you quantify what percentage of service requests come from Google. I'm assuming Google does not reverse that change, where do you focus your efforts to increase non-Google driven requests? And then related to that change, are there issues with what Google did or is doing that you think could or should be looked at by the regulators? And then separately on Match, they changed the payment flow on Android, and it's obviously really helping gross margin dollars. I'm wondering if there are any other or IAC businesses that could potentially see lower app fees. Thanks.

Brandon Ridenour -- Chief Executive Officer

So, I'll take the first part of that question. In terms of quantifying our reliance on Google, and just about 40% of our customer acquisitions come through Google, about a quarter of that 40% is actually people directly seeking out our brands in response to either previous experience with us or perhaps some of our branded marketing and TV marketing. So, I think you can look at it as perhaps 30% reliance on finding new customers.

Our long-term strategy has been to diversify our source of customer acquisition, broadly and we have over the years made that a priority and even though we're still at 30% reliance that's way down from where it has been historically. But, it's clear we have more work to do, if we want to control our own destiny. And so, we will continue to not only get better and put more investment into mastering Google, because it's an important place to find customers, but we will continue to make it a priority to diversify where we're putting dollars to work, and where we're finding customers and both of those things will remain important to us.

Separately, we also need -- if we're going to sort of achieve our aspirations here, we need to become effectively a direct destination brand, and Glenn alluded to this in terms of repeat use, but what I would say is we need to form stronger bonds with our customers and a more loyal relationship and see them come back directly to us more frequently. The path to get there is essentially mostly through product and product innovation, and we have a lot of things in the pipeline that we will bring to market over the coming months that we think will make a very large difference there.

Separately, while we talk a lot about the cost of acquisition and how it's gone up, which obviously is important. Our strategy around fixed price sales can make a very large difference. First, it positions us well with emerging consumer expectations, I think Joey said it well in the letter, where people now expect solutions at the click of a button, not just information, particularly with millennials, the expectation that you can transact digitally even in home services is going to become more and more prevalent, and our early experience integrating Handy really already shows the level of engagement, interest from a sales and conversion rate standpoint with our customers at HomeAdvisor.

Aside from that, the great thing about offering essentially a buy it now feature is that for the 40% of SRs or service requests where we have not been able to match that consumer with a service provider. We will now have a solution, broadly available for those folks; that does a couple of things. It obviously improves the quality of the experience for those people in a dramatic way, but it also -- these are service requests that we paid for and to have 40% of the service requests, we pay for go un-monetized and unserved is obviously harmful to our unit economics, and if we can make great headway in monetizing those requests, all of a sudden the acquisition cost that we're paying don't look so prohibitive and our buying power, obviously as you understand would increase pretty dramatically.

And then lastly, and this also goes to the question of SP capacity -- we have a perennial problem here which is, there is more consumer demand each year that's growing and imbalance with our ability to bring capacity to the market from a provider standpoint. Obviously, we've grown our service provider network dramatically, but it does not keep pace with the really unbelievable amount of consumer demand around home services. So, our traditional model works well, but with fixed rate services we will be able to complement that, and the beautiful thing about it is, we'll be able to go to service providers and instead of asking them to pay us for an advertising product, we'll be able to take a job to them, for which we will be paying them, and that's a powerful concept and I think a powerful tool to help us really bring a lot more provider capacity to the marketplace to serve all of this underserved demand.

Joey Levin -- Chief Executive Officer

On the question of regulators, look we get inquiries from regulators all the time, as you'd would imagine. That is not our strategy, that is not our plan on how to address the issues that we have in this business. I think everything Brandon said is exactly right, and is exactly the strategy. The -- to make it really simple, we have to deliver a better product, so that people come to us directly always, and there's blueprint for this. I think eBay did a nice job in this over time, I think Amazon is the ultimate, had done a nice job over this. It has to be that and today, I believe it is absolutely true, our product is unequivocally better than the product of going to Google or going through Google to us -- coming to us directly is the best solution in the marketplace right now. But, I also think we can make that meaningfully better and meaningfully better than the alternative and we can deliver that then we'll get the customers directly and that's our biggest strategic focus right now for sure.

In terms of your last question lower ad fees I don't think it's a meaningful driver elsewhere in IAC. I mean Mosaic does pay ad fees and that business is entirely -- well split of iOS and Android, but I don't think that there is a meaningful untapped opportunity in those businesses right now. Next question?

Operator

Thank you. Our next question will be from Ross Sandler with Barclays.

Ross Sandler -- Barclays Bank -- Analyst

Just a general question around like the investment philosophy. So, the release mentioned the Pinterest stake, which I think you've been asked about before. Now, we're talking about it. So, can I guess -- can you talk about the history of that investment and what kind of return you guys realized and then, as it relates to Turo, this is probably a much larger bet where you don't have a controlling stake SoftBank-esqe in terms of it being a later stage company and a minority investment. So, can you just talk about the overall thinking around the investment strategy going forward, as it relates to controlling and non-controlling. And then maybe what your play is on Turo specifically. Thank you.

Joey Levin -- Chief Executive Officer

Sure. Good question. Ross I answered a little bit the Turo on there, but I'll go a little bit deeper on that. In terms of Pinterest, we I think we ballparked maybe we turned 2 million into 200 million, something like that in that neighborhood.

Glenn Schiffman -- Chief Financial Officer

We have about 4.6 million net shares right now, and you see it. Our cash balance of 2.7 includes marketable securities, of which the value of Pinterest at 6.30 is in that number.

Joey Levin -- Chief Executive Officer

Yeah. Of course, we'd like to do that exclusively from now on, but I don't think that is going to be our strategy. We are -- that actually originated with a woman named Shana Fisher who we backed, who used to work for IAC and we backed with a pool of capital to make early stage investments and she did just a phenomenal job on that and Pinterest was a grand slam of course, and there were other great ones there too. And so, overall I think she just did a phenomenal job. She now has her own fund, and I think continues to do a phenomenal job at that.

That is -- I think spreading around minority investments and see big investment is not really a core function of IAC, is that, you'll see us do a lot of -- there will always be exceptions, where we find something that makes sense for whatever reason, either strategically where we think we can learn something or we're gelling up with something, it's the only way in, but we're not focused on being -- becoming a venture fund or significantly expanding venture investments.

I think that Turo generally is unique. It was a business that, so we thought fit with a lot of the themes that we've succeeded in historically, we've been helpful in historically and that we thought had great potential, and this was the only way in. So, we are open to those opportunities, but we are not fundamentally shifting toward pursuing that. We significantly favor majority acquisitions, significantly favor majority deals or deals where there is a clear path to control, and that will be our priority, just we will be -- we will be open to alternatives. Did that answer the question Ross?

Ross Sandler -- Barclays Bank -- Analyst

Yeah. Super helpful.

Joey Levin -- Chief Executive Officer

Okay.

Operator

Thank you. Our next question will be from Dan Salmon with BMO Capital Markets.

Daniel Salmon -- BMO Capital Markets -- Analyst

Hey, good morning everyone. Maybe one for Joey/Brandon. I'll let you guys dive into the first one and then maybe just a quick one for Glenn at the end. Just Brandon I appreciate the mea culpa is on the marketing missteps, if we put those aside, could you maybe just step back a little bit and talk about the broader competitive environment for ANGI right now. In particular, some of the bigger vertical Internet players or excuse me horizontal players, I look at it like a Facebook marketplace where you're a partner obviously but Amazon home services. How are you viewing, sort of what the big guys are doing in your space these days, and if there are any other major competitive changes you'd talk about.

And Joey, I'd love to hear your thoughts on that as well, since it does touch on the big guys and you're always thoughtful on that. And then, lastly just for Glenn I think the last line of Joey's letter confirms this but I just want to be clear on the timing here that it sounds like you will have an update on the Match and ANGI stake process by this time next quarter.

Brandon Ridenour -- Chief Executive Officer

Sure. I think in terms of competitive landscape and particularly with the big platform players, obviously anytime they get involved in something, you want to keep an eye on it, but it's not I guess from my perspective has not materialized as a significant threat. I think Amazon's efforts have mostly to-date focused on product installation and product support, which makes a ton of sense. I think they always have that kind of service. So, that's not really particularly new. I don't think Facebook, is really active in this space anymore. And obviously, Google has competitive products, which perhaps compete with us from an acquisition standpoint, but I think in summary, in the long run there is a real desire for a vertically focused deep solution by homeowners and you're just not going to get the same depth of experience, and the same focus from people that are doing this part time as you're going to get from a team that's focused on this day in and day out. I think that's probably my view on the strategic front.

Joey Levin -- Chief Executive Officer

Yeah. I agree with all that. I guess I'd add -- it is some of these businesses have some fundamental advantages for sure; distribution would be the biggest Google has a massive distribution network of course by far the biggest, and Amazon does on the back of some other things, but they don't have a fundamental product advantage and they don't have, what we have, which is very hard, very labor intensive, very capital intensive, which is the service professional network, and we've spent a lot of time, a lot of capital and a lot of learnings on getting that right, and how to satisfy a service professional, and how to deliver them the things that they want in the form that they want it.

These platforms, given their scale have generally been able to force people into the format that they already have and that isn't going to work for all service professionals, and we are focused on delivering this. We have to deliver the best product in the category. I'm confident, we have by far the best product in the category today and I'm also confident that things that we've built, the service professional network in particular, but all the things we've built around product, it allows us to build that next generation of product and be that destination here and you see really, in particular in the mobile landscape with apps, people like a dedicated solution for a dedicated problem.

And I think we can be that solution, and will be that solution, so long as we stay ahead on product which I'm confident we can do. Was there another question there?

Glenn Schiffman -- Chief Financial Officer

Yes. Just timing -- will we reach a conclusion by the next earnings call.

Joey Levin -- Chief Executive Officer

I think that's our target, and is not a guarantee lock that, that will be there then, but that's certainly our goal.

Glenn Schiffman -- Chief Financial Officer

And Dan, in terms of competition, as Match has proven over the last 18 months as long as you continue to delight your customers, given the best product experience, and invest in your brands you can persevere through so called threats.

Daniel Salmon -- BMO Capital Markets -- Analyst

Thank you all.

Operator

Thank you. Our next question will be from Kunal Madhukar from Deutsche Bank.

Kunal Madhukar -- Deutsche Bank -- Analyst

Hi, thanks for taking my question. Two if I may, one with regard to the service professional spend on marketing. So, on their budget, how much does ANGI's list get today or ANGI Homeservices as a whole kind of gets today. How much of that do they spend on Google search and on other -- on other sources of traffic and then on the spin -- with regard to the debt. Does that -- and as you look at it, and as you evaluate the spin process. Does the debt move with this spun off companies or will that debt stay with IAC because if that does, then the [Indecipherable] would be significantly higher. Thanks.

Joey Levin -- Chief Executive Officer

I lost a bit of that at the end, I'll cover the last bit and then go back to Brandon. The -- we have flexibility to move the exchangeable securities to either subsidiary that was part of the -- I think that's true of all three different buckets of our exchangeable securities. So, that is something that goes into the consideration set in terms of how we might do transaction. To the extent, we pursue one or both or we might do it those are things that will go into the consideration set.

Brandon Ridenour -- Chief Executive Officer

Yeah Kunal, as you saw, we have $2.7 billion of cash, well, well, well in excess of our debt in each of our three financing entities, Match, IAC and ANGI have significant debt capacity therein.

Glenn Schiffman -- Chief Financial Officer

And then, in terms of the service -- share of service provider advertising budget we're getting, the research is a little rough around that, but our best number say that we're getting around a third for the providers that are part of our network, but of course we also only had a small portion of the overall providers in the economy. So, there is both room on -- more share of wallet from of advertising budget standpoint, but also just getting more penetration into that market.

Kunal Madhukar -- Deutsche Bank -- Analyst

Thank you.

Operator

Thank you. Our next question will be from Brent Thill with Jefferies.

Brent John Thill -- Jefferies LLC -- Analyst

Thanks, good morning. One of the questions for investors is on the Match potential spin, given that it has one of the highest operating margins in the industry, what does that mean for your overall profitability and are you effectively considering the big margin reset given that hit?

Joey Levin -- Chief Executive Officer

I don't know -- I don't think I followed the question, are we, is Match -- sorry there is the map of Match's margin relative to all the other businesses and one doesn't change the other, but yes, if you take a higher margin thing out of total and what's left is smaller and smaller margin. Does that answer your question or maybe I don't understand it.

Brent John Thill -- Jefferies LLC -- Analyst

Yeah. Just the overall profitability hit Joey. How you think about managing the business, given that is one of the best performing stories that you've had, and effectively the profitability is among the highest in the industry.Got it. Look, we have a -- one is that translates into of course, Match's operating margins, translate into of course, cash flow for IAC. There is -- IAC is currently very well capitalized to the extent, we pursue this we can further well capitalize IAC in that and there are ways to accomplish that through spin-offs and things like that, so that we can organize cash -- we can organize the cash into different places, and that's something that we think about, and will continue to think about. So, it's a question really of -- there's one question, will each business be OK from a balance sheet perspective? And the answer to that is we have lots of flexibility there.

Then we talk about each individual business, it's a different story. Each individual business has a different margin profile, both short term and long term, I think you're seeing now with Dotdash where I mean I said earlier I think Vimeo mobile has just done a phenomenal job. We are starting to generate real margins there and that business is therefore starting to generate cash flow -- that adds we think great potential.

Vimeo -- Anjali Sud has done a very nice job of that business. She's -- we're growing very nicely. We have I think market potential there, that's not -- market potential there that's not short term that's longer term, but so that business as a recurring to ads business, it has great market potential.

The applications business delivers real margin, but each one of those things is different, we'll have businesses generating margin, we'll have businesses consuming margin and being in an investment phase like Vimeo is right now and that's all OK. That's not dissimilar from frankly where we were in 2008 where -- when and we did four spins [Phonetic] we weren't really generating any cash flow or margin of note. We had lots of things in investment mode or earlier in their stage -- earlier in their life and we built things up to generate that margin and that cash flow.

Glenn Schiffman -- Chief Financial Officer

Yeah. And just to put another number around it, IAC ex-Match ex-ANGI in 2018 had $1.4 billion of revenue. So there's a lot of opportunity embedded there.

Joey Levin -- Chief Executive Officer

And by the way, I think our applications and App Media business, which are two cash flow machines. I mean, Tim Allen [Indecipherable] around those businesses are cash flow machines.

Brent John Thill -- Jefferies LLC -- Analyst

Okay. Just a quick clarification on ANGI, you don't believe this is anything external in terms of competitive forces this was more internal and related to Google?

Brandon Ridenour -- Chief Executive Officer

Yeah. Absolutely. I think. It's really specifically cost inflation from the search engine environment, and obviously Google is the largest of those. And, I know we spent a lot of time talking about obviously the impact of that which near term is a headwind, but the real opportunity for us is to address the other side of the ledger, which is we need to have breakthrough repeat use from our customers, so that we're not having to acquire them particularly multiple times through places like Google and we need to bring more provider capacity to the problem of our 40% of unfulfilled demand, and if we can do that honestly the acquisition cost will be somewhat irrelevant.

Brent John Thill -- Jefferies LLC -- Analyst

Great, thank you.

Operator

Thank you. Our next question will come from Robert Coolbrith with Wells Fargo Securities.

Robert Coolbrith -- Wells Fargo Securities -- Analyst

Great. Good morning, thanks for taking my questions. A couple of follow-ups on ANGI. First on the Google issue, just wanted to maybe understand the cost inflation a bit better. Do you understand that to be a relevant assessment applying to aggregators versus the local SPs or a broad-based issue across every one in the category anything more you can talk about that? And then going back to the 40% of SRs, that results in zero matches today.

I imagine there's a limitation on ad budget capacity or actual work capacity. Out of that 40%, just wondering if you have a thesis on how that can be attributed across budget capacity -- ad budget capacity versus actual work capacity among the SPs and how you're thinking about the opportunity to drive down the percentage of zero Match SRs with the on-demand offering. Thank you.

Brandon Ridenour -- Chief Executive Officer

Yeah, great question. So, with regard to the cost inflation, just to just to put a number on it. We were seeing acquisition costs were up, greater than 30% year-over-year sometimes quite a bit above that, so obviously that's material. In terms of why that's happening, our original assumption was that, this was something that was within our control and that we could manage the margin back down without losing volume, unfortunately what we found was, it looks like it's just a broad-based increase in cost and price at least for homeservices and we were not able to bring the price back down without losing substantial volume.

In terms of what's causing it, and whether it's targeted toward aggregators versus local SPs, no one knows, there's no visibility into our transparency into that question or answer that question. However, I would highly doubt that we're paying a different price than your local SPs it just doesn't seem reasonable. I think that there are a bunch of factors which are driving increased competition, including changes to the structure of the page, competition from other Google products to the traditional as SEM product. And honestly, just more participants participating in the auctions.

The cost there do typically go up every year, which isn't surprising what is exceptional is just the sheer volume of appreciation that's occurred this year. On the 40% of unfulfilled SRs those are evenly distributed across all the project types that we service. Home services are an amazingly fragmented and hyper-local type of problem to solve.

And so, the reason why we have so many that are unfulfilled is a combination of factors. Sometimes, we don't have a provider who does that service in that location. Oftentimes, we do have a provider, but they are simply at max capacity and in other times we'll have a provider, but perhaps they've already spent all their advertising budget again largely because of the imbalance of too much consumer demand for the amount of provider capacity, we can bring to bear.

And I think fundamentally, obviously our traditional model here continues to grow nicely, but unable to keep up with the growth in consumer demand. So we have, I think, as our obviously top priority, is figuring out how to productize this demand, and take it to market, take it to providers in new and more compelling ways that, that complements our traditional service.

So, offering a buy it now feature, either when we don't have anybody at all or perhaps even alongside local providers will give us, one, give, consumers/homeowners the option to choose the experience of their preference. And for those that want a purely digital solution we'll standardize upfront pricing that will have that option. And then, it gives us the opportunity when someone does purchase to take that demand, take that project out to a much broader set of providers, perhaps those for whom our traditional product is an appealing or maybe those who are in our traditional product but have additional capacity and can take a job where they're going to get paid for it, rather than having to pay us.

Joey Levin -- Chief Executive Officer

The one thing I'd add is, I do believe the Google does not favor aggregators "aggregators", I don't love that terms or as they reference to us, but I think that's a mistake on their part, and it's an advantage on our part. We add a lot of value in matching the right consumer, with the right service professional, which takes a lot of technology and takes a lot of -- to some extent manual labor and that delivers a -- we think a more compelling experience for the consumer, a better price for the consumer, because we can -- we can help the consumer through that process.

And when you go to the -- without the aggregators, the consumer is somewhat left on their own, and I don't think Google's solution solve that for the consumer, actually I think that solution without players like us makes it -- I really believe this makes it worse for the consumer that they end up with generally the highest price provider or provider who is working their ecosystem in a way that may not be optimal for the consumer, the homeowner.

Glenn Schiffman -- Chief Financial Officer

And our confidence in fixed price is borne of observable inputs from two very important learnings that we've had over the last year. One is the Handy experience and for certain task, that's just a better experience with all of the collateral benefits of repeat rate and customer satisfaction and Brandon was the architect and the driving force behind that acquisition, and then Brandon invested a product last year. The opt-in product, which also taught us that the SP's capacity is actually a lot higher than his budgeted or her budgeted capacity and that if we give someone a specific job which the opt-in product is a path to a fixed price.

If we get them on a specific job, they react differently better. Our win rates are higher for our SPs and that also gives us a lot of room on take rate.

Joey Levin -- Chief Executive Officer

All right, next question.

Robert Coolbrith -- Wells Fargo Securities -- Analyst

Thank you.

Operator

Next question will be from Mike Ng with Goldman Sachs.

Michael Ng -- Goldman Sachs -- Analyst

Hi, thank you very much for the question. I just had a few first in the letter, you said the majority of the guidance reduction for ANGI was because of higher marketing. Can you talk a little bit about your decision to spend more marketing instead of dedicating even more to accelerate the roll out of the pre-priced services, given the attractiveness there? And then, on the higher marketing is that simply a function of cost inflation, or are you actually trying to increase the reach and frequency and experiment with new channels? Thanks.

Joey Levin -- Chief Executive Officer

I think we'll turn to Brandon, it's a very good question and one that we've talked about quite a bit internally.

Brandon Ridenour -- Chief Executive Officer

What was it again?

Michael Ng -- Goldman Sachs -- Analyst

Well, the first one is what is -- why are you spending on marketing as against.

Brandon Ridenour -- Chief Executive Officer

Yeah. So I mean, on the first question, we are ready to do both. We are spending on marketing to continue to drive growth, to bring consumers to our service providers that might seem silly on the surface, when we spend most of the time talking about the lack of capacity, but the issue is that the nature of the business in the marketplace is extremely hyper local and most of our advertising is on a national, or at least a regionally broad basis.

And so, unfortunately we have in order to get the service requests and customers and the demand from them that feed our service providers when we do our capacity, you also get a lot of request for which we don't and there's really no easy way or no effective way to target at that level from a marketing perspective.

So, we think continuing to grow our marketplace, continuing to feed our growing network of providers needs to be a priority. All that said, part of the change here is to give ourselves the flexibility to radically accelerate our efforts around fixed price. We are going to move quickly, the goal is to expand as fast as possible that will largely not be governed by investment limitations, but will be governed by our ability to fulfill services at a high level of quality and in a way that is satisfying to our customers.

One thing, we know for sure is that it's easy for us to sell these. We've launched -- I think we referred to this earlier, but we recently expanded -- we've been been operating in several categories for most of the year, traditional Handy categories, we recently expanded to 19 new categories where we're seeing very good customer engagement and conversion. So, we know we can sell these services. What will be our limiting factor here is ensuring that we can scale and fulfill very reliably and I think we have more to learn there.

Joey Levin -- Chief Executive Officer

And I think the answer to your second question, although I might have forgotten it was, we see a combination, we do think that ecosystem has gotten more expensive and we do think we've added some wounds where our costs were not in control, in ways where we've now brought them or in the process of bringing them under control. And I think we'll go [Indecipherable] two more questions, but this may be the last question. Operator?

Operator

Thank you. Our next question will be from Ygal Arounian from Wedbush Securities.

Ygal Arounian -- Wedbush Securities -- Analyst

Hey, thanks guys. So like there is two kind of distinct but very close-related issues with Google. One is the algorithm issue we talked about extensively and then the other is that Google just giving more of its real estate its own products. And so it's -- what's your view on -- does this change the overall dynamics of SP growth unless you're consistently spending more on marketing.

If consumers are going to Google, and just looking even if it's not as strong of a service and they're not getting the best experience that they might not know that, if they're clicking on the first couple of link, can that have a long-term impact on the actual ads as far as growth trajectory and you noted July was a really strong month and just curious on what is your outlook on the year on SRs growth has changed at all? Thanks.

Brandon Ridenour -- Chief Executive Officer

Yeah. So we mentioned earlier that about, about 30%, 40% overall, but 30% that could be affected by these types of changes -- of our customer acquisition comes from Google. So we're really well diversified, and of course, we're still going to continue to push on that. But we certainly believe that we can continue to be successful in a Google system, in fact we have to be, it's too important of a place for finding customers.

And so, we are ramping up our investment and our focus and have some promising initiatives and technologies in the pipeline that we think are going to make a difference. Longer term, we need to acquire our customers and keep them as I mentioned earlier. Our focus in fixed price as part of this, but there are other things as well -- our entire focus is to create a much stickier experience with the homeowners, such as we acquire them once and then they come back to us time and time again.

I think for us, that is the breakout change that will really transform the business in a number of different ways, both in terms of the quality of the service and the experience for homeowners but also obviously in terms of the economic profile and margin profile. We've got a lot coming on that front, and you'll see a lot of changes over the coming year -- coming 12-months that they go directly at that opportunity.

Joey Levin -- Chief Executive Officer

And the 30% from Google on the unbranded sense, I don't think there's new consumers discovering Google today in America and they are increasingly going to Google for it, and I'm certain that with the product that Google is offering there, that they're are not -- they're not more likely to start to go to Google to see that product. Will the 30% be more challenging? I think, yes, I expect that to be more challenging for eternity.

But, we're going to -- we still got work to do in there. I think we can improve what we're doing in there for sure and we've got the other 70% that's the world is our oyster, and we feel we're excited about the things that we're rolling out, and to your last question-- which is the last question, we can answer is as long. The service request forecast.

Glenn Schiffman -- Chief Financial Officer

Yeah, we were 15% last quarter 17% this quarter. We don't think it's going to materially increase from their high teens, maybe 20% on a go-forward basis. But you know what, there is a lot of volatility in the ecosystem, for sure, and we just have a lot of different levers, remember you have revenue per SR as well here. And then, as we continue to get more successful on price, that could change the underlying metrics as well. But all support, obviously our 20% to 25% revenue growth on a go-forward basis.

Joey Levin -- Chief Executive Officer

All right. Thank you everybody very much for the quarter, for your questions and we'll speak to you again in 90 days.

Operator

[Operator Closing Remarks]

Duration: 62 minutes

Call participants:

Glenn Schiffman -- Chief Financial Officer

Joey Levin -- Chief Executive Officer

Eric Sheridan -- UBS Investment Bank -- Analyst

Jason Helfstein -- Oppenheimer & Co. -- Analyst

Brandon Ridenour -- Chief Executive Officer

John Blackledge -- Cowen and Company -- Analyst

Cory Carpenter -- JPMorgan -- Analyst

Ben Schachter -- Macquarie -- Analyst

Ross Sandler -- Barclays Bank -- Analyst

Daniel Salmon -- BMO Capital Markets -- Analyst

Kunal Madhukar -- Deutsche Bank -- Analyst

Brent John Thill -- Jefferies LLC -- Analyst

Robert Coolbrith -- Wells Fargo Securities -- Analyst

Michael Ng -- Goldman Sachs -- Analyst

Ygal Arounian -- Wedbush Securities -- Analyst

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