For single people across the world, paying a dating site like Match.com to find a partner can be considered an investment in love. What about investing in the company that finds love for people, though? As it turns out, this strategy can be quite rewarding for investors.
IAC/InterActiveCorp (NASDAQ:IAC) is a media and Internet company that owns several popular brands, chief among them Match.com. Shares of IAC have performed well in recent years, up nearly 30% in the last 12 months and over 300% since 2009.
The company's latest earnings results indicate that the search for love has perhaps never been stronger. While the company's dating websites are expected to continue growing well in the future, several of IAC's other business segments are struggling and need to be monitored closely by investors going forward.
The dating game
There is no doubt that The Match Group is the best performing business segment for IAC right now. The company's most recent first quarter earnings results reveal as much.
In total, IAC's first quarter net revenue of $740 million was flat on a year over year basis. The Match Group and Search & Applications generated $211 million and $398 million in the quarter, respectively, making them the two largest businesses for IAC by far. This is important because they were also the best performing sectors in the quarter.
The Match Group grew revenue 9% in the quarter. Growth was well balanced as domestic sales increased 7% and international sales increased 12%. In fact, The Match Group was the only business for IAC to grow year over year in the first quarter. The company's Search & Applications segment remained flat while its other three segments witnessed significant declines in revenue in the first quarter.
However, the largest potential for growth rests with The Match Group, which includes popular website Match.com as well as others like Chemistry.com, OkCupid, and Tinder. Accordingly, the company eliminated the Chief Executive Officer role in its recent reorganization and appointed former IAC CEO Gregory Blatt as the Chairman of The Match Group.
In the company's most recent earnings conference, Gregory Blatt explained, "Let's talk about Dating. Dating is something we're really excited about right now. The market has been really growing, we think it's going continue to grow, and it really grows on three separate vectors. One is adoption, one is engagement, and one is monetization."
Blatt also explained that in the last five years the number of people who have tried a dating product grew by about 20%. He stated that with a growing single population and the disappearing stigma associated with online dating, the business of dating is expected to only get better.
He concluded, "We think that's going to propel that 20% growth over 5 years to higher levels going forward."
The search is on
Unfortunately for investors, IAC is not only comprised of its fast growing dating businesses. The company's largest business by revenue is Search & Applications. With sites like About.com, Ask.com, and Dictionary.com, IAC's search business is in direct competition with industry juggernauts like Yahoo! (NASDAQ:YHOO).
While IAC's search segment failed to grow at all in the first quarter, Yahoo!'s search segment grew a solid 4.7% year over year in the same quarter. Search generated an impressive $444.7 million for Yahoo! in the first quarter, which makes it one of the company's largest segments just under Display, which generated $453.2 million.
For IAC, several brands in search appear to be working. The company's recent acquisition of ValueClick as well as CityGrid Media and About.com are performing well. However, they were not significant enough contributors in the quarter to overcome weakness at Ask.com.
Management at IAC remains hopeful for a turnaround in its Search segment however. CEO of Search & Applications Joseph Levin concluded, "But in sum, we're really excited about the Search & Applications business. I think we're in the first or second inning in our content strategy, and we're already seeing the fruits of our effort with the strong momentum in that business."
For growth investors, at the current time, an investment in InterActiveCorp is very much an investment in Match.com and related dating services. The overall trend toward online dating is easy to understand and the space should continue to grow well in the future.
However, IAC's success also depends heavily on its other businesses like search and in this regard, the company is struggling. Up against larger and better-entrenched competitors, IAC will have to continue to strengthen its search brands to grow at high levels.
Philip Saglimbeni has no position in any stocks mentioned. The Motley Fool recommends Yahoo!. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.