IAC expects stunted profit growth for the rest of the year, in part as a result of the cost of the marketing effort.
IAC/InterActiveCorp., owner of Ask.com, Citysearch, Match and other online entities, reported a 10 percent boost in revenue in Q1 2007 over Q1 2006, driven in part by its online businesses. The company earned $1.6 billion in revenue for Q1 2007 and launched a major ad campaign promoting Ask.com. IAC expects stunted profit growth for the rest of the year, in part as a result of the cost of that marketing effort.
IAC experienced a 43 percent rise in media and advertising revenue, hitting $168.1 million, up from $117.6 million in the first quarter of '06. That upward movement was fueled by growth in search queries and revenue per query. Overall revenues were tempered by lackluster profits in the company's LendingTree and U.S. retail operations.
Despite some bad news, "The good is the rest of IAC showed big growth," said CEO Barry Diller during this morning's earnings call with investors. The company was pleased with "healthy revenue gains" at its search and media businesses, which include Ask.com, Ask.com UK, Fun Web Products, and network properties like syndicated search advertising, search results and toolbar products.
Traffic from network offerings drove 45 percent of search and media revenue, up from 36 percent in Q1 2006; traffic from Ask.com and other proprietary businesses drove 55 percent of search and media revenue, down from 64 percent in Q1 of last year.
The company today also announced the launch of a multimedia marketing campaign, in conjunction with the rollout of its evolved search algorithm, dubbed Edison. Through the altered system, IAC aims to improve search results by factoring in the social aspects of relevance in queries.
"Profit growth was aided by the fact it was a reasonably light quarter in terms of Ask.com marketing as we prepare for a new second quarter campaign and product launch," said IAC CFO Tom McInerney during the earnings call. "With an expected major advertising for Ask.com commencing in Q2, we expect only modest profits in this segment in the second quarter."
The cross-media campaign prods people to "Experience instant getification" by using the search engine, and employs the word "algorithm" inappropriately in conversational situations. A TV spot, for instance, features a guy proclaiming, "I was all algorithm-ed out."
The year-long campaign "will go in flights, and the message will evolve in concert with product launches," according to Ask.com VP of Marketing Greg Ott, who spoke to ClickZ News from Prague, where the company is filming upcoming TV ads. Simple ad units will be seen on social networking, news and tech sites including CNET, MySpace, NYTimes.com, Slate and YouTube.
"People take search engines a little bit for granted," continued Ott. "This campaign is helping to get people to consider the differences in search engines."
As noted during the earnings call, IAC spends $175 million each year on online advertising, and is in the process of conducting all its CPM buys on a single platform in the hopes of creating greater ad buying efficiency. Ask.com buys ads direct and through ad networks, said Ott.
IAC was asked during the call about the expiration later this year of its partnership with Google, by which Google provides paid text listings alongside IAC search results. Though he remained vague regarding the issue, Diller said the company expects to have the situation sorted out by this summer, adding, "We are in discussions with everybody."
"Clearly Google is helping our revenue per query increase," said Doug Lebda, president and COO. "We're getting a higher percentage of commerce queries... which tend to monetize better," he continued.
To compete directly with Google's AdSense network, IAC announced the launch of its own contextual ad network last week.
In addition, IAC-owned Citysearch unveiled a redesign yesterday and will now offer local advertisers custom films along with other new ad options.
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Kate Kaye was Managing Editor at ClickZ News until October 2012. As a daily reporter and editor for the original news source, she covered beats including digital political campaigns and government regulation of the online ad industry. Kate is the author of Campaign '08: A Turning Point for Digital Media, the only book focused on the paid digital media efforts of the 2008 presidential campaigns. Kate created ClickZ's Politics & Advocacy section, and is the primary contributor to the one-of-a-kind section. She began reporting on the interactive ad industry in 1999 and has spoken at several events and in interviews for television, radio, print, and digital media outlets. You can follow Kate on Twitter at @LowbrowKate.
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