Diller Stands by Synergy

While Time Warner is rumored to be shopping AOL, IAC/InterActiveCorp is still confident that synergies between Ask.com and its various content and e-commerce sites will bring success.

“Contrary to the flavor of the day, IAC’s actual advantage is that we’re a conglomeration of multiple businesses,” said Barry Diller, IAC’s chairman and CEO, speaking on its quarterly earnings call with investors. “Every day, we are making the inter-relationships that can only be accomplished in the very much inter-related conglomeration of IAC.”

The company has been moving to incorporate Ask.com into its network since it acquired the search engine in July. It has added search boxes to most of its sites and is working to include more of its own vertical content in search results.

“There’s a symbiosis that’s natural between a search engine and these fantastic vertical services,” Diller said. “As you integrate these into search results, you give consumers a better value-add than they can get anywhere else. It’s that differentiation that will allow us to grow share.”

The fifth-ranked search engine grew its market share by 25 percent since January, ending September with 6.4 percent of U.S. search queries, according to comScore. Diller said a bigger push to gain share will commence early next year.

Responding to a question about Time Warner’s rumored talks with Microsoft and Google that would potentially give one of those search players a stake in its AOL unit, Diller advised Time Warner to think about AOL’s benefits over the long-term. “They’ve got a great business in AOL, I’d hope it doesn’t get carved up,” he said.

Profits dipped for IAC/InterActiveCorp despite higher revenue, mainly due to costs surrounding the spin-off of Expedia last quarter.

Overall revenue grew 55 percent over the year-ago quarter, up $526 million to $1.483 billion last quarter. Net income dropped by 24 percent to $68.1 million, or $0.19 per share, compared with $89.5 million, or $0.24 per share in Q3 2004.

Revenue growth was led by the Media and Advertising unit, mostly due to the acquisition of Ask Jeeves on July 19. Sector results were also helped by increased pay-for-performance revenue and lower operating expenses at Citysearch, which contributed positive earnings in the quarter. Revenue in that sector rose 958 percent to $83.5 million, up from $7.9 million a year ago.

For the full quarter, Ask Jeeves increased revenue by 15 percent over the same period last year. IAC attributed the increase to growth in North American search queries. Revenue growth was slowed somewhat by IAC’s August decision to reduce the number of sponsored search results on its site to improve the user experience.

Profit margins at Ask Jeeves also declined due to increased sales and marketing expenses and higher revenue share payments to third party traffic sources.