Morningstar | IAC Has Valuable Properties, but Remains a No-Moat Company
We think IAC/InterActiveCorp is once again well on its way to generating attractive returns from two narrow-moat businesses--Match Group, a collection of fast-growing and profitable online dating offerings; and HomeAdvisor, a market leader in matching reputable home service professionals with consumers. Unfortunately, this Internet media company’s portfolio also consists of no-moat businesses, such as the secular declining publishing and applications segments, and the fast growing but nonprofitable video segment, all of which offset the narrow-moat Match Group and HomeAdvisor, in our view. IAC’s market-leading HomeAdvisor markets the services of home service professionals. IAC has invested in areas within HomeAdvisor that have resulted in basically a feedback loop: attracting more service professionals, who have helped bring in more consumers, who in turn have attracted more service professionals, and so on, thereby strengthening HomeAdvisor’s network effect. Per various studies, the home services market in the U.S. is valued at nearly $400 billion, of which more than 90% of transactions are initiated offline. We think HomeAdvisor, the online market leader, has 3%-5% of this market, an indication of attractive growth opportunities for the segment.The firm’s Match Group is a provider of online dating products with more than 45 brands, including Tinder. We believe by creating and acquiring various online dating products, with each serving different people in terms of demographics, location, and culture, Match Group successfully created a network effect for its entire portfolio of services that is becoming more mainstream. We estimate the addressable market for Match Group is $3 billion-$6 billion.IAC’s no-moat video segment keeps burning cash, stemming from investments made in Vimeo, a platform for video creators. While Vimeo has displayed subscriber growth, it has not yet begun to monetize the viewers of the content, which are around 250 million per month. IAC’s publishing and applications are in secular decline, and while we expect them to generate cash going forward, we do not think they have a moat source, as their revenue depends heavily on Google.IAC/InterActiveCorp is a media and Internet company. The company has majority ownership of both Match Group, Inc. (Match Group or MTCH), which includes Tinder, Match, PlentyOfFish and OkCupid, and ANGI Homeservices Inc. (ANGI Homeservices or ANGI), which includes HomeAdvisor, Angie's List and Handy, and also operates Vimeo, Dotdash and The Daily Beast, among many other online businesses. The company's operating segments are MTCH, ANGI, Vimeo, Dotdash and Applications, which are also reportable segments, and within its Emerging & Other reportable segment, Ask Media Group, BlueCrew, The Daily Beast, College Humor Media and IAC Films.
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