IAC/Interactivecorp (NASDAQ:IAC) Q&A with IAC Business Leaders July 16, 2020 10:00 AM ET

Company Participants

Joey Levin – Chief Executive Officer-IAC

Brandon Ridenour – Chief Executive Officer-ANGI Homeservices

Anjali Sud – Chief Executive Officer-Vimeo

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Neil Vogel – Chief Executive Officer-Dotdash

Tim Allen – Chief Executive Officer-Care.com

Glenn H. Schiffman – Chief Financial Officer-IAC

Conference Call Participants

John Blackledge – Cowen

Brian Fitzgerald – Wells Fargo

Brent Thill – Jefferies

Jason Helfstein – Oppenheimer

Youssef Squali – SunTrust

Brad Erickson – Needham

Cory Carpenter – JPMorgan

Dan Kurnos – Benchmark

Benjamin Black – Evercore

Kunal Madhukar – Deutsche Bank

Ross Sandler – Barclays

Dan Salmon – BMO Capital Markets

Ygal Arounian – Wedbush

Nicholas Jones – Citi

Justin Patterson – KeyBanc

Michael Ng – Goldman Sachs

Eric Sheridan – UBS

Ryan Gee – BAML

Glenn H. Schiffman

All right, I think we’re now broadcasting to all our attendees. Good morning, everyone, and thank you so much for all the time you’re going to spend with us this morning and we’ll probably creep into the early afternoon, as you know by the agenda. And welcome to our Q&A session with IAC business leaders.

Just a quick reminder on the agenda. 10 to 10:15, Joey Levin will take questions. 10:15 to 10:45, we’ll be joined by Brandon Ridenour, CEO of ANGI Homeservices; 10:50 to 11:25, Anjali Sud, CEO of Vimeo; 11:30 to noon, Neil Vogel, CEO of Dotdash; 12:05 to 12:35, Tim Allen, CEO of Care.com; and I’ll close at – from 12:40 to 1:00. You see we have a couple of minutes in between some of these. If – we’ll see how we’re going, maybe we’ll take a break here and there or we’ll have some overage if we roll over.

Before we jump in, 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 these risks have been set forth in our SEC filings and in the July IAC shareholder letter posted yesterday to the Investor Relations section of the IAC website. We may 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.

With that, I’ll turn it over to Joey for a few short remarks then open up to Q&A.

Joey Levin

Thanks, Glenn. Thank you, everybody, for welcoming us into your homes or at least the analysts for welcoming us into your homes or wherever you may be, it looks like some people outside your homes. This is the first video interaction that we’ve had with everybody. And I actually, 1.5 minutes into it, really like the format because I can see all your faces. And I think we could hopefully be a little bit more interactive. And I think the goal of today is to be a bit more interactive. It’s really just a long period of Q&A with the leaders directly.

And this is the new and improved IAC. So video is a new experiment for us, obviously, driven by the environment around us. But I think we’re going to do a lot more experiments in new IAC as we’re smaller, as we’re nimbler. You see some other experiments also for us in the last 24 hours, which is that the – we’re not doing guidance anymore, and we’re going to start posting our key metrics monthly. And the thinking behind those things was really to – maybe counterintuitive, was really to focus everybody on the longer term of the business by saying, here’s the metrics, you can see them monthly.

There’s not one big event in quarter. There’s not one big event for the year. It’s just – this is the rhythm of the business. This is the flow of the business. This is what we look at. This is things that we think are important. And we hope that you look at those things and think they’re important but not organize the world around the reporting of one particular event. So that we can all organize for operating the business for the long term and not wasting the time on things like guidance and kind of reducing the importance of any individual particular reporting event. Hopefully, that works. But maybe it won’t, maybe it will increase the volatility, and it will hit people to focus even shorter term. And if we learn that, we’ll adjust but we got to try and see if we can change things.

The other thing that is new is, I’m really excited to be able to introduce all of you to the leaders at IAC’s businesses and to be able to ask them the questions directly. And I think it’s a very – of course, quite biased on this, but I think it’s a very impressive group. Brandon Ridenour, you all know because ANGI has been public for a while. Anjali Sud, some of you have met, she’s done some conferences, but an exceptional young leader at Vimeo and really architect of the current strategy at Vimeo, which, as I mentioned, that really has finally broken through and seeing some really exciting momentum right now. You can see it in the numbers.

Neil Vogel, who’s done at Dotdash, which – what no other digital publisher has done. I mean it’s really – it’s amazing to see right now, kind of relative to competition. But the most impressive part of what Neil and the team at Dotdash have been able to pull off, and you guys should drill them on this, is the focus that they had for the prior several years when everybody else was chasing really shiny objects and things that Neil was convinced didn’t make economic sense, didn’t make business sense, didn’t think could build the business. And he stayed focused on the things that he thought were good for delivering a compelling consumer experience and delivering a productive advertiser experience, an efficient advertiser experience. And that’s finally come through. And I think it’s just really nice to see.

And Tim Allen, who’s very new to the job but not new to IAC. We bought Care at the beginning of this year, and that business is, like everything else with the pandemic, saw some real volatility but is now back to what we think in a very nice place and has – is in some ways given Tim and team the time to lay some really important foundation for building what Care we think can become. We don’t have any metrics on Care yet because it’s too small and too early, but you should talk to Tim about strategy and how he’s thinking about it, what he’s prioritizing.

And then, of course, you get Glenn the whole time, and you all know Glenn well. And of course, he’s an enormous asset to the team at IAC, and he’s done unbelievably well for us since he joined and really helped change a lot of what IAC is doing and continues to do. And so we’re thrilled to – and of course, Glenn continues as a key component of new IAC. That’s the story.

Let me now turn it because we’ve got a limited window here before we think Brandon takes the stage. So let me turn it to questions for whoever’s got one.

Question-and-Answer Session

A – Glenn H. Schiffman

All right. I guess we have a queue building. We’ll start with John Blackledge of Cowen.

Joey Levin

Hey, John.

John Blackledge

Great, thank you and thanks for doing the call. Joey, just given the $4 billion-ish in cash, curious post spin, how you expect to allocate that capital in the coming years for M&A. Should we think about deals within the current business segments or new segments or both? And then just curious, your thoughts on asset values now that we’re 4 to 5 months into this pandemic

Joey Levin

Yes. I knew that one way or the other that would have to be the first question or probably the first several questions, and I was trying to think as I was preparing for this for a clever new answer, but I had to go back to the answer that we always give, which is really – it’s all of the above. We’re definitely going to prioritize the existing businesses. That’s where we have a real advantage. That’s where we say we think we can be the smartest people in the room, and so we can lean into that advantage. But I also think realistically, probably now more than ever, new opportunities, new categories are more likely because I think that their – the cash balance relative to the businesses that we have invites that.

We just moved out, so to speak, of a very big business. And I think that gives us the window, the bandwidth, the capacity to move into new businesses. So I do think that’s probably more likely now than it’s been in a while. And we’ll always look at things kind of in any area and in any stage. And we’d like to have a range of businesses that are more mature, being able to generate profit and businesses that are still early and have enormous growth potential. Well, we’d like enormous growth potential in all of that. But realistically, I think we’ll have a range of life stages in IAC.

I do think that minority investments, we did with Turo, that was a big step for us. Again, I don’t think we’re becoming a collection of minority investments, where I do think minority investments are possible, and that gets a little bit to your second question, which is asset values. There was a window, but it only lasted about 2 weeks, where everything was very cheap. And we initiated a bunch of really exciting discussions then and thought that things could happen. And then I guess, fortunately, I’d say, overall, fortunately, maybe unfortunately for that narrow slice, but fortunately, the Fed stepped in and put in a lot of support. And all the things that we were discussing became totally irrelevant very quickly and not enough time to get anything done.

I think that what – in a lot of instances, businesses that we like, that we like long-term, that we could imagine owning long-term or having a big influence long-term, I think those opportunities may be more available in starting with minority positions, and that’s something that we will consider. But we’re still meaningfully biased towards control positions and things. And I don’t think things generally look cheap right now. I think things generally look pretty expensive right now. But there’s always exceptions to that. And so we are – we’ve always been focused on new opportunities. We’ve always been focused on how to deploy the capital and the cash, but probably now more than ever, it’s very – it’s front and center relative to everything else.

Glenn H. Schiffman

Thank you. Next, Brian Fitzgerald of Wells Fargo.

Brian Fitzgerald

Thanks guys. Joey, I had a question around – Barry recently was interviewed by Bloomberg, and he said, more or less, he expects the world to return to normal after the pandemic passes in terms of office work and travel maybe. Is a similar viewpoint guiding your planning, your execution, maybe how you plan to deploy capital? Do you expect a shift towards video interaction and e-commerce to revert back to the mean? Or is this a new normal we’re dealing with?

Joey Levin

Yes, I think there’s a couple of things in what Barry said, I don’t want to over-interpret what Barry said, you probably have to bury the – if there’s a deeper meaning. But I think what he was saying is, eventually, the world will go back to normal. Of course, I agree with that. And the question is, is normal identical to what it was or is normal different but still normal, comfortable, we’re not isolated and things like that.

Take – video is a great example. I think this is the first time that we all have interacted on video. I can’t imagine why, notwithstanding a vaccine or something where we could be physically close to each other, I can’t imagine why we wouldn’t do this over video in the future. I think this is a great way for us to interact. I can be closer to your face than I would be in person. We can have an audience, which is easy and helpful for more shareholders to be able to participate. As I think this is a fantastic format.

When we think about Vimeo specifically, which is where we have a lot of exposure in this area. We’ve got – my favorite recent example of a customer is a 60-year-old diner, I think, in Oklahoma or a similar part of the country. That said, we’re – this wasn’t a customer we called, it was a self-enrolled customer, and they started creating videos to explain what their COVID program was, meaning when they were open, or how takeout worked, or things like that.

Right now, that customer is communicating with their audience by video about COVID. But when the diner comes back open and everybody is fully in the store, they’re still going to want to communicate with those customers by video because they’re going to want to say when they have a Memorial Day barbecue. They’re going to want to say when they have a happy hour special or whatever it is, and now they know that they can communicate with their audience with video and that their audience interacts in that way. I think that, that is very sticky and a meaningful change in consumer behavior.

So I do think, and I’m sure Barry as well thinks, that changes in consumer behavior created by this or accelerated by this are permanent and sticky, but also, there is a time that the world will go back to normal with the benefit of, that diner now has the ability to communicate that they always had plus the ability to communicate with video, and they’ll use that. And I expect that to be the case across a lot of areas.

I mean I think that the main thrust of what Barry was saying is will people go back to offices? And will there be a culture around office, physical location, Monday through Friday, nine to five? I do think – I do also think that is likely. I think there will be changes, adjustments, but I haven’t yet heard a great alternative, and we’ve been brainstorming, and thinking and talking to experts and everybody on this.

I haven’t heard a great alternative that allows companies to build careers, build leaders, build culture, build camaraderie entirely remotely. But who knows, it may happen. I mean there’s all kinds of innovation happening. So it’s possible. But our bias is that people will congregate in person in offices, again, in a meaningful way.

Brian Fitzgerald

Okay, thanks Joey.

Joey Levin

Sure.

Glenn H. Schiffman

We’ll take our next question from Brent Thill of Jefferies. There we go.

Brent Thill

Great.

Glenn H. Schiffman

Hi, Brent.

Brent Thill

Thanks good morning. Joey, when you think about the top couple priorities of the new IAC, can you just articulate how you would lay that out from here?

Joey Levin

Yes. I think probably, to me, the biggest is ANGI and really fixed price services in ANGI. And I think that is just a massive opportunity, a huge potential competitive advantage, a huge leap forward in the consumer and the service professional experience and call it, an interesting and risky and really early exciting positive momentum on that. And so when I think about that in terms of where we are, where we can get to size of the market, things like that, I think that’s a very big and exciting one for IAC.

Vimeo, opening up and confirming that the market is as big as we think it is in video, that was – that required a leap of faith six months ago. And we believed it. We believed it strongly, but it was nonetheless a leap of faith that didn’t require a leap of faith starting in March, but now the question is, are we right? Is it sticky? Will it stay around? Will the story I just told Brian be real times millions? Creating the product reality and the use cases to make sure that it is relevant, it stays relevant for a bunch of different vertical-ized businesses, I think, is also probably top three.

Going back to the first question, John’s question, of course, what to do with the capital, the $4 billion is also certainly in the top three. Those would be I think the biggest – I mean in each business, of course, we have priorities, and we have opportunities. But to me, those are probably – are almost certainly, I think, the most transformational and largest opportunities in IAC at the very moment right now.

Glenn H. Schiffman

Joey I took one or two minutes on the safe harbor language. Let’s squeeze one quick one in. Jason Helfstein, you want to go, Jason Helfstein from Oppenheimer.

Jason Helfstein

Thanks. Maybe I’ll just be more specific. So is there a hurdle for M&A versus buybacks or a time frame, and investors should think about it, you don’t use the money for M&A in a year, would it make sense to buy back? Just be more specific how you’re thinking about buybacks. Thanks.

Joey Levin

I don’t think I can be more specific. I mean not to hide anything. I’d like to. It’s just – I don’t know the answer to that question. It really depends on the market. It depends on the price. It depends on the opportunity. Last time we were in this position, which is sort of post spin or post multiple spins and arguably overcapitalized, we did buy back a huge amount of stock. I mean I think over that period, we bought back sort of half over the subsequent three years. And it’s something that we’ll always look at. I mean I do think it – notwithstanding the political rhetoric, I do think it’s a very appropriate and useful tool for us to consider, and we will consider it all the time, and we’ll act when we think it makes sense to act on that.

One thing we won’t do, I guess, to answer that question, part of that question specifically is force ourselves a time line, like say that if we haven’t bought something within X years, we’ll turn into buybacks, we will turn into dividends or something like that. I think we’ve always been opportunistic and maintain flexibility. And I think that’s what we want to do right now again.

Glenn H. Schiffman

Okay, thank you Joey. We will switch on over to Brandon. Brandon, you’re – there you go. Now you’re still muted. But let’s switch over the questions to Brandon. Okay, we’ll start with Youssef from SunTrust.

Youssef Squali

Great, thank you very much. Good morning, everyone, and thank you so much for doing this. This is very practical for all. Maybe can you talk a little bit about some of the metrics that you published last night? I’m particularly curious about growth in monetized transactions which lagged significantly versus growth in revenues. I was just wondering what accounted for that. Was that because of the – maybe the SP capacity issue that you talked about? And what’s basically the strategy kind of to resolve that issue? I know we had it – maybe six or twelve months ago, it seems to have been fixed, but it seems like it’s back on the table. Thank you.

Brandon Ridenour

Yes. It’s a great question, obviously, given the metrics we’ve released. We had an exceptional quarter in terms of just executing against our – the sort of core inputs that drive our growth. Our new SP sales, we had three record months. Sales overall were up 30% year-over-year. That is the primary and long-term driver of SP capacity and financial growth in the business. However, unfortunately, the pandemic has had impacts on us. Early in the pandemic, it was all about consumer demand. But what we saw over time as consumer demand bounced back is that SPs in small businesses are just broadly being impacted.

And the impact to those small businesses really comes in two forms. They are struggling with workforce issues, and they are struggling with supply chain issues. And so we do a lot of surveys on SPs. I think the original number is that well over 60% reported having been impacted, and I think 57%, so they either had to reduce operations or shut down or suspend operations altogether. A lot of those have come back, but there’s still a big cohort that reports operating at reduced capacity. And where it stands today as of this week is that 95% of those who report continuing to be currently impacted expect to be back up at full capacity within 90 days.

Now we all know that that’s very difficult to predict in the current world. But I think the intent that they’re signaling is very important.

And I would say, more importantly, when you look at the revenue friction between SR growth and what we actually translate into revenue, that is largely driven by our external – sorry, our existing sort of long-term customers. We saw a reduction in spend from some of those long-term customers as a result of these sort of COVID-19 impacts, but they’re not leaving the ecosystem. They’re not attriting out. They’re simply either reducing their spend or they’re pausing their leads due to their lower capacity.

So between the fact that they’re not attriting, they’re staying in the network, and the fact that they’re signaling to us through our surveys that they expect to be back at full capacity, I’m very optimistic that they’ll come back. I think the best case scenario – sorry, not that they’ll come back, but that their spend will regain former levels. And I think the best case scenario and perhaps what we expect is that these customers will drive their spend back up.

And as a result of that, we won’t really lose any time in terms of the growth trajectory of the business because all of the inputs around service requests, the cost of service requests and the pace of new sales have been at or above our plan. If these sort of existing customers that have lowered their spend a bit simply revert to where they were before, then we’ll be right on track with where we expect it to be. As for when that will occur, it’s hard to know. I mean they’re saying within 90 days. I think half of them are saying within 30 days. But I think the path of the pandemic will play a big role in that. The reality is we’re dealing in people and not products, and there’s an effect there.

Glenn H. Schiffman

Brandon, I skipped over and went into questions. I don’t know if you had any opening remarks that makes sense to share, or were they just done in that question.

Brandon Ridenour

Yes. I think I hit a lot of them, which was, look, we think we had an exceptional quarter. All of our key metrics on the sales side, I just quoted them, were really incredible. On the service request side, you guys can see that publicly. Our cost per SR was down about 20% year-over-year. So I think that was the – June was the highest SR growth in two years, while costs were down considerably. We are experiencing friction related to existing customer capacity.

We have a plan proactively to work on resolving that. We’re kicking that off this week. But of course, some of this just comes down to when they can restaff at the levels they need to restaff to. A lot of companies reacted to this very quickly by cutting staff, and some are cautious to rehire because of fear of sort of a wave two. But many are having difficulty rehiring for a variety of reasons. One of which is the unemployment surplus program where the wages are competitive with that.

Aside from sort of our just operational execution, we had a phenomenal quarter in terms of pushing forward on our strategic goals, in particular, developing greater loyalty of our customers. We have an exceptional pace of innovation. We had more than 1 million homeowners use our HomeAdvisor app in June. That was up 85% year-over-year, and we expect to, yet again, double that in pretty short order. We said that’s a primary strategic goal for us.

And we’re seeing really fast progress. We’ve got a long way to go, but we’re moving very, very quickly. We launched our payments platform, that’s growing very rapidly. In the first 90 days, first 12 weeks, it grew at about 35% week-over-week throughout that entire period. So we’re seeing great engagement. It’s early, it’s small, but we’re seeing the type of engagement in that first 90-day period that makes us very excited about it. And we have a really incredible pipeline of features that we’re going to launch in the second half of 2020.

First of all, we are going to offer and introduce financing options for consumers around just about every project that they come to us for. Another thing I’m excited about is extending the payments platform to our SPs for any customer they have, whether that customer was acquired through an ANGI business or not. And ultimately, they’ll also be able to offer those customers financing along with that payment functionality. That’s the capability that most providers don’t have today, particularly the financing component.

So we’re really excited about that. It obviously leverages our network to extend our reach to their non-ANGI acquired customers, and we’re excited about the implications there. So we’ve got a lot on tap for the second half of the year. Hopefully, we see the impacts from the pandemic resolve, I guess, in line with the expectations that the service providers are telling us, but we’ll have to see how it plays out.

Glenn H. Schiffman

Thank you, Brandon. Moving over to Brad Erickson of Needham.

Brad Erickson

Okay. So I guess just to follow-up on that. I think the question people have, Brandon, ultimately is like, are you guys in control of this SP capacity issue? Or is the macro? And kind of puts and takes there. Maybe a couple of things there. Talk, one, just about some of the sales strategy that you’re rolling out to try and address that. And then also maybe just hit in the context of like things like the subscription removal from the end of last year, I believe.

We’ve seen kind of a persistent deceleration starting out the year. Understand that some of the potential unique factors related to the pandemic have driven that, but just talk about kind of what’s going on the sales side to address that SP capacity issue. And then I have a follow-up, if I can.

Brandon Ridenour

Yes. Let’s just ignore the pandemic effect for a moment and pretend that doesn’t exist. We have seen exceptional – you could – let me take a step back. You can effectively divide our business into two halves. We have products we sell to service providers, advertising products where they pay us. And we have a range of new offerings effectively where we pay them. And so I really think of our opportunities on each of those two sides that are very different. The sort of ad sales where they pay us is our traditional business.

And we did a time testing and optimization around segmentation beginning late last year. And we’ve seen that pay off tremendously in the form of some of the highest sales force productivity that we’ve had in a very, very long time. And that’s where we’re having record sales months and 30% year-over-year growth on really what is a flat to down sales force size. So that tells the story right there. Effectively, we’re getting about 30% more sales out of about the same size sales force.

We think there’s a long way to go in terms of optimizing. We barely scratched the surface in terms of using segmentation and tailored offerings to drive even more productivity. What that whole exercise has allowed us to do is effectively tap into a historic sort of 90% of our prospect database that had become resistant to our historical offer, and now we’re finding them engaging at a much higher rate.

So I’m very optimistic and excited that we can continue to grow that traditional advertising SP network. Without a doubt, the overall monetization has taken a hit here, but that, I believe, is temporary. And if those customers come back, it won’t even manifest in terms of just lost time from a growth perspective. The other side of this is we are developing – I mean, there’s fixed price and a range of other things that we’re doing that effectively deliver jobs to SPs without them having to pay us for advertising. And these can take a couple of different forms. Obviously, with fixed price, we just pay – we pay an SP to do a job.

We have some other offerings where we take a portion of a one job, which just gets you closer to the transaction, which tends to have more appeal to providers than paying for advertising or leads. These are working very well. The reality is the advertising business has been growing for 20 years. It’s enormous. And these other things are going to take a little time to scale before you feel it in the overall – on your overall financials of the business, just given the size and sort of history with the ad model. They are moving along in spite of COVID at the pace we expected them to in terms of growth. And the leading indicators, if you will, are really strong. And I’ll talk about one of those in particular, which I have alluded to in the past.

We knew we could introduce fixed price for these sort of simple projects. We did that last year. We’ve been experimenting with much larger projects, let’s call it mid single $1,000 projects, install a wood fence and solid deck, that type of thing. I think I mentioned last time that we were seeing consumers pull the trigger and buy these on the site, which was exciting. And I think was the primary thing we needed to know in order to know that there was – they’re there, if you will. But what we’ve accomplished over the last couple of months is really starting to scale fulfillment of those jobs.

And so we’re really starting to see a pretty strong revenue growth rate for those higher-priced jobs. And that segment of the marketplace is about – from an addressable market standpoint, is about $200 billion. So if the original ones we launched were about $50 billion in TAM, we’re unlocking now projects with this fixed price model that represent up to $200 billion in addressable market.

So these nascent efforts are working. I think the two ultimately form a flywheel, I believe, that as we strengthen, as we grow these new product lines like fixed price, because we’re monetizing the same SRs, ultimately, these form a greater hole, together with the ad model. I expect the ad model to keep growing. Certainly, it won’t grow at the rate that these new initiatives will, but I think in combination, we’ve got – we fully expect to reattain our 20% growth rate. I think our aspirations are even higher than that, but we certainly have confidence in getting back to that 20% level. And it will be a combination of the ad model as well as the new lines of business we’re introducing.

Brad Erickson

Got it. And then maybe just a quick follow-up, if I could, just on a model type question. It’s a little bit hard to tell but I wonder if you can just give us any sense. Did fixed price potentially sort of flatten as a percentage of revenue or maybe even go down sequentially, just given some of the unique factors in the capacity shortages? Or is it safe to assume that, that just tends to expand?

Brandon Ridenour

I don’t know the exact answer, just down to the math, but I’ll tell you, two things did happen. One, most of our retail partners suspended offering our service during Q2. Everybody just stopped wanting to put people in the home and our large retail partners were no different. So retail partners are a big driver of fixed price transactions. And so that had a big impact. They mostly began to come online in June. And I think we’re – I think we’re pretty much up at full run rate again there. But of course, that could change, as we all know.

The other thing that we were not an exception to is we got thrown for a loop by the drop in consumer demand in March and early April. And we pulled back on our efforts to scale our fixed price provider network. That was a mistake. If you could have seen six weeks into the future, you would have stepped on the gas, don’t hit the brakes. But nevertheless, we lost four, maybe six weeks of aggressively leaning into growing that provider capacity. And so to some degree, we got slammed with demand, and we’re catching up, and we’ll – our team believes within 90 days, we’ll fully make up that gap in terms of having the provider capacity we would have otherwise had. But those are two things that definitely affected fixed price. I don’t know where the math nets out exactly, but they were meaningful for sure.

Brad Erickson

That’s helpful. Thanks.

Glenn H. Schiffman

Move over to Cory Carpenter from JPMorgan. Cory?

Cory Carpenter

Great. Thank you. Brandon, maybe sticking with fixed price. I think one question we get a lot is just bigger picture on how this scales over the next few years. So I guess my question would be, could you just frame your ambitions longer term? Is this something that can maybe even be the majority of business one day? I know it’s still very early. And then what are some of the milestones we should be looking for over the next few quarters?

Brandon Ridenour

I think over the long term, we certainly think it can be the majority of our business. I think over a few year period, we’d love to see it get to be half of our revenue. I don’t think that is – I don’t think that’s crazy. It’s certainly ambitious from where we’re starting. But just given the nature of it and the appeal to customers and some of the secondary characteristics around repeat use and loyalty, we believe as we get customers broadly having their credit card on trial, with the ability to pay not only for fixed price projects, but for any project, and dramatically remove friction in the purchase process that we’ll see demand continually grow.

So our ambitions are, call it, in that ballpark of pushing toward getting it to be half the size of our marketplace business. But it’s a big jump from where we are today. That’s for sure.

Glenn H. Schiffman

Okay. Moving on to the next one, Eric Sheridan of UBS. Eric?

Eric Sheridan

There we go. Thanks so much. Brandon, I want to come back to your comment about the relationship with the consumer. How far along are you in the process of reorienting or rearchitecting your marketing spend to sort of lessen the dependence on Google as a channel, own more direct traffic? You mentioned mobile app usage on the platform. I wanted to know where you see yourself in that broad evolution as a platform. Thanks.

Brandon Ridenour

Yes, great question. So we fundamentally believe that the answer here is less about moving spend away from Google into other sources. We are, of course, eager to find other sources where we can put money to work effectively with a strong ROI, and we’re having success with that. But that’s not – we don’t strategically intend to take away spend from Google, just to take it away. Fundamentally, we believe the answer to having a more loyal customer base that comes to us directly, it’s all about the product and the product experience.

And from my perspective, we’ve done a lot in the first half of the year. We have a ton in the pipeline for the second half of the year that I think is going to create an incredibly sticky experience, whether it’s getting people with a credit card on file, having them – giving them the ability to really frictionlessly pay for any project they do without having – contactlessly, as they say, without having any contact. Whether it is the ability to offer recurring services, like we’ll just – you can sign up once and we’ll clean your gutters twice a year, you never have to think about it again or being able to design your own bespoke subscription package of multiple services that we just handle for you throughout the year.

As you can imagine, anybody that gets into those kinds of relationships are going to have an incredibly sticky relationship with us that is dramatically different than the historic sort of fleeting matching experience where you go through, call it, an interview and you’re quickly on the phone with a provider. So we believe it’s all about product. Everything I’ve talked about or alluded to is going to be in market this year. And I think in concert, those things are going to be incredibly powerful.

Now to see that translate to business impact, we’ve got a scale participation on those things. We’ve got a scale participation in fixed price. We’ve got to get huge engagement in the usage of our payments platform. We need to get as many people into recurring services and subscription packages as we can. And we’re dealing with large numbers. We had I think 26 million SRs from 12 million or 13 million individuals in the last 12 months. And we got – in order for it to really make a difference and really create an inflection point, we’ve got to get – all of those folks, we’ve got to get a significant portion of those millions of people engaged in these new features, and I expect that to take some time. We’ll have them in market, and we’ll know quickly how folks that do engage, look, how do they behave. We’ll know whether we’re on the right path in short order.

Glenn H. Schiffman

Okay. Moving to Dan Kurnos of Benchmark.

Dan Kurnos

Great. Thanks. So Brandon, maybe you can – if I could just follow-up on that, just on the SP side of the equation, getting them to participate, you talked a lot about sort of filling holes, I think, and moving up tier. You did pretty well getting to tier 1, rolled out tier 2 pretty aggressively, getting to kind of that higher tier bucket. What kind of – what holes do you need to fill to get sort of SPs to commit more willingness to participate? I think the consumer side will come. And how much has the current environment kind of changed the strategy or allowed you to maybe redeploy capital as you think about how the landscape shifts going forward?

Brandon Ridenour

Well, if you mean tier 2, if you mean larger providers, is that what you mean?

Dan Kurnos

No, I’m talking like a bucket size, so job size. So tier 1 being…

Brandon Ridenour

Right. Right. Right. Yes. We – fundamentally, we do not have a hard time acquiring SPs to participate in fixed price. There’s almost no downside to it, right? You basically – in our app, we’ll have job opportunities come across your screen. It doesn’t cost you anything. It’s your option whether to gage or accept those. And I think some people have questioned why – how do you make the economics work, the pricing, the delta between the price we charge and the price we pay the provider.

The reality is it’s an incredibly useful tool for providers who often have gaps in their schedules, where it just fundamentally hurts their margins. So the ability to have a tool where you can just plug in and fill in jobs to occupy, let’s say, a crew that you’re going to pay for one way or the other is a very valuable tool for business owners. So we really don’t have a problem with the offering and the acceptance of the offering.

I think when you look at the tier 2 projects, the expensive projects, the challenge is around pricing. How do you price a wood privacy fence installation without – how do you do it upfront without sending somebody out to actually look at it? And the answer is not universal. It’s a project-by-project sort of grind. So for privacy fencing, we’re using satellite imagery to estimate the length of fence, and letting the consumer indicate on that imagery, which piece of fence they want to replace or install. And that works really well for privacy fencing. We’re getting to a point where we can price it very accurately.

We’re kind of having to go through each of those projects to figure out how to do that because they’re just more complicated. So the offering for service providers is an incredible value proposition, but we’ve got to be able to get the pricing right, and that’s the hard part of scaling up to these more complex projects.

Dan Kurnos

Got it. Thank you.

Brandon Ridenour

Yes. Thanks.

Glenn H. Schiffman

Switching over to Michael Ng from Goldman Sachs.

Michael Ng

Great. Thanks so much for the question. I just had two. The first was a follow-up to the prior question. I was just wondering if you might be able to quantify the fixed price adoption or reception from your SPs. How many of your SPs participate in fixed price today? And from their standpoint, did they view it largely as additive?

And then for the second question, I was just wondering if you might be able to talk about the consumer behavior that you’ve seen during the pandemic. Have there been certain jobs, whether they’re nondiscretionary or discretionary indoor or outdoor that you’ve seen have done better or worse?

Brandon Ridenour

Yes. The second question is a great question that I should have addressed earlier. First of all, with regard to fixed price and SPs, we have, to this point, kept those two provider pools completely separate. So in other words, our advertising providers are, generally speaking, not participating in fixed price, and we are not tapping them for fixed price. The fixed price team operates really as a separate line of business, and they go out and are building up their own provider network.

The reason for this is pretty simple. What we’re doing is complicated. And in order to ensure that we are building discrete incremental capacity, we want to create two distinct pools. And I think in the long run, clearly, we want to offer a hybrid. We want to let those who want to engage in advertising plus accept fixed price jobs do so. But we’re in the – just after the first year into this. And it’s important – it’s hard enough as it is without muddying the waters to understand if we offer fixed price jobs into our advertising network, what effect that might have on behavior there and perhaps attrition around that advertising product.

So to keep it clean in the early stages as we learn and get certainty around it was the – and I still believe it is the right approach. I suspect that if not this year, certainly by next year, we will begin to offer those fixed price jobs into our traditional advertising network as well.

Your question on the SR growth, what types of projects is a really important one, because one of the big factors – aside from the fact that small businesses are impacted by COVID, one of the other factors driving the delta – sort of unexpected delta between SR growth and revenue growth is that we have seen very uneven service request growth.

We’ve had some categories and project types that are 70% or 80% or 90% SR growth year-over-year. For example, installed swimming pools is up 95% in June. And I mean, just to be frank, we can’t – a marketplace like this cannot deal with that type of demand spike in any reasonable way. And so that is creating an enormous – like that will create an enormous spike in unmonetized request. Separately, and again, to your point, we are seeing a skew toward outside projects away from things like kitchen remodeling and bathroom remodeling.

Unfortunately, this skews toward slightly lower value projects. Remodeling and renovation type projects are lower in absolute volume, but extraordinarily important from a revenue standpoint, given their size and the advertising fees we charge. So that’s the other thing that’s essentially taken revenue per SR down a bit relative to where we thought it might be.

Glenn H. Schiffman

Okay. Moving on, maybe last one or the last one or two. How about Benjamin Black from Evercore. Ben?

Benjamin Black

Yes, here we go. Sorry. Yes. So Joey mentioned in the letter that you guys leant into marketing late in the quarter and early in the 3Q. I’d be curious to hear your thoughts around incremental marketing spend in the back half of the year. And perhaps a more longer-term dated question here, so what gets us to where we are today to your longer-term margin targets? And what are some of the milestones we hear ourselves or should be looking out for? Thank you.

Brandon Ridenour

Yes. So we obviously pulled back on TV and similar marketing early in Q2. By late June, we were beginning to ramp again. Quite frankly, the TV advertising market is really appealing right now, just given where rates are. And separately, with consumer demand having rebounded, the response rates are really strong. So we like seizing the opportunity to build our brand on TV. It’s – not only is an important way for us to acquire consumers, it is one of the key differentiators that SP see – advertising SP see with us relative to any potential competition.

They see us on CNN or other channels, and they find that very appealing because that indicates to them this is where consumers are going. So spend will increase in Q3. It will continue to be – and our TV spend will continue to be lower, quite a bit lower than last year. And frankly, that’s because with rates being substantially lower, we can get a similar level of impression but a lower cost. I’m actually excited about that opportunity, and I think we want to take advantage of it while it lasts.

In terms of long-term margin targets, we still believe that we’re going to get to 35%. But I will just say that’s fundamentally – our primary aspiration and ambition is to grow at 20% plus. The business is getting very large. And we intend to continue at that growth rate for years to come. It is unlikely we will significantly expand margins while we are pursuing very high growth rates. The cost to particularly build out the provider capacity while you’re growing really fast is just a reality of scaling.

There is, of course, some natural leverage in terms of fixed cost and other things that don’t scale as the business scales. But we will invest at least in the next year or two pretty aggressively toward achieving high growth rates. I’ve said this before. If we’re unsuccessful at achieving high growth rates, then margins automatically expand in many regards because we don’t – we’re not expanding our sales force. We’re not incurring the cost to go out and get new providers for fixed price.

We’ll get better at optimizing fixed price pricing. We’re in the early stages of that in terms of understanding where optimal pricing is or should be. That’s something that as we get more and more data, that pricing optimization comes down to every locality, and we need more and more data. It’s a data – it’s a scale data opportunity. And I think those are probably the primary factors. And I would just add to that. Probably perhaps more important than anything is our success in locking in customers and getting them to come direct to brand and ultimately lowering our marketing costs associated with consumer acquisition.

I talked about that earlier. We’ve got a ton of things in the pipeline. I think we’ll know whether we’re on the right path, even by the end of this year. And if we are successful in our ambitions there, then we’ll be able to flatten, if not reduce, our consumer acquisition marketing and continue to grow. And obviously, that will help margins pretty dramatically.

Glenn H. Schiffman

Okay. We’ll squeeze one more in under the finish line Brandon, and we’ll let you get back to your day. Kunal Madhukar from Deutsche Bank. Kunal, you’re still on mute, if you’re – I think you’re on mute.

Kunal Madhukar

I’m sorry. Can you hear me now?

Glenn H. Schiffman

Loud and clear.

Brandon Ridenour

Yes.

Kunal Madhukar

Okay, great. Sorry. So thanks for taking the question. With regard to the model and how it evolves, and especially as you think of like getting to 35% margins, can you talk about the economics of the fixed price model and how we should kind of think of like gross margins on that side kind of evolving over time? And then with regard to the growth, when we think of like 20% growth, how much of that should we think is being driven by the fixed price model versus the pure advertising model? Thanks.

Brandon Ridenour

Let me take the second question really briefly, which is we certainly think that the traditional advertising model would grow in the double digits and perhaps better than that. I don’t think we know exactly where it will land. But we – with the recent innovations and the performance of the sales force, I believe we have plenty of opportunity to continue to grow that at a high rate, whether it’s at the 20% mark or short of it, I think, is an open question.

The fixed price layering on top of that clearly gets you irrespective of where the former lands, gets you over the hump in terms of 20%. The open question on that is, how fast can it grow, and how big can it get. And like I said earlier, our ambitions – our confidence is in 20%, our ambitions lie higher. And it’s – we’re doing something that hasn’t been done before. So I can’t answer you with certainty how that’s going to unfold.

What was your – the other part of your question? Well, I think it was the margins on – what are the margins on fixed price. Look, we started with a simpler lower cost projects. The margins on those projects are exceptional. They’re very, very high. And I’m – the financial profile, ultimately, fixed price on those low-priced projects is going to be really strong. And I don’t see that being any kind of degradation to our overall margin profile or our ability to get to 35%.

I think as we go up the project scale for the tier 2, the more complex, higher cost projects, the situation changes a little bit. These projects have a substantial amount of materials and parts costs within them. And sometimes they have extra labor costs beyond the individual doer, if you will. And so it’s possible and likely that if we’re successful with some of those higher complexity projects that the margin profile will be a little lower. But the absolute dollar value will be much higher, and the absolute margin dollar value will be dramatically higher than, let’s say, what we make off of our leads product today.

So again, that’s a little bit unanswerable because we don’t know how extensive our fixed price model will be from a success standpoint with regard to these complex projects. But what I can say is from my perspective, it’s a great problem to have because I know at the end of the day, it will cause faster revenue growth if we’re successful and it will cause us to generate more aggregate margin dollars, even if it were to have some impact on the margin profile at that point. Hopefully, that makes sense.

Glenn H. Schiffman

I’ll add in very, very briefly, and maybe we can cover it when I close. But as we’ve talked about before, the three biggest drivers of margin improvement in this business, absent the enjoyment of incremental margin with scale and the scale economics of a business as big as Brandon runs, are zero accepts, repeat and SP retention. Every single thing we’re doing around product, around fixed price, around everything Brandon talked about is to drive zero accepts, repeat and SP retention. And what you will see, and our history bears this out, is margins move in step functions.

When we went – if you recall, when we went from a lead gen business to a marketplace business, margins doubled from 5 to 10. When we went from a marketplace business and then added in national TV and the scale of Angie’s List, margin went from 10 to 20 in the form of 1 year to 18 months. We’ve taken margin down, as you know, by design, to invest in the – in category penetration here. So we’ve come off of that 20%. And as we make progress on fixed price and on zero accepts, repeat rate and SP retention, we think we will see lockstep increases in margins there from plus, as Brandon said, we’ll be playing with much more aggregate dollars given fixed price, we start with all of the ticket versus a small piece of the ticket. We could jump into this more when I get in at the end of the call.

Brandon Ridenour

That’s a great point. I neglected the zero accept opportunity. Obviously, a huge margin impact as we begin to monetize more and more of the service requests we’re acquiring. That’s an excellent point.

Glenn H. Schiffman

All right. Well, Brandon, outstanding.

Brandon Ridenour

Okay. Thank you all.

Glenn H. Schiffman

Thank you. Let’s see, Anjali is next. We’re running a little late, so maybe we’ll do a rolling break if people want to do that now. And then maybe we’ll take a five-minute break between Anjali and Neil. So Anjali, I’ll turn it over to you. I think you’re still on mute. All right.

Anjali Sud

Can you hear me?

Glenn H. Schiffman

Perfectly.

Anjali Sud

Great. Hi, everybody. Good to see some faces that I recognize as well as some new ones. I’ll share a quick update on the business and then jump into your questions. I think, as Joey mentioned, and as you can see in our monthly disclosure, it’s been a busy few months at Vimeo. We’ve long believed that our TAM is massive, that eventually, every business in the world will want to use video to communicate with customers and with their employees.

And so our question was never if that demand would come, but when. And I think over the last few months, the trends have been pretty clear, that the pandemic has accelerated the demand for video. We’re seeing step function increases in adoption of our software. It’s happening across use cases and user segments and price points and geos. And it’s everything from that diner that Joey mentioned in Montana and restaurants and local shops all around the world who are using video now to stay connected on social media with their customers. It’s everything from fitness studios and churches, live streaming classes and sermons. And of course, Fortune 500 companies all now needing to host their town halls, their conferences and their events virtually.

So the question that we all have is, of course, what will that demand look like in the future? We don’t expect everything will just continue exactly as is. But I will say we’re not seeing any signs yet of that demand subsiding. And we’re very focused on capturing it with a great product and great experience.

And so while we can’t sort of predict where things will ultimately settle, we all have a lot of belief that right now, many more businesses are being exposed to the power of video for the first time and we don’t expect that they’ll stop using it, that they’ll stop seeing it as a critical tool long after the pandemic is over. So it’s an exciting time for the business. We’re very focused on this massive market opportunity we have ahead. And welcome any questions.

Glenn H. Schiffman

Outstanding. Thank you, Anjali. First question, Ross Sandler of Barclays.

Ross Sandler

Hey, guys. Can you hear me? All right. I think I can speak for everybody, taken a few fitness classes over Vimeo. I could definitely take a few more. But two questions. First, on pricing. How much pricing power do you have within each tier? And can you talk about the graduation rate as subscribers move from one tier to the next, how prevalent is that? And then the second question is on distribution. YouTube and Facebook have pretty substantial distribution advantages. But you guys have better tools. So can you just talk about how you compete on distribution with some of those larger platforms? Thank you.

Anjali Sud

Yes. Sure. So on the pricing power question, look, I think, our view — and we’ve continued this quarter to move ARPU up nicely, and we’re seeing our ARPU increase in both our self-serve and our enterprise business. And our view is that as we unlock more capabilities and utility and in the enterprise side, as more people across the organization and team start to use video, there is opportunities to increase our pricing. But for us, it comes more from, to your point, graduating people and having them access more features or use video more frequently as against just sort of increasing price.

So we’re really focused on moving people up tiers. And then within the enterprise, sort of landing and expanding. So starting maybe with the town hall, live streaming the town hall, and then moving to be powering video for the marketing team or for HR onboarding and training. So that motion is really where we’re seeing a lot of opportunity. And I think we’re seeing it right now in our numbers. We also have a big opportunity to continue to invest in the products to unlock more use cases.

One thing you’ll see, live streaming is a good example where the willingness to pay tends to be higher for live streaming because it’s real time. You need it to be flawless. You need the quality to be great. And you’re often broadcasting to large numbers of people. So it’s one of our higher tier plans. And so over the pandemic as demand for live streaming has increased, that has had a real impact on our ARPU. And so that’s really the approach we’re taking.

As it relates to distribution, we really don’t see ourselves any longer as competing with a Facebook or a YouTube. We really see ourselves as helping you put your videos onto those platforms, as well as anywhere else on the web. And today, one of the big parts of our value proposition is that once you have a video, we’ll help you make videos, we’ll help you live stream content. You can also simultaneously distribute that content natively onto Facebook and YouTube and LinkedIn and Twitter and your website.

And that actually is a major value proposition for us. And it’s really the difference between being a destination, which is what YouTube and Facebook are, and a walled garden, where they’re trying to keep content on their platform, and our sort of soft SaaS B2B approach, which is how do we help you get your videos everywhere.

And so I don’t see Facebook and YouTube and any — really any distribution platform as a competitor. I think they’re a partner, and we’re very focused on actually integrating with them in a variety of ways. And you’ll see us do more partnerships and integrations with exactly those players over the year.

Glenn H. Schiffman

Okay. Moving over to Dan Salmon, BMO Capital Markets.

Dan Salmon

Thanks, Glenn. Good morning, Anjali. How are you? So I had a two-part question really on how short-term trends right now may impact your long-term opportunity. What are the most important ways right now that you are looking to lock in this sort of upticks right now? And then second is, what sort of feedback are you getting from your customers, new customers, current customers about products that are proving to be more important? I thought previously, it sounds like live streaming is one of the focus, but how is this short term changed your product road map going forward?

Anjali Sud

Yes. It’s a great question because in many ways, the last few months have been a wonderful sort of accelerant to our product strategy. Because suddenly, we’re getting inundated with use cases that weren’t on our radar before, and we’re getting a ton of feedback around the product that we want that we can react to.

So what I would say to your question is we’re seeing now — and we’re getting incredible amounts of data and signals around new use cases, willingness to pay for various use cases, how much we have to do to go from sort of an MVP to a completely frictionless, brilliant product experience in each use case. And we are taking this time to really think about our R&D investments. And it’s one of the benefits, I think, of being owned by IAC and having sort of long-term oriented investors, is that we can look at the demand that we’re seeing and actually really take a step back and say, okay, based on these signals, where do we want to plant the seeds for innovation for the future.

Some of the things — I won’t get into the details, but yes, live is certainly one of them. And a good example is, we had originally conceived of live streaming as being really important for enterprises. And then on a self-serve basis, more for professionals. But now the reality is everyone wants to be live streaming, again, whether it’s classes or other types of content. And so the way that we build the tools, the user experience, the capabilities do need to change and the way we go to market need to change to really make that perfect for the yoga instructor.

And so that’s one example. The other is just within organizations, we’re seeing people use video now much more deeply to collaborate and communicate in ways that we had never expected. And so how do we think about the future version of our product that really solves that problem incredibly well. So sort of a long way of saying we’re getting a ton of signals and information. We are actively rethinking our R&D road map as well as our investment levels. Because we think we’re uniquely positioned, both because of our strategy, our head start and our investors to really go after the long-term market.

Dan Salmon

Great. Thank you.

Glenn H. Schiffman

Great. Let’s move over to Ygal Arounian from Wedbush. Still on mute.

Ygal Arounian

Thanks for taking the question. So a couple of questions for me. I guess you mentioned the growth trajectory staying relatively the same, but noticed that in June, the subscriber growth, while still nice, ticked down a little bit. So maybe you could just talk about that for a second. And then in terms of areas where you’re seeing growth and increase in usage, e-commerce obviously has been a big area that’s gotten a ton of advantage in this environment. Are you seeing Vimeo be used more for e-commerce websites, integrations with that kind of the direct-to-consumer sale? Has that been an area where you’re seeing your product getting used more?

Anjali Sud

Yes. So on the subscriber question, it’s worth calling out that we lapped the acquisition of Magisto in June. So that’s why you see the trend there. If you actually look at organic subscriber growth, it has accelerated each month since March, same for organic revenue growth. And it’s worth also mentioning that revenue growth and total subscriber growth are really outputs to the leading indicators for us, which are new subscribers and bookings. Because ultimately, most of our plans are annual plans, the bookings impact that we see today takes time to show up in revenue because of the way we recognize revenue over the life of the subscriber. And then our new bookings trends, because of the size of our total subscriber base also takes a bit of time. So it’s just worth calling out for me and my team, like we’re very focused on looking at that new subscriber growth and the bookings traction. And that’s really what’s driving a lot of the sort of commentary around adoption and momentum.

As it relates to e-commerce, that’s a great example, sort of back to Dan’s question of a use case that we are seeing gain traction in the last few months. We do have a variety of products and tactics coming to sort of really go after that market. We have actually a video creation app on Shopify today, and we’re really thinking about partnerships here to really build up the right offering. But do we think e-commerce is a very interesting, large, exciting market? Yes. Are we sort of preparing to play a big role there? Yes. And again, I think if you look at the underlying capabilities that we have, we’ve really invested quite deeply in AI-driven video that fits very well with e-commerce where you have like thousands or hundreds of thousands of SKUs, and you want to be able to quickly create videos. So we think we’re well positioned for that opportunity.

Glenn H. Schiffman

All right. We – please raise your hand on the Zoom, if you have more questions. We’re trying to get to everyone. I think we’ve covered everyone who has had a first question, so we’ll roll back around to a lot of you have a second question. But again, we don’t want to exclude anyone. So if you haven’t raised a question, please raise your hand. With that, we’ll go back to Brent Thill.

Brent Thill

Great. You’ve articulated the 20% long-term margin. Margins today are negative 20%. So if you could just maybe help bridge the gap from where you’re at to your long-term goal?

Anjali Sud

Yes, sure. So first, worth calling out, you will see our Q2 margins improve substantially from, I think, that 20% that you referenced, Brent, because, of course, we are seeing sort of the top line growth as against the investments that we’ve made. That being said, we do have a very clear sort of path to margin expansion. And it’s really in a couple of buckets. First and foremost is our gross margin and continuing to drive sequential improvements in our gross margin. I think we’ve shared we expect to be long-term gross margins north of 70%. We feel very confident in our ability to do that. And we continue to see sort of very steady improvements there and that has a big impact on EBITDA.

Then there’s sort of our more maintenance investments, things like G&A and discretionary spend. There, we are thinking always about operating leverage. And then most importantly, is really just sales and marketing. And we really focus on LTV to CAC and how do we keep driving the distance of that ratio by increasing our customer LTV and then reducing our CAC. We have seen big improvements in LTV to CAC, obviously, over the last few months. But the real thing we’re focused on is sort of the pandemic demand aside, how are we really driving that. And that comes from a couple of big levers. On the self-serve side, it’s really the creation tool that we’ve launched. And our thesis has been that we’ll get a materially lower cost of acquisition because it’s a mobile app, and we’re primarily a desktop or web product, and we’re seeing that bear out. It’s been a couple of months since we’ve launched the tool.

And our cost of acquisition is much lower than what Vimeo has had previously. And then on the enterprise side, it’s really our sales efficiency. And as we scale our sales team and sales force, are we able to do that in a very scalable way. And what I can say on that is we see lots of reasons for confidence there. We’ve been able to scale the sales team very efficiently, and we see a ton of white space as we look at the demand coming in. Frankly, we’re at a point right now where we’re not sort of set up to even take all the demand. And so there’s a lot of low-hanging fruit there that we’re focused on.

Glenn H. Schiffman

Great. Moving to Brian Fitzgerald.

Brian Fitzgerald

Thanks guys. We wanted to ask about Vimeo’s leverage or opportunities or use cases across the other IAC businesses, Care.com, Bluecrew, ANGI. Can you talk about any ways internally your partner companies are using your services?

Anjali Sud

Yes. So first I’ll say, I think IAC has always operated as the anti-conglomerate, meaning there’s no sort of disuse, sort of incentive or a leg up that my team gets on working with the other IAC businesses, and I think that’s appropriate. But we absolutely do work with our various IAC businesses in different ways. In some cases, we’ve been powering town halls, including Joey’s town hall that he does with IAC and with other companies. We have areas of the business like Daily Burn using our technology. We are working with Match on a variety – though they are no longer part of IAC working with Match on a variety of initiatives.

So I sort of – for me and my team, we really think of it as just another set of customers that’s on us to offer the right product and sort of bring over. I would say we’re not at 100% adoption, but I think that’s probably just a lack of us going and knocking on the right doors. But we are seeing our IAC companies find a lot of use in our tool.

Glenn H. Schiffman

We can make some introductions right, Anjali, if you will, let’s see. Let’s move to John Blackledge, Cowen.

John Blackledge

Great. Thanks. Anjali, could you just talk about how big the enterprise opportunity is for Vimeo? And how does enterprise sales approach the large enterprises? What part of the organization do they typically reach out to? How does it expand within the organization? And then when they’re approaching the enterprise, like who are they competing against if at all?

Anjali Sud

Yes. So look, I think, enterprise, I think today is now sort of very clearly a material portion of our business, and it’s our fastest growing business, and we expect that it will continue to scale, because we are still in the early days. So definitely a big priority for us. The main use cases that we see, and we sort of bucketed into internal communications and external communications. So when we go to an enterprise, it’s usually either they are looking to use video to engage with employees. So that would be town halls, onboarding and training and just other events internally. And then there’s external communications; marketing, conferences, webinars.

Today, our product really sits across both use cases, though we do have work to do to go deeper and sort of make sure we have the – sort of absolute best products in each. But we do see – if you look at sort of the deals that we’re doing, you’ll see a pretty even mix and so what we see is some of the deals are all internal, just the town hall or onboarding, some are all external just a conference and then some and increasingly more are a mix. And what’s really interesting is that there isn’t one motion that we’re seeing bubble up as against others, meaning we might start with internal and then sell external. We might start with the marketing team and then go to PR and HR. We’re seeing it move in almost every way.

And it may be that there is a sort of very specific motion that we’re going to lean into. We’re waiting for sort of the very clear signal there. But right now, it looks to be across the board. We think that’s good. We think that, that indicates that video is just going to be ubiquitous across organizations. And that’s why when we think about our R&D strategy, we really want to be the player that can provide and serve those use cases. But that’s sort of what we see. In terms of the sales team in general, we continue to have sort of short deal cycles. It’s a very transactional motion. We’re able to upsell once we have a customer come in.

We’re able – we see – six months later, nine months or a year later, we see them actually substantially increasing their usage and their dollar spend. And we have a ton of opportunity. Outbound sales is an area where we’re sort of investing in and scaling for the first time. International sales force expansion. We’ve added a couple of people in the EMEA region, seeing fantastic traction there. We have nobody in APAC, like there’s a ton of room on that side. And then most importantly and strategically for us is, how do we actually drive land and expand from self-serve to enterprise. And that, for us, we don’t have to go fish in other people’s ponds. It’s just a self sort of propelling flywheel. That’s really an area that we think uniquely differentiates us, and we’re seeing good traction there as well.

John Blackledge

Thank you.

Glenn H. Schiffman

We move to Cory Carpenter of JPMorgan. Cory, you’re on mute on your end.

Cory Carpenter

Sorry, can you hear me now?

Glenn H. Schiffman

Loud and clear.

Cory Carpenter

Okay. So two quick ones for me, following on the product side first, just following the addition of creation and live streaming tools over the past few years, I’m curious if there’s still any gaps you think you may need to fill in on the product side. And then separately, one question we get a lot from investors is around competition. So maybe hoping you could just frame how you view the competitive landscape and where you think Vimeo is most differentiated.

Anjali Sud

Yes. So I think you – the first question is around product investment. I’ll answer it sort of a little more directly as it relates to sort of M&A versus sort of incrementally improving what we have. Look, we have – certainly, if you look at the offering we have today, we’ve certainly used acquisitions and M&A to accelerate our speed to market, get access to proprietary technology. And I think that’s served us very well. It’s allowed us to have the right product, at the right time during this pandemic. When we look across sort of all the other areas that video, we think, can be very meaningful in the future, we certainly think that we have work to do on the product.

There’s no question that our product investments will continue and need to continue because it’s not good enough to be able to just serve a use case. We need to deliver incredible, frictionless, delightful experience. And so we will absolutely continue to invest in the product. What we don’t think is that there are big sort of gaps that would require us to need to do M&A or big gaps that we can’t fill through building on top of the foundation that we’ve created. And so while we’ll look opportunistically at M&A, we don’t think that there’s like huge, huge areas or pillars that we’re missing, and it’s really more about sort of putting the sort of finishing touches, I guess, on sort of the breadth of solutions that we now have and unifying the experience. One of the challenges when you do acquisitions is you have to integrate everything. And so there’s definitely still work under the hood there, but nothing that I would describe as a big gap today.

In terms of the differentiation, look, the reality is there isn’t any other – there’s no one direct competitor today, with the breadth of offerings and video solutions or the depth, being able to go as deep in video as Vimeo. That doesn’t mean we don’t have competition. Really, historically, our biggest competition has actually just not been a player, it’s been that most of the market didn’t use video. They thought video is too hard or they didn’t know that, that was an option or they didn’t know Vimeo was a place that was providing B2B SaaS tools. And so that’s really historically been our biggest competitor. But then if you look at alternatives, it tends to be either sort of a free version of a tool that’s significantly less – has significantly less capabilities or it’s often cobbling together a bunch of different free and paid offerings to do the whole sort of video workflow. So that’s sort of one.

And then on the enterprise side, the other competition that we see is just should an enterprise invest in their own engineering team and capabilities themselves. That’s frankly not a trend we’re seeing happen very often. Now it seems to be declining. But on the self-serve side, it really is like we offer the one – a simple all-in-one video solution. We’re doing it with a value prop both from a price point perspective and an ease of use perspective that is better than anybody else in the market. And we think it’s a huge market. We think there’s room for more than one player, but we have a giant head start, and we plan to be best.

Glenn H. Schiffman

Great. Moving over to Nicholas Jones from Citi. Nick?

Nicholas Jones

Thanks for taking my question. Just kind of staying in the same line of thinking around product usage. I mean what were the most surprising trends you saw amid COVID between enterprise and between small and medium-sized businesses that seemed the most interesting to you?

Anjali Sud

Yes. It’s a great question. I think on the sort of SMB or creation side, I think probably the most interesting has just been the fact that the small business, we’ve always thought about small businesses as our biggest – the biggest part of the market, is how quickly people are sort of adapting video. It’s sort of, for so long, we were focused on how do we educate people about power of video, and then how do we lower the barriers for them to use it. And what we’re seeing is that when we provide inspiration and ideas to small businesses and to entrepreneurs, they immediately adopt.

So an example is like we started providing templates around your company reopening or pandemic safety guidelines. And that – those sort of creative templates or video templates that help someone get started if they want to make a video, those are seeing incredible adoption. And then the same thing exists for templates that aren’t pandemic related, so Memorial Day sale or Father’s Day promotion. So I think that probably the biggest learning that we’ve had on the SMB side is that small businesses don’t just need the tools. They need the inspiration to create. And actually, Vimeo’s roots as a creative community, as actually the number one video creative community in the world can be a really powerful differentiator that really goes beyond just SaaS and really makes us a community-driven SaaS product. So that’s on the self-serve side.

On the enterprise side, probably the biggest surprise is just not only are people now getting used to seeing – we’re all used to seeing each other’s faces and communicating with our colleagues on video and in Zoom calls, and it makes sense that we want to live stream our town halls. But we’re seeing a lot of interest in demand for people to just use video to communicate any idea. So think of it as products and creative teams that are working on something and want to quickly do a quick video to communicate their pitch. Or marketing creative teams who are talking about their next campaign, and they want to share it and they want to stitch together a quick video to put it together. So what’s really interesting is just how much video, we believe, is going to become a communication mechanism for all sizes of teams and all types of ideas.

Glenn H. Schiffman

That’s a great, great answer. And if you just put it in a nice little bow or box for all of us, the TAM’s just – so what we’re seeing is the TAM, total addressable market, is so much bigger for the Vimeo business than we even thought. And the diversity of use cases, of which Anjali spoke, prove that. And as we continue to take out friction like we’ve seen with all of our businesses, the TAM just grows and continues to grow. Moving on then, therefore, Jason over at Oppenheimer.

Jason Helfstein

Thanks. Maybe talk about average or legacy customer retention versus newer cohort retention. And then legacy versus new customer ARPU and how both of those things impact how you think about marketing spend and then growth. And as you get more confident in retention and pricing, you can invest more for LTV and just any specifics you want to share on any metrics. Thanks.

Anjali Sud

Yes. Yes. So it’s funny. I think when you see a big increase in demand coming from new cohorts during something like a pandemic, probably the biggest thing that we’ve been focused on is the health of those cohorts and what are the indicators, leading indicators of retention of those cohorts as against what we’ve seen in the past. As a reminder, over the last few years, our retention has been very steady, very predictable. Newer cohorts have come in, have had a higher LTV and a similar average life to older cohorts. And it really hasn’t moved even going back to cohorts as far back as 2008. And as we’ve increased our ARPU by moving people up tiers, we also haven’t seen our average life move.

So pre COVID, we were kind of in a world of very steady retention and really just continuing to tick up LTV, which, to your point, unlocked more marketing spend. During the pandemic, we’re watching all the trends and specifically looking at things like our newer cohorts engaging with the product and using the product in their first day, week, month, three months in similar ways to older cohorts. And are they sending any other signal that they might behave differently? For example, are they opting out of auto renewal at a different rate? So we sort of very religiously are monitoring these leading indicators.

And then the punchline is we’re not seeing any indication whatsoever that these cohorts are going to behave differently. Time will certainly tell. But the way we’re seeing it is no signs. In some cases, we’re actually seeing more engagement because people obviously just need to use more video today. And then we’re very focused on how do we proactively increase our chances of keeping that retention by keeping highly engaged cadence with those users and doing all the things we do on customer relationship management to drive it. So that’s sort of on the retention side. Remind me, again, your second question.

Jason Helfstein

No just it was so retention and ARPU, right? And then kind of how that’s driving your view towards marketing? And so like the ability to step on the gas because you’re more confident in LTV.

Anjali Sud

Yes. So I think on the LTV side, because our retention is steady, it’s really just driving people up tiers. And I think there, probably one of the biggest areas where we have sort of more confidence that we had — than we had a few months ago is live. So just our self-serve live tiers, our highest priced live tiers are $900 a year. And that tier has seen incredible elevation and adoption. And again, the types of users that we’re seeing, it’s just a much more diverse group, and they are engaged and they’re not showing any signs or behaving differently. So we do think that there’s an opportunity at that price point, that the LTV of a live streaming customer is one where we can probably get broader and more creative in the types of marketing we do because our allowable can be different. So that’s definitely one area that we’re thinking of.

The other which is worth calling out is, it’s not just increasing LTV where we have an opportunity, it is lowering our cost of acquisition. And as I mentioned, Vimeo, historically, we’ve been a web-based tool, which means our marketing channels are only desktop and desktop inventory has been going down for years, in general, as more people move to mobile. And so with the launch of Vimeo Create, our new mobile app, we are very focused on how we unlock additional inventory at a much lower cost of acquisition. And that, so far, in the first few months, we are seeing good validation. That strategy is a prudent one. And so you’ll likely see us over the next few months both expand marketing but also shift more of our dollars from web, traditional web-focused for video hosting marketing to mobile-focused video creation marketing. So basically going to small businesses, saying download the app, try start making videos and then upselling them into the rest of our features.

Glenn H. Schiffman

Okay, let’s get one last one Anjali for you Youssef Squali, SunTrust.

Youssef Squali

All right. Great. Hey, Anjali, so couple of questions. The first is around just the long-term growth prospects for this business. So Brandon at ANGI just earlier talked about being very confident that growing at 20%, with greater than 20% as an aspiration for him, if things would go right. What is that number for you for the next several years? And I’m not sure if this is as relevant, but just on the competition question. Amazon seems to have launched a new product yesterday. I think they called it Amazon Interactive Video Service, and they place it — or the way they define it as a newly — or as a new fully managed service that makes it easy to set up live interactive video streams for web and mobile applications in just a few minutes. I suspect your offering is much richer at this point, considering how long you’ve been at it. But I just wonder if you have any early kind of color on how Amazon may or may not be a competitor.

Anjali Sud

So on the growth outlook perspective, we said previously that we’re — our sort of longer-term growth trajectory is 20% to 30%, and that, that was being driven by double-digit growth in both subscribers, volume of subscribers and ARPU. Volume of subscribers really being driven by our SMB and self-serve business and ARPU really being driven by enterprise. I mean, certainly, the pandemic, I think, has increased our confidence that we’ve migrated to the top end of that range. And I — that’s sort of how I’m seeing it. And when we — probably pre-COVID, it was really that 20% to 30% range. And now it certainly feel that we’ve really migrated to the higher end of it. And then, of course, the TAM is huge. And if we find ways to move faster, to unlock it more aggressively, we will.

As it relates to Amazon it’s a great question. And it probably the simplest answer is, we don’t see this offering or really the strategy for Amazon as being directly competitive. The reason is that, if you look at what Amazon’s effectively launched, it’s really a product for developers who are accessing their API and twitches API APIs to build video services on top of existing company. So it’s effectively for companies that have developer teams that want to add live video on top. That’s what this offering does. And I think it’s a good offering and it is competitive to players like Agora or Mux that are really focused on developer API-driven solutions. That is not an area that we have chosen to invest in or focus on.

So, we’re providing the tool for the PR or comms leader at an organization without a technology team, without –with nothing to just live stream an event. So it’s a, it’s a bit of a different use case. And you know, it is one that we have chosen not to invest in and pursue. And actually one of the reasons is that we did sort of feel that would likely be either commoditized or better served by companies like Amazon. So for me, I see this as sort of an unsurprising good move in general for the market. And I think it’ll just mean more companies will where it makes sense, try and add live video directly into their offerings. But it’s a bit different from the use cases that we’ve sought out to solve and where we see the market.

Youssef Squali

Thanks.

Glenn H. Schiffman

Anjali, outstanding. Thank you very much. Let’s all take the three minute break or so, and then we have a Neil Vogel in queue. So, we’ll start at 11:37, which is three minutes from now.

Anjali Sud

Thanks everyone.

Glenn H. Schiffman

Okay. It is 11:37. Let’s start back up. We obviously have a long queue of questions. We will – if someone hasn’t asked a question yet, we will put you to the top of the queue. Otherwise we’ll keep cycling, cycling through given we do have a long queue. But Neil welcome, I don’t know if you want to make a few remarks before we dive into Q&A.

Neil Vogel

So I’ll give you the background for people that don’t know us. We are an online publisher. 20 years ago, we’d have been called a service publisher. We publish content that helps people, helps people, make decisions, buy things, cook things, diagnose things, and we do it across the most commercially viable topics on the internet with the purpose of really serving user’s needs and attracting an intent driven user. We’re not really interested in browsers. We don’t do news, we don’t do sports, we don’t do gossip. We help people now have a specific stated intent and had something to do something to solve, something to learn or some action to take.

Our model is fairly simple and in its simplicity, it’s also fairly differentiated. We are very, very focused on three things, being the single best piece of content on the internet for every single thing that we cover, whether that’s in health or in finance, in home or in food. We’re going to do it on the fastest sites in publishing and some of the fastest sites online, which we do. And we spend a lot of money on speed, and we can talk about speed correlates with performance really highly. And we have materially and measurably fewer ads than our competitors, which users prefer, algorithms that send those traffic prefer, and it actually makes ads perform much better when there’s fewer on the page.

So we started this from what was essentially sort of the ash in About.com, and now we have 10 different – almost 10 different brands and 21 different domains. And it’s really working. And over the last three years, our traffic has grown. If you believe ComScore, our audience has grown from – so the audience is about 40-plus million per month to I think last month, we’re about 100 million. In the last three years, our revenue has gone, as I’m sure you guys know, from about $70 million to $165 million.

Last year, we went from losing $20 million in EBITDA to making nearly $40 million in EBITDA, and our growth continues this year through COVID. And we have a real strength in a diversity of areas that we cover. Some performed really well. Some have been a little beat up in the last few months. And we have a real diversity in revenue streams. And I think we don’t look like other publishers. We’re very focused on two things, which is building sessions and building audience; and on the other side, monetizing those people appropriately. And what we’ve been doing has been working. And I think we are – contrary to – depending how close you guys to our publishing, contrary to a narrative in publishing that things don’t work, things absolutely work if you have the right model. And I think we’re really happy with where we are. I think we feel even better about this business now that we’ve seen how it can perform at a tough time like COVID, and we’re just – we’re excited.

We have a lot of growth going forward. We’re not the number one in any space we compete. There’s lots of organic growth. We’ve dabbled a little bit in M&A, done some small things. I think there’s some opportunities there for us too, and we’re excited. We’re ready. We’re excited to get to talk to you guys on things like this now, too.

Glenn H. Schiffman

Outstanding. First question, Ross Sandler from Barclays.

Ross Sandler

Thanks. So, just two questions. First, like a strategy question and then quite a more specific question about the numbers. So is there – how does the revenue concentration look across the breadth of sites? And are there any that are a material portion of your revenue? And then what verticals look like good opportunities that you’re not currently in? And the second question is performance marketing has been driving huge amounts of growth more recently. Can you just walk us through how much of that’s from impression growth versus price? And in general, I know you want to keep the ad load lower than your competitors or your peers. But where are you on ad load? And how tapped out is that opportunity? Thank you.

Neil Vogel

I’ll say first thing, in terms of revenue concentration, you can think of our business at least now for this way. We look at our business in three buckets, which is we have a health business, we have a finance business, and we have a lifestyle business. Inside the lifestyle business is beauty, home, food, tech, travel. It’s not exactly this, but you can sort of think of it as about 1/3, 1/3, 1/3. And they’re all growing for various different reasons. Our health business has been a really good performer. We’re like the first scale new entry in the health business and the first new competitor for the WebMDs of the world in like a decade. So that’s doing exceptionally well. Our finance business have done really well, particularly during COVID, because financial advertisers benefit a lot from volatility. So that’s been great.

On the lifestyle side, we’re seeing really good growth in home and food. Our Spruce brand is really emerging as a world-class brand. We’re really excited with some traction we have in beauty. That advertising has been a little bit beat up through COVID, but we got some green shoots and it’s coming back. But we don’t have any undue reliance on any one vertical, and that’s sort of by design. And let me – take a look at our travel business has gotten its butt kicked in the last three or four months, as one would imagine, but we’ve managed to handle right through it because pharma and health has done well, and finance has held on pretty well.

Some of the other lifestyle has gotten beaten up too, not to the extent that travel has, but we’ve done fairly well coming out the other side of this on the outside. Your second question about – I want to make sure I have the specifics right, about performance marketing and why that’s growing. I think it’s – I think take a step back and look at what performance marketing means for us. That means we help people decide what vacuum cleaner to buy, and we help them to decide what like robo-brokerage to use. Like do they want to use Betterment or Wealthfront? And when someone buys a vacuum or when someone signs up for a Wealthfront account, we get paid something. I think it’s going up for – obviously, because we have a larger audience, but it’s also going up because I think what we found is our audience is super intent-driven. And what we’ve learned is people like our brands and they trust our brands. And I think as we’ve gotten more into this, people want us to help them make decisions.

So, traffic is going up, but our ability to understand what people are doing and help them make decisions has gone up like exponentially, and that’s what’s really working. I mean you can see our traffic, it’s all sort of like public and what the growth has been. But what we’re really understanding is when someone comes to us and is reading an article about why is our route too slow, they very likely want to buy a new router. Or when someone is reading brokerage reviews on Investopedia, they very likely need a new broker. And what we’ve been able to do is create a whole class and layer of guides and ratings and reviews, content that is like super intense, and I would argue is the best on the Internet, that is completely editorial independent. No editor that works for us has any idea of any financial arrangement. We haven’t anybody that pays us for referrals or we help sign up for, and it’s – the growth has been astounding.

I think what we saw, and you can see it in what the – Joey’s shareholder letter yesterday, we were growing at like 70%-ish, 65% to 70%, first two months of the year, which seemed like steady-state growth. And then COVID happened. And there was basically nowhere to buy anything in the world other than your grocery store for two or three months or in varying degrees. And we saw a really big bump of people, a, who are searching a whole host of new things that we already covered; but b, a lot of consumer behavior shifting online. So you’ll see a big bump in the growth of our transactional bump in the growth of our transactional business in March and April and May. I think in June, as the world has opened up a little bit, we’ve seen that go back to normal, but it is still well above, like 25% above where it started and what we would think would have been a more normal growth rate, which would have been beginning of the year, January, February. So, who knows what’s going to happen? But we’ve proven that sort of even when things are at their bleakest, we actually still really perform. So we’ll see.

Glenn H. Schiffman

Great. Let’s switch over to Justin Patterson of keybanc. Justin?

Justin Patterson

Great. Thank you very much. With third-party cookies in decline, how do you think about opportunities to engage more advertisers? Would imagine the intent driven-content insulates you from a lot of the challenges your peers face. And secondarily, how do you think about creating new performance ad products to better monetize your audience?

Neil Vogel

Two very good questions. The first question is my favorite question, because we don’t need cookies. And I think the fundamental advantage we have, even in a world with cookies, is that intent-based targeting, contextual targeting beats cookie-based targeting every time by magnitudes. Think of like – people think Google is very targeted, because people go in there and they type the question or the query that they want. We’re actually the answer. Like so we’re way down funnel from where even like Google is. So, cookies going away accentuates our advantage.

So in the short term, there’s going to be some thrash as people are figuring out what to do in terms of programmatic markets, and there’s a whole industry built around targeting by cookies or by whatever other tool they have. But without it, we’re great, and we look forward to a world without cookies. The second question you asked was around performance ads. We don’t really do performance ads. Like all of the stuff that we – I think you mean – if you mean our transactional business or do you mean what we’re doing for advertisers? Like in pharma, there’s a lot of tracking of our ads. So, you could call those performance, like people track those to KPIs. And in payment services, there’s a lot of – well, our ads track to KPIs. We are actually very careful not to do anything.

When you start to make ads that are overly performant, you start to do crappy things to users. And because we have fewer ads and because our audience is so strong, we don’t have to do that to get performance that is above what our peers’ performance is. And you see this in – if you look at the list of our top 25 advertisers, which IAC has brought up a couple of times, we’re like 90%-plus renewal on top 25 quarter-over-quarter. That’s just not a thing that typically happens with publishers, and that’s because what we do really, really works. It really, really works when you’re trying to get cell phones into somebody’s hand. It really, really works when you’re trying to get people to open brokerage accounts.

It’s a display advertising sale, but tracking to KPIs and performance is something that like we – it’s how we win, because we didn’t come in here with 25-year-old brands like WebMD and 100-year-old brands like Good Housekeeping. We got in the door with performance, and we’re winning with brand.

Glenn H. Schiffman

Great. Let’s switch over to Eric Sheridan, UBS.

Eric Sheridan

Hey, thanks so much. Maybe, I can ask a follow-on question from Justin. When you think about your advertiser base, what are some of the big priorities to sort of deepen the base of advertisers you have across the platform? How should we be thinking about just your level of advertisers by vertical and where you want to take that over the medium to long term? Thanks.

Neil Vogel

Good question. So we classify advertisers – we’ll classify this as premium advertising, which is something bought through an RFP or something where someone reserves and then it worked programmatically. It’s something where we’re really talking and working through them. There’s sort of like three levels of where we can be. You can be like off the buy, where you’re not part of their program. You can be on the buy or you can be the must-buy. And we went from two or three years ago, being entirely off the buy to getting on the buy. We’re not in a lot of our verticals yet a must-buy. We are an interesting buy. We are part of the portfolio.

Occasionally, we win the lead slot. And part of it is our brands are new. Part of it is people want to try us, and a lot of it is no one who buys pharma ads ever got fired for giving WebMD $4 million. If you give Verywell your $4 million right now, that’s not going to be great. But as people see our performance and as our traffic grows and as our audience grows and as our brand grows, we’re really able to upstream with our relationships. And we’re seeing real progress in brands like in Verywell, in Investopedia and in Spruce and in Byrdie, where we are talking and winning the biggest cosmetics companies in the world that only used to work with like a Cosmo or a Marie Claire or whoever.

And in pharma, we’re competing with the big boys on all things. And then Investopedia, we’re taking brokerage showers away from much larger and more established players. And it starts with performance. But then for us, it – we’ve really created ad people. We’re really, really innovative. We don’t – we’re really – I guess coming from a challenger position, this is a hard thing to prove, but we are intensely customer service oriented, where some of these big established competitors just don’t really care. They’re like click the coupons and take your money, where we work our asses off to make sure that we deliver these things.

So we are seeing a move from off the buy to on the buy, but we got to get to must-buy. That – so – and the other thing is we do not win at price rates that some of our competitors win. Like in health, the big players or in home, the big players, they get higher rates than we do, even though we perform better because of history and branding and expectation and things I talked before. So there is a pricing opportunity. There is a sales volume opportunity. People occasionally speak ill of having like advertising as a big piece of revenue. But for us, it’s all opportunity. We love it. If you a good business that really performs, you’re going to do really well.

Glenn H. Schiffman

Great. We’ll go over to Michael Ng, Goldman Sachs.

Michael Ng

Great, thanks so much for the question. I just had one on CPMs. You’ve talked about, I think, 90% kind of rate per impression growth in the past. How much of that has to do with your verticalization strategy? And do you see increased room for you to gain rate because of a better, effective CPM for some of your vertical-focused advertisers? And then the second question is really just about traffic. How much of your traffic is direct versus coming from organic or paid check search?

Neil Vogel

Traffic first. That’s an easier question. Our traffic is like 99% organic. We don’t buy anything. Occasionally, we’ll buy around an ad deal, but it’s usually because we’ve made a mistake or something. But we’re 100% organic traffic. Like anyone on the consumer Internet, there’s – a lot of it’s from Google, probably more than 50% is from Google. But we’re – we actually like that because Google is trying to get people the best answer to a query they have. We are generally trying to be the best answer for people’s queries. So we align fairly well with Google, just like we do with Pinterest, just like we do with Flipboard, just like we do with Apple News.

So our traffic is all organic. And it’s – from either the time we started something to the time we bought something, every single one of our sites is bigger than where we started. So a lot of that is attributable to verticalization because I think the Internet, over time, has changed and people appreciate. There isn’t much of a market for a general interest website anymore. You need to be specialized, and I think that was a big part of what we did. And the other thing is we spend a ton of money on content, and we care about user experience more than other people, I think, and it’s all paying off the traffic.

The second question is ad rate. And certainly, you have to break it up into different things. We are less concerned with the ad rate on a unit as we’ve grown than as we are with the value of someone’s session. And what I mean by that is when someone comes, if they’re coming, if they’re a health visitor and they’re reading our diabetes content, we are going to monetize them almost exclusively with advertising and most likely all-pharma advertising. If you’re coming to The Spruce and you’re talking about what to do in your new kitchen, looking at blenders, there’s a different mix of revenue there, where that is a high percentage of transactional revenue, where people are buying a lot of things off The Spruce or they’re not off of pharma. So that mix is super different. So CPMs are much lower in that as compared to pharma advertising.

However, there’s a really, really interesting commerce opportunity and then move to like The Balance and Investopedia, it’s the same thing. There’s advertisers that are really interesting, but there’s also the ability we have to sign people up for personal loans and for credit cards and help them find brokerage. So each – one of the interesting things about the business that we’ve found is each one of our brands has a very different mix of revenue. And what we are trying to do across those brands is well – we obviously want to maximize CPM within the advertising portion of what they’re doing. But we are looking at what is the proper mix in each of those brands, and that’s really where we focus.

On the advertising, this is more anecdotal than anything and – the easiest way to judge – I think the CPM ad rate, again, I said before, I think we’re still below our premium competitors in the big space just because a lot of our brands are fairly new. Programmatically, we generally, as far as we can tell, and when the people who run these programmatic markets like would tell us, we get among the best rates programmatically because that’s a much more clear, direct measure of performance. Those guys are a little less brand sensitive. So hopefully, that’s a helpful answer.

Glenn H. Schiffman

Moving over to Dan Salmon, BMO Capital Markets.

Dan Salmon

Good morning all. So I had a couple of questions. One, you’ve highlighted Google a couple of times. Your business is trying to serve high-intent users, and a lot of them start there at that big horizontal search engine. You also mentioned you don’t pay for traffic, all organic there. So just high level, take us back. You mentioned that you play well with Google. They are trying to serve more answers there. How do you look at that sort of balance? Is it partnering to be somebody who’s being served in a zero-click search, or ultimately, we think you probably want to get them through to your site? But just that big-picture positioning on how the organic links work versus answers that they’re giving.

And then just secondly, more an educational question for everyone listening. Just maybe tell us a little bit about your sales channel mix. You’ve talked about programmatic. How much is sort of a human-led sales force? But what’s the balance of business across different sales channels?

Neil Vogel

Again – I’ll do the second one first. It’s a quicker answer. Again, it depends on the vertical in Verywell – and the Verywell brands that is human-led sales. When you get into Spruce, which is much more CPG, where rates are lower and buying habits are very different, that is a very programmatic-led sale. I think of our ad business – but just because it’s programmatic doesn’t mean there wasn’t a person involved. There is often – people tick on tick on our trading desk if they are setting up deals, which is kind of a lighter-touch sales thing. Well over half of our advertising revenue has a human being involved in it somehow. And again, it varies by vertical, and it’s fairly large, so you could figure out like the higher touch, higher value, more expensive ad vertical is finance, and health are way more medium touch. And when we get into the more CPG, more consumer, it’s usually run more programmatically.

To answer the question about Google, I actually think that you honed in on the one concern with Google. Overall, we’ve got 21 different domains. We’ve had countless Google changes over the last five years, four years, right, since we started this. And traffic goes up because we’re – and we’re not trying to manage Google. We’re trying to deliver the best experience for users, and that works. We’re very much aligned. The – you call it a zero-click search, but all of the different things that Google is doing on their search, Page 2, and half of Google searches never leave Google at this point.

Two, if you are answering what day is Christmas, you’re not going to have a very strong business. But if you’re doing what we’re doing, which is very expensive, comprehensive content on something as simple as a recipe where that recipe has not only your recipe and ingredients but the cultural history of that recipe, a video showing you how to do it, a series of step-by-step pictures, tells you how many dishes you’re going to use and a chef made it and reviewed it, there is a really big market for that. And we haven’t seen any traffic drag from Google answering things for us. If it’s like how to boil water, Google is going to do that. But maybe we’ve grown through some of it. There probably is some. They’re creeping, creeping another point in a year. They might not mean the search pages, but we haven’t really seen that. There is sort of like that middle layer where Google takes you and puts you and you’re the answer, and then they link to you, which is usually good but not always. And now there’s this new box with like lots of questions, when you’re the answer to those questions. There’s all kinds of things that they’re doing. We’re not – I mean, we’re very concerned with being technically sound, so Google and other algorithms can know exactly what we’re doing.

And we have obviously very talented people working on that. But we are much more concerned in each of our verticals with looking at that article on like how to paint a window, finding every other how to paint a window article in the Internet and making sure ours is the best. And if you do that, these other things sort of solve for themselves, and they have. And so look, Google is a front door to the consumer Internet for lots of people, but we – and I think we’re appropriately concerned, but I think we’re doing pretty well. And we had a big enough sample size that says we’re in pretty good shape.

Glenn H. Schiffman

Well said, Neil. Benjamin Black, [Evercore].

Benjamin Black

Hope you can hear me. Neil, I would love to hear your investment priorities over the next 12 to 18 months. From a content perspective, from a vertical perspective, do you think there are any holes in your portfolio? And then perhaps secondly, it was really good to see the durability of your revenue streams this quarter. I’d be curious to hear about your – perhaps your longer-term targets in terms of the margin profile of the business, perhaps the revenue growth over the next few years. It would be great to get a sense as to where this business could go.

Neil Vogel

Let’s do the holes first. And actually, that is what we’re most excited about. So I was talking to Glenn yesterday and trying to figure this out. We spent over $100 million on content since we started verticalizing this company three years ago, and we’re going to spend more on content in 2020 than we spent in 2019 in the face of the pandemic. There are very few publishers, and I don’t want to say none, there’s probably a few, that are spending like we are spending on content.

And our business – our best pieces of content, because of the type of content we make, evergreen service content, our best pieces of content were originally written two, three, four, five, six years ago. So what we’re doing now in investing in our existing libraries and making new content at an increasing rate from what we are winning when everyone else in our space is not really investing and some of the biggest competitors have materially pulled back, we know because we’re getting everybody’s resume, and we talk to them all, I think that is going to be an incredible opportunity for us in the next couple of years.

Our model sustains itself, and other people’s models don’t. And some of these other people are the guys still winning the traffic. And so we’re very excited about that. In terms of where we’re investing, we are very bullish on health. We are very bullish on finance. We are very bullish on home and food and Spruce, and we’re very bullish on beauty. And we’ve – there are sort of like different points in their life cycle. What I would say is if you look at health, Verywell is the first scaled new entrant in that space in at least a decade and we’re – we’ve done incredibly well, and we’re still 1/3 of the size of WebMD and 1/3 side of Healthline.

If you look in food with what Spruce is doing in food, we’re still like 1/3 of the size of all recipes. So we think we’ve got tons of organic growth. And you said, where are we looking to invest. I think we’re – someone asked. I probably didn’t hear the answer to that. We are very much looking to invest in the verticals that we are in now. There might be a few others that are interesting, but we really like where we are. We’re in the most commercially viable and have a foothold in the best verticals on the Internet in terms of the ability to run our model, make content and monetize in an appropriate way that gives us a return. So I think, look, we’re going to be looking at some add-on acquisitions, hopefully some bigger things that we’ve done. And we’ll see with that.

Your second question was – there’s another question. Oh, long-term targets. I mean I’ll let Glenn deal with what he thinks growth targets will be, but we’re generally a fixed-ish cost business. As our articles gain traction and gain traffic, there is an incremental cost. It is very a reasonable expectation to expect EBITDA margin leverage from here. Again, a lot of it depends on the investment decisions we make and the opportunities we see out there. I think we have found a way now to invest really heavily and maintain very healthy EBITDA margins, and I would hope that there’s upside from here in those in terms of top line growth. I’m not sure what – again, a lot of it is – there is some uncertainty, obviously, going into the back half of the year.

Like a week ago – we’re feeling great about our business and the resilience of the business, as you mentioned. Who knows what’s going to happen? But we’ve proven that sort of even when things are at their bleakest, we actually still really perform. So we’ll see.

Benjamin Black

Okay, thank you.

Glenn H. Schiffman

Yes. Maybe I’ll cover some of that during my time, so we can squeeze in one or two more, Neil, for you. Let’s go to Daniel Kurnos. [The Benchmark Company]

Dan Kurnos

Thanks. Neil, given the evolution of the platform, and you and I have talked about this a little bit before. You guys have really made a push to increase the user interaction, sort of thumbs-up, thumbs-down ratings. Maybe talk about sort of what you’re seeing, especially in this environment, on that engagement, the potential for increased community contribution to that content portfolio.

And then just secondly on sort of the Google point, I would actually think that mobile-first indexing would be a win for you guys given your speedy advantage and kind of the depth of the content. So maybe if you just want to address that, that would be helpful. Thanks.

Neil Vogel

I’ll do the second one first. We agree. The more rules of the road that Google and other algorithms established, like they want you to be fast, they want you to be this way, all of it accrues to our benefit because we’ve been exclusively focused on this. We have ad loads. And the way we’ve built our sites, they’re super fast. They were all built for mobile, so we are very excited about this sort of like move to the future. And it’s astonishing to look at what other people are doing and people are not that, but people are still not doing that. So we’re really excited about that. And what we’ve learned, you touched on it. It’s worth mentioning for a second.

The fastest websites’ performance improvement in terms of how you can serve ads and touching on some of like user interaction, things go up. It is not a linear relationship between speed and performance interactivity. It’s like – I mean it’s not like algorithmic, but it’s pretty steep. But the faster you get, the better you do. So being really focused on fast helps us a lot with Google and with other algos. And going back to your first question, with interactivity, we see a surprising amount of engagement in all of these things, thumbs up, thumbs down. We intentionally do simple things. We do comments in a couple of verticals, which every single comment is moderated and the human that works for us reads it before it gets live. We’re never going to be a platform that features user-generated content. That is not what our brand is. It’s not what we want.

We are – everything that we write, it’s really important for us to be written by really topic-specific experts, and in many cases then, reviewed by a secondary expert or checked by a secondary fact checker to prove that it’s right. Like we call it two-factor authentication. So you’ll see across Verywell, there’s an article written by a doctor, and then it is also checked by a doctor. So we’re actually going a little bit in the other direction where the quality of our content and making sure that every reader and every person who gets there can say, like, “Wow. That is exactly what I want to read. That has a really recent date stamp. And it’s about diabetes, and it’s written by a doctor, and it was reviewed by doctor. This is what I want.” We’re headed a little bit more in that direction.

We use the feedback to know what we have to work on, and it’s nice. People feel empowered by being able to – in fact, they like it as an experience. So we’re doing a lot for that. Comments are really important in things like food because everybody reads a recipe, then they want to know if it’s like easy to make or hard to make, or if I messed up the blueberry pie crust or – but in a lot of places, like, we’ll never have comments in health. We very rarely ever have comments in finance. The really high value where the decision you’re making based on our content is a high-value decision is – that’s the – we will get further away from anything user generated in those categories.

Dan Kurnos

Got it. Thank you.

Glenn H. Schiffman

One last one for Neil. Jason Helfstein from Oppenheimer. You want to do the honors?

Jason Helfstein

Sure. I’ll ask a quick M&A question. I mean historically, IAC has done quite well in acquisitions and in publishing. I would imagine in this environment, there’s a lot of properties that are struggling particularly because they have lack of scale, even if they have a decent brand. Maybe it’s for you and Glenn jointly, but just talk about the desire to buy properties or your comments about just investing so much in content. Do you just continue to invest and grow internally? Thanks.

Neil Vogel

We would love to buy properties, and we bought five brands – about five brands in the last year that have really serviced – like we bought our way into beauty, which has been really, really successful. We bought Liquor.com, which has really enhanced the food business. We just bought TreeHugger, which is certainly a green lifestyle brand that’s going to help all of our verticals. They’ve all been very small to date. I think there is a lot of IAC pattern recognition that, we took our model, we figured it out. It’s really working.

And now how do we grow it? And obviously, buying things and buying things in scale is of great interest, but we have to do it with discipline, and we have to make sure that the people that – as you’ve mentioned, the people that are underperforming or might not be doing great or might be subscale, I still think there may have to be some reckoning in valuation, just to be reasonable. But look, we’re looking at everything. I think we’ve proven we can buy things, and things we bought today have been pretty small. But we’re actively looking, and I think it’s going to be a very IAC process. We’re happy to have Glenn and his squad, helping us, leading us in this, and we’re very active. We’ll see if we can do something.

The thing we like the most is we don’t have to do anything, and we don’t have to reach. We don’t have to – like we’re good. And we’re sometimes surprising ourselves with the speed at which we can make an impression in an industry like we have in beauty since we bought these properties. So we’ll see. We’re going to be smart about it, but I think it’s going to feel very much like an IAC property, if we do this the way we hope to do.

Glenn H. Schiffman

Well said, Neil. Thank you for your time. And we will switch over to Tim Allen, who I see on the screen. And you’ve just unmuted yourself. Outstanding. So Mr. Allen?

Tim Allen

Thank you, Glenn, and hi, everyone. Since the acquisition closed in February, we’ve been full speed ahead on executing our game plan against the $300 billion TAM and major secular tailwinds. Our mission is hyper focused on the tools and services in support of families finding care for all you love. We’ve already started rolling out a broad range of product improvements, including upgrading the user experience, improved curation to make it simpler and faster to match the right caregivers and rapid booking with a primary objective of driving increased frequency and engagement. This will enable us to serve the more than 39 million U.S. households with children under the age of 18. However, it also helps us with the senior care market with the 35 million families with adults that are 65 plus. And there’s four million new retirees entering that pool every year.

It’s also interesting to note that 87% of seniors want to age at home. Enterprises are also increasingly becoming a big part of care, and they provide care options to employees. The current macro environment is served to accelerate this trend dramatically, resulting in big wins for our Care@Work division, including new and expanded relationships with Amazon; Starbucks; Moderna, who as you may know is hard at work on a COVID vaccine; and well over 200 other organizations.

Finally, I’d be remiss not to acknowledge the world around us. The issues that parents face with childcare were not only present before the pandemic but are also now exacerbated and exponentially growing.

In our recent annual current Cost of Care Survey, 63% of parents indicated that they faced a real concern in finding affordable and reliable childcare. With schools now adopting hybrid models for the fall school year and many parents facing the abject fear regarding how to get back to work or working from home or the reconfiguring of care options, especially within center and group care centers struggling for survival, we’re quickly innovating solutions for emerging care needs.

One example of this that addresses the emerging demand and tackles affordability is our upcoming release of Care Share. Care Share will provide the tools to match families who share core values and principles, including health practices, and allow them to form small pods of at-home care. They can also then find childcare tutors or any other caregiver on Care.com. Care Share makes it more affordable, provides more control over the health practices administered inside of the home and is really an evolution based upon what’s occurring in today’s environment. Care.com is the solution to the growing care struggle in our nation. It will undoubtedly take us some time to execute our vision fully, but Care checks all of the boxes for IAC: large TAM, fragmented supply and demand and a dynamic where scale not only provides pricing power but also improves the profit.

Glenn H. Schiffman

Outstanding, thanks, Tim. Let’s go right to questions. Brian Fitzgerald [Wells Fargo]?

Brian Fitzgerald

Yes. Thanks, Tim. Hey, I wanted to get an update on some of the consumer attitudes on the brand given some of the challenges in the past and maybe unpack a little bit some of the safety initiatives you’re working on?

Tim Allen

Yes, no problem. So as everyone knows, there was an article last year that the former management of Care had to contend with us in the Wall Street Journal. What we’ve seen is the brand has actually been resilient, so parents continue to flock to Care, especially in this environment, and coming to Care. What we have done and taken steps to do is we’re now providing what we call CareCheck 100% across all providers as of this month. And what CareCheck is, is a background check for all providers. So all of our providers on our platform are background checked, and then they are also verified and validated. So we’ve gone through – they had taken some initiatives starting back in June of 2019 under former leadership, and we’ve accelerated those under the ownership of IAC. Some of the other initiatives I would mention are we’ve got product initiatives that are underway, such as geotracking inside of our mobile app, so parents can know the location of the caregiver; and then also one-button call for help for the caregivers to be able to hit a button inside of the app and provide additional help or call 911.

Glenn H. Schiffman

Okay. Ygal, how about you next?

Ygal Arounian

Thanks, Glenn. So I want to maybe dig into the Care@Work piece a little bit more. You noted that some of the enterprises coming onboard. Let’s just – maybe if you could just expand on that broadly, maybe a little bit on what the sales process is like with that. How that can contribute to better ARPU or increasing revenue growth? I think it’s a smaller piece of the overall business right now. But it feels like, with the current environment, probably has outsized importance. So maybe just expand on all things you’re seeing there and how that contributes over time.

Tim Allen

Yes. It’s a great question. So Care@Work is a smaller piece of our overall contribution, right? Consumer is the majority. But what’s interesting about Care@Work is it has a ton of tailwinds behind it, as you mentioned, given what’s happening inside of the current COVID environment. Then what I would say about the sales process is it is health administered and health benefits, HR departments. They’re creating relationships and having conversations there. We have a sales team, a sales force that are out there all day, every day, having a conversation with them. And what we’re seeing is we’re seeing a substantial rise in demand, right?

Employee benefits in care community is becoming table stakes, right? Think of it as the equivalent of a health benefit, right? Employees such as Amazon want to know that they have a access to, one, a high-quality, safe provider network, such as the one that has access to the digital Care.com platform; but they also want what we call backup care, which is on-demand urgent care, in case there’s a need or an immediate need where we have caregivers who can be deployed on demand into the home. So we’re seeing that confluence of events really accelerated through the current environment, and we’re seeing that become a real demand inside of HR departments.

Glenn H. Schiffman

Great. Move over to Eric Sheridan, UBS.

Eric Sheridan

Okay. So question on the long – the medium and long term with respect to aligning sort of marketing against your broad growth goals. Wanted to understand how you’re sort of positioning the brand in the marketplace. How should we think about marketing intensity behind driving demand onto the platform? And how many years you think it will take to sort of get to where you want to be in terms of scale? Thanks.

Tim Allen

Yes. Great question. So what Care has been known for where it has brand resonance has really been the nanny and the long-term care. People go to that in order to find kind of a longer-term care Care provider. There’s 79 million babysitting jobs that sit out there that have been mostly untapped by the Care network. So we have a real expansion opportunity inside of that, right, more of the on demand, more of the instant book functionality for us to be able to get a caregiver for those more short-term gigs.

Now in this environment, as Joey said when he opened it up, we expect that the world will start to resume at a certain point in time where people will try to go back on date nights or try to get out for an evening, right? We’ll be positioned in order to take advantage of that. We’re putting functionality and technology in place in order to capitalize on that marketplace. What I’d also say is there’s a lot of opportunity and low-hanging fruit inside the existing long-term care, both with nanny and then also with senior care. As I mentioned, senior care is a nice growing vertical for us. So we’re positioning all of the product and the functionality to really be right match, right time, all of the tools across what we call accessibility, affordability, reliability and trust. So those are the four tenets that we’re building all of our products around.

You had mentioned marketing. So I’ll just go into marketing for a moment to answer that, which is there’s a lot of opportunity inside of marketing for us to be able to go capitalize on these new positions, such as date night, babysitting or also what I mentioned in the opener, which was nanny share, right, Care Share. So Care Share allows for families to form these pods, and we’re seeing a lot of families looking to match with other families who they feel comfortable with their health practices. So that they can do hybrid schooling, right?

With schools going back two days a week, we’ve got a lot of families that are trying to find other families that they can make it more affordable and find a nanny, a tutor or even a senior care member that they can then share with another family. And so we’ve built tools that we’re now going to facilitate that matching process, and that will really be a new marketing venue for us to open up and a new channel for us to go and acquire users from. We use the traditional TV means of advertising, but there’s a lot of low-hanging fruit in both online channels and then also TV.

Glenn H. Schiffman

Great. Switch over to Ryan Gee from BAML.

Ryan Gee

Hey, thanks for taking the question. So you spoke earlier about the impact on demand that COVID has presented. Can you talk a little bit about the impact on the supply side? Have you had to alter the on-boarding process for the care providers, the caregivers in response in recent months?

And then related to that, second question, do you see other verticals behind nanny and senior care that you could pursue more aggressively, thinking about pets here, as we’re working remotely? And then how flexible do you guys feel you need to be with pricing models and terms in a post-COVID world? Thanks.

Tim Allen

Yes. Great questions. I’m going to take the last one first. So today, we’re a subscription-based service, and we think there’s a lot of low-hanging fruit inside of the subscription-based service. But what I’d also say is we’re exploring subscription plus. There’s a lot of opportunities for the on-demand economy, the gig economy for us to be able to do gigs and other opportunities for just the instant payments of that. And then there’s a ton of opportunity out there for us to be able to provide more and more product and more and more value incentive to subscription to lengthen the retention. So there’s a lot of opportunity from where we stand today, which is just solely a subscription-based service.

On your second question, the verticals are always really interesting, right? We have the opportunity to really, really do a lot of work inside of childcare and inside of senior care. A lot of low-hanging fruit there. A lot of – you’ll hear me say that again and again, a lot of opportunity for scale and for growth. We’ve barely tapped into the market. Similar to what you guys have heard in ANGI’s and the HomeAdvisor business, off-line is our biggest competitor. And we have seen a seismic shift happening and really accelerated by the COVID environment from going off-line recommendation for childcare and senior care into online, and we are the de facto platform to come and make those matches. So we see that the two core tenet verticals, so to speak, childcare and senior care, are rich of opportunity, but there’s also opportunities to go into adjacencies such as pet care, as you mentioned. And the technology is built in a way in order to service that. We’re in pet care today, but we can continue to tackle that market and go deeper there.

And on the first question, what I’d say is when we look at the overall landscape, there’s a real opportunity for us to continue to grow and go into the penetration of that TAM. And so we’re barely scratching the surface. We barely believe that we’ve even – I like to say to a lot of people we haven’t even left the dugout yet. We’re not even in the bottom of the first. So we’ve got a ton of room for us to scale and to grow.

Ryan, I think I hit all three. Just let me know if I missed one.

Glenn H. Schiffman

Sounds like you got it. Go to Ross Sandler next. Ross?

Ross Sandler

Okay. As a parent of three kids under eight, I can see why Care.com has a very strong future and lots of market cap in front of it. You guys have talked about how this platform reminds you of ServiceMagic 1.0 from back of the day. And Tim, you’ve been around IAC, in the family for a long time. I don’t think you’ve worked at ServiceMagic, but you’ve been in a bunch of different areas. So how much technical work or business model change or plumbing work needs to be done here versus just kind of rebuilding trust and maybe adding some marketing resources and some firepower to the platform? Does it have to be kind of completely overhaul? Or do you feel like you can just throw some money and some smart people at it and scale this fairly quickly? Any color there?

Tim Allen

Ryan, it’s a great question. As a father of two twin boys, I totally – I’m with you. three kids, right? So what I’d say is the house has a foundation, right? They did a good job of setting the foundation. We have great, unaided awareness in terms of brand. People use us as a cognitive preference when they’re looking for childcare or senior care. So there is that opportunity for us to be able to put more fuel to the fire. Like I mentioned in the previous answer, it’s really about shifting off-line to online. In relation to ServiceMagic 1.0, what I’d say is there is plumbing to be done. We released the first matching algorithm change in 14 years to the platform.

And as you know, a lot of things have changed in the world in the last 14 years. So matching with the right caregiver at the right moment in time is – it’s an evolving process. We have a team dedicated to now focusing there and focusing more on the plumbing and the foundation, but we actually see it as a parallel path. We can actually invest off of the foundation of what has been built and set already and accelerate the product enhancements, while at the same time, also going after the marketing and increasing the market cap by going after the off-line channels and really tackling that off-line community of people who are looking and talking to each other for childcare.

Without a vetting process, without a background check, it’s similar to what you saw happen inside of HomeAdvisor.

Glenn H. Schiffman

We’ll move over to Dan Salmon.

Dan Salmon

Okay. Thanks again, Glenn. Tim, thanks for doing this. I’ve got, I guess a couple of follow-up questions. One on the enterprise business. You said it’s smaller today, Care@Work, but getting a lot of interest and adoption. Is that a business you think could be bigger than the consumer business over the long term? Or do you ultimately think the more direct-to-consumer business is the bigger one?

And then second, maybe this is an obvious one to ask. But with the Care Share initiative that you’ve talked about a couple of times coming before the end of this year, it would seem to me the restart or not restart of schools after the end of the summer will be a very important thing for that, whether it’s everybody going online only and parents having different sets of opinions on the quality of an online learning environment. I’ve already heard from groups of people who are doing exactly what you’re talking about with Care Share for general childcare and groups together, that essentially homeschool together because they’re dissatisfied with online learning. I know that’s not the – learning is not the key of the platform. But as everybody’s into that a little bit here in COVID, education and childcare maybe are blurring a little bit together. So just love to hear about how you think about how the fall might play out for you.

Tim Allen

Yes. It’s two great questions. So I would say – I’m going to go to your second one first in terms of Care Share, right? Care Share is an opportunity. One is, as you acknowledged, which is fall hybrid schedules are starting to come online, right? New York City is going into a hybrid schedule. You’ve got Los Angeles and San Diego, which are going fully online to start. So we’re starting to see the makings of that environment creative. What’s good about Care Share is affordability has also – has always been one of the blocks in terms of people going to private care in home care, and it really tackles that also for the long term.

So it will address the immediate need that’s occurring inside of this environment, right, allowing people to match together in terms of homes, right? We already have the demand. We have the eyeballs. We have the families who are craving and seeking this in terms of finding other families who share their practices and also their health beliefs. What also helps us for the long term is families that form together can also then, for a longer-term basis, find care or tutors or learning, to your example, through our platform and really stick with it, right? It really unlocks that affordability aspect of what people have had as a stigma against in home care, vis-a-vis, group care and in-center care.

The one underlying point I’d also say is group care and in-center care are also struggling in over for survival. So we’re – as more of those close, this will become more of an alternative option for both the short term and for the long term. The platform does take into account families being able to talk about health practices, talk about matching. So it really provides that glue where we have the base of families who are looking for this kind of matching service between each other versus just matching strictly with a caregiver. And then the beauty behind our platform is we fulfill on the caregiver as well, whether that be a tutor or whether that be a home school teacher or whether that be a nanny or a caregiver.

So we have the whole comprehensive view, and the belief is it will be both short-term and also long-term durable. And then on the first question regarding enterprise, I’d say, as any good entrepreneur will tell you, we’re looking for both to grow rapidly, and we want one to eclipse the other and continue to grow. But there is a ton of tailwinds inside of employers. It’s severely under penetrated in terms of an employee benefit, but we see more and more blue-chip marquee brands moving towards this. And we think, over time, more SMBs will move towards this as well.

So as I mentioned at the onset, this will be a table stakes. This will end up being akin to a health care benefit. So as more employers do that, we see a velocity of growth in terms of enterprise. But the beauty is we also have a velocity of growth inside of consumer, so we’re going to have both of them growing in tandem. And we’re very fortunate to be in the position of both of them growing at the same time. But if enterprise beats consumer or consumer beats enterprise, it’s a bounty for both – for the platform itself.

Glenn H. Schiffman

Great. Let’s move to Justin Patterson. Justin?

Justin Patterson

Tim, you called out the four tenets of your strategy earlier. Where are you today in those areas versus where you aspire to be? And how should we think about the time line and investment required to achieve those goals?

Tim Allen

Yes. Great question, Justin. So we – like I said, we are not even out of the dugout yet. We are just in the bottom of the first maybe, if we’re lucky. There’s a lot of work to do, but a lot of low-hanging fruit. So when we look across the four tenets, we have real initiatives and real drive. I would say, as IAC has indicated and expressed explicitly, we are investing heavily into this for the long-term. This is a long-term play for IAC. And so one, two years of investment here that we’ll continue to build product, continue to build the facilitation of the four tenets, right, accessibility, affordability, reliability and trust. And we will continue to invest in those, both short-term and medium-term and long-term, and we have initiatives across that spectrum as well.

So I’d say we’re really early days here. Having been the CEO for close to 17 weeks now is, I think, the last count I had, through a pandemic, we’re really able to agile and be adjusting, but we’re really focused on those four. And I would say, you’ll see a lot being released across this, so just care share and affordability. But you’ll see more and more product initiatives across those four tenants as well, over the medium to short – short to medium to long-term.

Glenn H. Schiffman

We’ll move over to Youssef Squali.

Youssef Squali

Great. Hey, Tim. So a couple of questions on my end here. One, other than the – some of the vetting issues that you’ve had and seems now to be in the review mirror, can you speak to the biggest friction points that you’re experiencing, things that still kind of frustrate you in growing the platform? And what kind of growth rate do you think this platform can sustain over the next say three to five years as you take advantage of the consumer demand of the enterprise, et cetera? And then because it’s subscription model, I was wondering if you can speak to customer retention, maybe LTV-to-CAC. I know it’s early, but any kind of indications or anything you want to share, that would be helpful.

Tim Allen

Yes, I’ll address your second question first. Given my background of where I came from in IAC, we were having a strong team that ran apps, which as everyone knows in terms of the mechanics of that business, and then also the team that founded and created Mosaic, we have a stronghold on LTV-to-CAC, meaning that we have very profitable LTV-to-CAC, and we continue to sit in that spectrum knowing that we understand how those mechanics and also just manage to those mechanics. And that has been proliferated across the Care spectrum already, meaning that was one of the first things we went in and put in and institutionalized. So really strong LTV-to-CAC in terms of this business.

What I’d say in terms of the investment for consumer and for enterprise, in terms of the friction points or the frustration points that we face, it’s any good entrepreneur, we want to move faster, faster and quicker in releases, but the unlocks for us are really completing the flywheel from the families. It’s always family-centric. Our religion is families first. So it’s always focused on the family. It’s always focused on the tools and services inside the family. So what we really want to get faster and better about is finding the right caregiver at the right moment at the right time faster, meaning that you come into the platform, you are matched with the right components for the duration of what you’re looking for.

In terms of retention in the overall spectrum of things as a subscription, we have strong retention mechanics. We continue to see an opportunity to build more stickiness and more retentive product features into the overall set of offerings, and you’ll see some of those releases happening before the year’s end. That will continue to prolong and lengthen the retention of the service with real value-add to the families.

Glenn H. Schiffman

All right. Jason Helfstein, Oppenheimer.

Jason Helfstein

Maybe just like a follow-up there. I think one of the things that many of us looked at a long time ago when we had looked at the company is the challenge around how do you solve the payment workaround for repeat activity where you hire a care worker and you pay them outside the platform. And how do you kind of recapture those economics? So how are you addressing that? And then also, how do you think about weeding out lower-performing providers to basically raise the bar so that Care.com stands for premium care?

Tim Allen

Yes. Two great questions. So we some real innovative sticky features that are coming to play over the course of this year in ways that we can get that flywheel of payment capturing all the way through. And then also mark for hire, right? One of the things inside this platform that’s always been disjointed experiences, you have a seeker who then messages inside of a provider. But then they never actually mark the person hire, or there’s this open-end question mark of what’s the fulfillment inside of that, right?

We have that to tackle, and we know that we have some real solves inside of that. So we see the whole spectrum of seeing the life cycle of the family, both for childcare and senior care, all the way through to fulfillment. And we’re tackling that this year. We’ve got a really cool ways and products that are going to be coming out in order to tackle that specific issue.

On – in terms of the overall provider quality, so we have upped the provider vetting process, meaning I’ve mentioned CareCheck earlier, which is the background checks, 100% background checked across all providers this month. Then we’re also putting additional vetting and questionnaires into the flow, one for heuristics in order to help on matching; but two, to also indicate quality of provider and then matching the high-quality providers with what who are looking for the families at that moment in time.

We have strong liquidity inside of this business, meaning we have strong provider to families looking for caregivers. So the beauty behind this is we now can start to move the needle in terms of quality even higher to where it has been before, and we’ve already started to do that in the first 17 weeks and we’re seeing that pay off.

Glenn H. Schiffman

We’ll move over to Brian Fitzgerald.

Brian Fitzgerald

Yes. Thanks, Tim. Maybe that’s actually a follow-up to Jason’s question. You just mentioned strong liquidity in the platform. Can you talk about anything you’re seeing with respect to supply elasticities? Maybe similar to ANGI, where some guys had to lay off people and – or people want to sit at home and collect PPP rather than working. Can you talk about any near-term dynamics you’re seeing on the supply side?

Tim Allen

Yes. It’s a great question. So we – I believe, and we actually have the data to support that there are probably some caregivers that are sitting on the sidelines for PPE. But we’re also unfortunately seeing a drove of high-quality providers such as counselors, teachers who have been furloughed by municipalities and other providers come to our platform. So we’re seeing supply growth like we’re actually seeing strong supply entering into the marketplace because as the largest platform for families looking for care, they’re coming to us and wanting to find families in order to support with their expertise and their specialty.

It has two things that is actually being helpful here. One, it’s helpful in terms of the matching, right, which is the obvious one in terms of finding families into caregiving. So we have elasticity of supply to go match families with and more caregivers in terms of order to do that. But it also is upping up the quality, when we see higher quality caregivers come online from the municipalities laying off teachers or furloughing teachers, the unfortunate circumstance of that. But we’re a real economic opportunity and we’re a real viable career option for them to come to.

So a little different than what I think you’ve mentioned – I’m not as familiar on the ANGI side of the house. We’re actually seeing when the teachers are being furloughed, they’re choosing us as one of the first options of finding alternative means of income.

Glenn H. Schiffman

Okay. Tim, that was outstanding. And I think we’re on time now for me to close and on budget. So thank you for that.

I will – just two housekeeping items, please, before we jump to Q&A. One, and you saw this in our S-4 that we filed in respect to the Match separation. We broke out Ask Media Group as its own – with its own financial disclosure. That was because the size of Ask Media Group. So you will see an 8-K that we will file, I believe, at some point next week, that will slightly re-segment our businesses. We will have Ask Media Group combined with our Desktop business and that new segment will be called Search.

And obviously, Ask Media Group then, therefore, comes out of Emerging & Other and Mosaic then, therefore, comes in to Emerging & Other. So we don’t take away disclosure that I know people want and enjoy. We’ll still give revenue for Mosaic like we do now. But hopefully, again, this gives you more information in a nice streamlined manner. So be on the lookout for that. And then, of course, we can address any questions attached thereto during our earnings call in a couple of weeks in early August.

Second, obviously, we disclosed the monthly financial metrics. As you know, the dispersion of financial outcomes is very wide this year. You heard me say in the last call, uncertainty reigns here this year. We all don’t know the length of the shelter-in-place. We all don’t know the length of work-from-home. We all don’t know the financial impact of the resurgence that we’re seeing in COVID-19. We’re obviously in the midst of a recession induced by forces and factors that, frankly, the world has never seen. So that will have an impact on business in general, some positive, as you see, some no doubt, negative, as you’ll see.

And then there’s a lot of fiscal stimulus and monetary stimulus that’s being thrown at the economy. So again, please don’t take these monthly numbers and run rate them. There’s puts and takes in all these businesses. And we will, of course, continue to transparently – as transparent as we can share with you the information as we see it. But again, uncertainty reigns here. So with that, I’m looking at the queue now.

John Blackledge, we’ll start with you.

John Blackledge

Great. Glenn, just a couple of questions. First, could you talk about the current valuation discount for the non-public assets after adjusting for ANGI and the net cash? That’s the first question. And then on margins, post-spin, the businesses are at different stages of maturity and different stages of cash flowing or EBITDA margin. Could you just walk through by segment how we should think about the margin trajectory in the coming years?

And then last question, just is there a minimum cash balance that you’re thinking about? I know it’s $4 billion now, but you’re thinking about in the coming years.

Glenn H. Schiffman

Third one, easy. No. Obviously, Joey talked about this a little bit. That will depend on the opportunities that we see out there. That will depend on our capital structure. That will depend on the capital structure of our subsidiaries. We always don’t like to keep a high cash balance. That, we believe, is a strategic weapon. That, we believe, allows us to go on the offense. Joey made the comment and I think either the first quarter letter or the letter prior to the first quarter letter that we weren’t looking for capital when we were in the eye of the storm. We were fortunate. We were looking for ways to put our capital to work.

So capital and cash is, again, we think, a strategic weapon here. On the discount, I don’t think it’s my job to opine on the discount per se. We’ve always said it will take itself – take care of itself over time. Hopefully, days like today, when you hear from our business leaders, of the true value that’s being created by our leaders in these diverse businesses, each of whom are in large addressable markets and barely are penetrating those markets and led by the exceptional leaders that you heard speak today. So hopefully, that helps take care of the discount. You know it’s funny. I was having this debate with a shareholder – a large shareholder of ours, who was scratching his head as to why in the sum of the parts, cash is discounting and how many other companies that have cash or have net debt. Should the debt be in the sum of the parts at a premium? Should the cash be at a discount?

That’s a head scratcher. The other observation that shareholder made that was a head scratcher was the special purpose acquisition companies out there, I think 80% of which, their only asset is cash and 80% are trading at a premium to cash. So that’s an interesting head scratcher. But look, the discount, as Joey said many times and we’ve written about, we think the discount takes care of itself over time. Margins by segment, that’s – there’s a lot in that. I think the overriding way we think about margins is we want to invest almost in every one of our businesses, frankly. We want to invest to maximize the opportunity to deepen and widen our competitive moat, to drive real penetration of the category by doing one thing, and that’s delighting our customers. When we delight our customers, we always win. And that’s what we seek to do. We look to remove friction. That grows TAM. That makes it easier. And obviously, revenue, therefore, grows, and revenue falls to the bottom line.

That’s, of course, an unfulfilling answer to you, I’m sure. So to give you a little more color, I can go business by business. ANGI, Brandon, I think, hit it spot on in terms of margins. We’re growing to grow the top line. We’re growing to deepen and widen that competitive moat. We’re growing in products across the board. This payments thing is really, really interesting and puts us knee-deep into the transaction flow. Fixed price, as Joey said in the letter is working and working well. So I think you’re going to see us investing there. We’ve called out the $30 million to $50 million investment. We’ve called out on the last call that we don’t think, even prior to that, we’re going to create incremental margin and then you have to layer on the $30 million to $50 million.

Maybe given some of the trajectory that we’re seeing on the top line, maybe we create a little bit of incremental margin. But again, we’re going to invest all that back. And then going forward, I think we’re going to be in investment mode here. That’s not to say the margins can’t increase from here. But I think we’re going to tilt towards investing because I think the market opportunity is so large. I think coming out of COVID off-line to online again will accelerate. We’re seeing new people on our – on the ANGI platform. So we’re not moving away from that 35%, but I think that it will take longer to get there, given our desire to keep growth going, and it will be dependent on us solving zero accepts, repeat and SP retention.

On Vimeo, I think Joey said on one of our previous calls, the debate is should we be profitable in 2021. And that debate is vibrant and ongoing right now. There is a school that says there’s the opportunity, given our top line growth to be profitable. There’s a school that said that is the silliest idea in the world, given our top line and given our opportunity. And we should be pouring more capital into Vimeo because the TAM is really being unlocked. And I think Vimeo’s video solution will not be an or solution as we come out of COVID. It will be an and solution coming out of COVID. So I think you’ll see us invest there. Yes, the 20% target we put out there, that’s long term. Hopefully, that will prove to be conservative. But again, time will tell.

Dotdash, I think Neil talked about that a little bit, what, margins were 24% last year. This has been a positive year from a revenue perspective thus far, and we expect it to continue. It depends how the fourth quarter rolls, well, depending if margins go up or down for the year, and we think there’s more margin there. We’re not – but we’re nowhere close up for – to optimize margins. And then Search, you’ll see some of the numbers coming out. So I’ll refrain from commenting. That business, as you know, is about optimizing cash.

And then Emerging & Other, when Care was run by the previous management team, that was a 10% margin business. And again, we’re nowhere near optimizing for margins – of margins there. We’ve told the world there will be no margins for a period of time as we invest to accelerate that business. So probably too long, but hits a lot.

All right. Moving to Brent Thill next.

Brent Thill

Glenn, you mentioned you’re not moving away from the 35% long term for ANGI. What gives you conviction still in that number given we’re way off of that? And I guess secondarily, given the desire to want to invest, do you think of a floor where you wouldn’t go through on margin? Is there a reasonable kind of bar to think about where you wouldn’t go through, even though you’re investing? How do you think about that?

Glenn H. Schiffman

I think the discipline of delivering margin obviously is clearly important. But no, I don’t know what the floor is. I think the hope is that our current margins or the margins we’ll deliver this year is the floor. But again, if there’s an opportunity to invest, we’re – we will err on the side of investing. These investments got to make sense. You’re talking to a management team that’s full of owners. We think like owners. We spend money like our own, and we put every investment through that kind of filter and if it makes sense, we’ll do it.

Our confidence that 35% is borne of the same confidence it was when we announced the Angie’s transaction – Angie’s List – sorry, acquisition. Our margins were, I think, lower than where they are right now when we announced that target. And now we come to the party with better product, with more scale, and with, we think, a clear path to solving some of those challenges that we have that unlock margin, and that’s zero accept, that’s repeat and that’s SP retention. So that’s where – those are the reasons why we are still excited about that and targeting that. But again, this is going to be a long-term march because we think the opportunity is bigger than when we announced the transaction in 2017. How about Cory Carpenter? Sorry, I think Cory dropped out. Kunal?

Kunal Madhukar

Can you hear me now?

Glenn H. Schiffman

We got you now. Thanks.

Kunal Madhukar

Sorry. Just following up on the margin discussion especially with regard to the economics of the fixed price business. Well, if you are — if you just told the consumer you are going to do the business. So let’s say, for like a service for like $100, and you get a service professional that is going to do it for you for like $90, that’s a 10% margin. If that becomes 50% of the business or larger, then it’s tough to see how you get to a 35% margin on an overall basis. That is why I was finding a challenge with it. So can you talk about that, please?

Glenn H. Schiffman

Yes. It depends, obviously, on [inaudible] versus what we got to pay for the job. Based on those numbers, you’re exactly right. Moving over to Michael Ng.

Michael Ng

Glenn, thanks for the question. I can appreciate that we shouldn’t necessarily extrapolate some of the more recent monthly trends given that there are puts and takes for each of the businesses. I was just wondering if you could flag any obvious trends that we shouldn’t extrapolate or at least talk a little bit more about ANGI in detail because it sounds like there’s an opportunity there to have the SP spend normalize over the coming months. Thank you.

Glenn H. Schiffman

Yes. I mean there’s a lot there. I’ll give a cursory glance to your question and then maybe we get it a lot harder in August here. As well — ANGI on the SP side, that will be a headwind for the business. Brandon talked about it. That could be months. As Brandon said, some SPs are impaired. Some SPs can’t hire workers. Some SPs are overwhelmed. And the supply chain, as I think everyone knows who’s maybe trying to get certain products through this pandemic, the supply chain globally has been disrupted and that impacts some of our SPs. So I think that will be a headwind. I think also you — May numbers obviously were higher than June numbers. I imagine May numbers, we took some took some of the April demand that was deferred, if you will. And so maybe that’s why May was a high watermark.

And then you saw June there, where, again, maybe people sheltering in place had a to-do list on their home of 10 items, and maybe they got through a lot of those to-dos. So we’ll see. We’ll see when the stimulus packages end, what that does and again, we’ll see what the recession is. What I do know though is, as Brandon said, we’re going to come out of this ANGI Homeservices in a much better spot from a product perspective, a much deeper and wider pool of SPs, here, having made progress on offline to online conversion and poised to really steal a march, we believe, on our competitors.

Vimeo, again, certain technicalities in those numbers. Whilst the June numbers are pure vis-a-vis the acquisition of Magisto, we had a large deferred for us — for that business, a large deferred write-off. So the 43% revenue growth was not organic in the quarter. We did pierce through 30% organic revenue growth there. And then Dotdash, I think the display business, we enjoyed working off some of our backlog that we will continue to build. So again, you got to go business by business. There’s puts and takes here and I’ll keep repeating it, uncertainty reigns. Moving to Ygal.

Ygal Arounian

Thanks, Glenn. I want to just focus on the cash and M&A, and then maybe debt for a sec. So Joey kicked off in the beginning talking about valuations, and they really only dipped for a couple of weeks and then kind of shot back up. So I want to get your thoughts and your mindset on if you’re not finding attractive targets at the right prices, how aggressive do you feel like you need to be to kind of rebuild the stage you are versus be patient and sit on the cash or as we go through the next 12 months? And then just maybe you could — you’ve talked about it before but rehash target leverage, how you think you could raise that and use that in that M&A path over the next year.

Glenn H. Schiffman

Yes. We’re going to — IAC has always had a healthy cash balance, and we’re going to be prudent about that. Given the assets that are inside of IAC right now and the trajectory of those assets and the growth opportunities embedded in each of those assets, we don’t need to buy another thing. That said, we will buy, hopefully, a lot of things, both inside our businesses and new verticals. But we think the organic growth trajectory is quite strong. The free cash flow throughput of these businesses is quite strong. So no, there’s not a shot clock, so to speak. Valuations go up, valuations go down. Market windows come and go, and having that healthy cash balance enables us again to be to be offensive. So you’re not going to see us ever in deal heat. It’s just not the way we operate.

As I said earlier, around our investments, again, we’re all owners of this business from Mr. Diller on down. We think about capital allocation that way. To do an acquisition, it’s got to make sense for our shareholders the second this deal closed, any deal would close. In terms of debt capacity, it’s a great question. Obviously, we have a lot of cash before we get into debt — into raising debt. That said, I think we would — like we did with Match, like we initially did and are doing with ANGI, we like debt on the subsidiaries closer to the assets. I think it’s a more prudent and smarter way. I think you can think about leverage targets of three to four times overall. So obviously, on the base of our EBITDA, that gives us a fair amount of firepower. Eric Sheridan?

Eric Sheridan

Here we go. So a couple of quick things. Maybe one, process first. Glenn, the shift away from guidance to the monthly operating reports sort of disclosure, will there be a regular cadence of that, that we on the sell-side or investors should expect in terms of when we might be getting that monthly operating report from you guys? I’ve gotten that question a fair bit already so far today from investors. Just to better understand what the cadence of that disclosure might be. And then second, you’re going to hate me for asking this because you’ve just completed the spin of Match. But if you go back to last summer, you guys discussed possibly spinning Match or ANGI and looking at both. How do you think about the life cycle of some of the businesses that maybe you’re a little closer to maturity rather than immaturity in the portfolio set? And how people should think about their capital needs and/or their ability to stand on their own outside IAC in the next couple of years?

Glenn H. Schiffman

Sure. No, I don’t hate you for it. Any question is fair game. And I appreciate you asking. In terms of the cadence, obviously, it will be monthly. To get more specific, I think it will be within 7 to 14 days of the end of the quarter once we’re comfortable that, obviously, the books are close closed or close enough subject to all the caveats and the footnotes and whatnot, that there could be some adjustments. So I think expect it no later than 14 days. We’ll see. Today, I guess, it’s 16 days after the quarter so maybe I should have said no later than 16 days. But I think that feels about right. As Joey said, this is an experiment. We think it’s a good experiment, but we’re learning with it.

In terms of future spins and capital needs, we — obviously, as you said, we just completed the Match spin. We did announce in August that we are considering both, and we made the decision to focus our attention on match and focus our attention on growing the rest of our businesses, and that’s where we are. So I think we’ll start to then, therefore, answer this question the same way we answered the Match question that was asked many times that we have nothing to say until the time in which we have something to say. But I don’t think it will be near term given, again, we have a wonderful opportunity to continue to grow all of these businesses, to maybe scale all these businesses and invest in these businesses. But again, that could change given other choices that we may decide to make.

In terms of capital needs, all of our businesses, obviously, have ample capacity to invest. We have ample capacity to invest. We have ample capacity to invest. We do, as you said — as you heard us say, we do evaluate and think about these things all the time but nothing to report here today. We’ll take one last one, and we will go to Benjamin Blank — Benjamin Black, sorry.

Benjamin Black

Sure, thanks. I have two actually. So wondering if you could talk about the percent of unmonetized service requests you have. I think it was typically closer to 40%. How has that trended this quarter? And also, when your supply constraints are resolved, should we theoretically see real margin expansion since you’re already paid the amount of these service requests? That’s the first one. And then second, could you potentially talk about the state of the competitive landscape for ANGI? I’ve seen some reports that some competitors have pulled back. So be curious to hear what the new competitor dynamics look like.

Glenn H. Schiffman

Yes. On the first one, zero accepts has gone up. Obviously, the quickest — to the extent that service request grows greater than monetized transactions that the math is simple, zero accepts goes up. And I think you’re exactly right, right? We’ve already paid for those zero accepts. So claims are taking off with empty seats, so to speak. Probably a bad analogy in this environment. But that is one of the reasons that we are confident in our future margin opportunity, and it’s what I talked about earlier on zero accepts. I think I gave a heuristic once that a 10% move in zero accepts from 40% to 36% drives — that alone drives two margin points. And I think we could do a lot better than 10% moving from 40% to 30% — to 36%. Your second question — sorry, I didn’t write it down.

Benjamin Black

The state of the competitive landscape for ANGI.

Glenn H. Schiffman

Yes. Look, we’ll see where it is. I mean we see some of the reports that you see. And all we know is that we’re investing. That we’re investing in our sales force. We’re investing in product. We’re investing in marketing. Joey referenced that in the letter. And we’re going to come out stronger. We’ve seen the same reports that you are. So we think we are, as we speak, stealing a march on our competitors and we think we will. We think we have the business model, we have the financial flexibility and we have afforded to do said action. And then we’ll see. Our biggest competitor, as you heard, I think, Tim Allen say, as you heard Anjali say, and I think is a great way to end this call is our biggest competitor is word-of-mouth and other off-line solutions that just don’t work as well as our online solutions.

And it’s in the Vimeo business. It’s businesses not using video that they really should and they will. It’s word-of-mouth to find the painter and the plumber. It’s word-of-mouth to find the caregiver. And of course, those people haven’t been background checked and those people don’t have ratings and reviews and the sample set when you’re getting a reference from your friend or your family, is typically one versus a marketplace. And we think a marketplace is a more efficient and better way to deliver these great services that we provide to our customers.

Glenn H. Schiffman

With that, I thank everyone. This has been fun for us and great to engage with all of you. Great to see all of you. We look forward to seeing you in person, hopefully soon, we will see and then we’ll be back in front of you in, what, three or so weeks. Stay safe. Have a great day and speak soon.