Meet IAC's Consolidation King
Holding companies may be par for the course in the ad industry, but that is not the ambition of internet conglomerate IAC, which in the past four years has cobbled together a business from more than 15 acquisitions and transactions.
One neat package
Pulling those together into one neat package for media buying, selling and Wall Street is not an easy job. Doing so falls on the shoulders of President-Chief Operating Officer Doug Lebda, whom CEO Barry Diller has tapped to glue together Match.com, CitySearch, Ask.com, eVite, LendingTree.com and Ticketmaster, among others. Banc of America Securities analyst Brian J. Pitz initiated coverage last week in a note that suggested "the lack of consistent branding across its sites allows for few cross-marketing opportunities."
For a man with such a tall task, Mr. Lebda is even-mannered, even relaxed, as he rests on a leather chair in his corner office -- if IAC's curvilinear, milk-colored headquarters on Manhattan's far west side can be said to have corner offices.
Mr. Lebda arrived at IAC in 2003 as CEO of LendingTree.com, the company he founded as a 26-year-old after his early years as an accountant. He lacks the flamboyance or attitude of many web entrepreneurs and media moguls (perhaps his boss' larger-than-life presence more than makes up for it). He is described by former LendingTree investor Bob Spass, managing partner of Capital Z, as "very laid-back, very serious" and "incredibly detailed" -- handy traits for managing a stable of disparate businesses.
Mr. Lebda admits this aim for integration is nothing new; it's been a priority for Mr. Diller for several years now. His self-described job is to "move things faster."
The integration is most apparent in marketing. And IAC certainly spends: $743.5 million on advertising 2006, according to recent Ad Age estimates. That's up almost 50% from the year before and enough to make it the 57th-largest ad spender.
A year ago, each of IAC's brands advertising offline -- Ask, LendingTree and Match.com -- were at different agencies and didn't talk to each other. Mr. Lebda consolidated media buying at Mullen and this past upfront the IAC brands negotiated as one for the first time, saving an estimated $8 million and "probably more on radio as well," he said.
More than half of IAC's marketing spending is online and the brands recently consolidated on a single ad-serving platform, which is helping them share knowledge and optimize better. For example, he said LendingTree might buy an ad on the uber-expensive Yahoo or MSN homepages, but share that placement among various IAC brands, which optimizes the performance. The company has found LendingTree doesn't perform well at night so they might sub in a Match ad, which does do well in the evening.
On the flip side is what the company takes in for advertising. In 2006, advertising made up only 9% of the company's $3.9 billion revenue, but that's a figure poised for growth. The emergence of a stronger local advertising market is considered a boon to many of its properties. One of the best examples of IAC tapping that space is Ask City, the local search play of Ask.com, which incorporates CitySearch, Ticketmaster and eVite.
Mr. Diller likes to call Ask "the glue" that can bind IAC's disparate online brands together and it's clear that although it is not yet a profitable business, it's not one IAC is interested in shedding. Mr. Lebda shrugs off criticism that Ask has yet to gain substantial share, saying he'd be happy with 10% of the market.
IAC's other big ad play is essentially a network called IAC Ad Solutions, led by Rich Stalzer, which will help advertisers target particular demos across the IAC brands. While IAC's almost $400 million in net ad revenue ranks it fifth in the U.S., it's almost three times smaller than the next largest, MSN -- but Mr. Lebda pointed out the marketing footprint is actually much bigger, as many of the brands are in the business of selling leads, "which you could arguably call advertising."