Neil Vogel, CEO of Dotdash Meredith on how they became the largest publisher in the United States and why they can now compete with both Google/Facebook plus much more…

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The Interview Discusses: 

  • How Dotdash in a relatively short period of time became the largest publisher in the United States.
  • IAC’s recent acquisition of Meredith and why he believes they now have the scale to effectively compete against Facebook and Google
  • Lessons learned from working with media mogul Barry Diller.
  • The future of print magazines and why Dotdash is intentionally shrinking their subscriber base.
  • The tremendous licensing opportunities they intend to take advantage of.
  • A potential spinout of Dotdash from parent company IAC.

About Neil Vogel:

Neil Vogel is the CEO of Dotdash Meredith, the largest digital and print publisher in America. Prior to its acquisition of Meredith in December 2021, Mr. Vogel was the CEO of Dotdash, where he led the company’s transformation from a general information website (then About.com) to a vibrant collection of branded properties and one of the largest and fastest-growing online publishers.

Before joining Dotdash, Mr. Vogel was the Founder and CEO of Recognition Media, a creator and producer of award shows and media properties for digital, creative, and advertising communities including the Webby Awards and the Telly Awards. Prior to starting Recognition Media, Mr. Vogel was Chief Corporate Development Officer at Alloy Media + Marketing, a digital content and marketing services company focused on the teen and youth market.

Mr. Vogel is a member of the Board of Directors of the Philadelphia Inquirer, the largest newspaper in America operated as a public-benefit corporation and serves as a venture partner at FirstMark Capital. He received a BS in Finance from the Wharton School of Business at the University of Pennsylvania.

 

Click Here to Read the Interview Transcript

Transcript of the Interview With Neil Vogel:

[00:00:00] [music]

Jonathan Boyar: [00:00:00] Welcome to The World According to Boyar, where we bring top investors, best selling authors and business leaders to show you the smartest ways to uncover value in the stock market. I’m your host, Jonathan Boyar. Today’s guest is Neil Vogel, CEO of Dotdash Meredith, one of the largest publishers in the United States that own some of the most widely recognized brands, including People, Better Homes and Gardens, Travel + Leisure and [00:00:30] Investopedia. Dotdash recently acquired the publishing assets of Meredith, and the combined company reaches over 175 million consumers monthly, and over 95% of American women. Neil, welcome to the show.

Neil Vogel: Thanks for having me. I’d like to point out, I am not a bestselling author, and I am not one of the world’s great investors either, but thank you for having me. It’s fun to be here.

Boyar: You are a business leader.

Neil: Thank you. I’ll take that. I’ll take what I can get.

Boyar: I, of course, want to discuss the recent Meredith deal, and what it means for the company, [00:01:00] but I first want to talk about the turnaround you did at what is now called Dotdash. Dotdash used to be About.com, which your parent company, IAC, bought from The New York Times, full disclosure, Boyar Asset Management owned shares of IAC. For those of you old enough to remember it, About.com was a very popular site in the early days of the internet that you would go in order to find out about pretty much anything, and you were tasked with running it after the acquisition, and after about two years or so, even though it was still making a fair amount of money, [00:01:30] you concluded that you essentially had to break up the site in order to grow it.

What you did was you took the giant site, About.com, dismantled it, and turned it into a bunch of standalone websites that focused on narrow verticals like health or personal finance. To me, this seemed like a really difficult business decision. You had a business that was working okay, but yet you decided to make a really expensive bet to transform the site knowing full well that initially, you would lose lots of money. [00:02:00] What gave you the confidence to do this? Can you take us through the analysis and decision making behind it?

Neil: The short story and the long story are kind of the same story. The thing that gave us the confidence to do this was that, we were wrong for two years, and understanding and learning from being wrong and learning from trying things gave us the confidence to pivot the model. I’ll give you a little backstory here. I joined About.com not that long after IAC bought it, probably six or eight months. I knew Joey Levin, who’s now the CEO of IAC. [00:02:30] He brought me in to run About.com, and at the time, About.com was definitely challenged. Joey had spoken broadly about why they bought it and what they did with it, but we got there and we saw this publisher.

About.com name that everybody knew. We’re like, “Oh, this is going to be for fun. This is like this fallen giant of the history of the internet. We’re just going to clean it up, and it’s going to be great, and we’re going to be able to fix it.” That is exactly what did not happen. We got there, and I’d never really been a publisher before. I brought in a bunch of people that hadn’t been publishers before. [00:03:00] We tried a bunch of things. We tried to make the content better. We tried to make the sites faster. We tried to do all these things, but the fundamental problem that we learned that didn’t work anymore is that, About.com, if you remember, was very credible information on all kinds of topics, very, very broad.

The internet had changed. Where About.com had information on symptoms diabetes, and had a beer battered  fried chicken, people that have diabetes did not want their diabetes information from the fried chicken guys, and the fried chicken people didn’t want to be on the diabetes site. [00:03:30] We would lose, and we would lose visitors to in health, like WebMD and Healthline, and in food, to, you name it, like Bon Appétit and Food & Wine, and some of the brands, all rest be, some of the brands we own now. After two years of trying and flailing, our story became a very icy story.

We basically, I think we missed like eight of nine quarters when we first got there. This is all internal, obviously. It was us going back to Joey, and Barry Diller, and saying, “That didn’t work, but we’re going to try this, and that didn’t work, but we’re going to try this.” Eventually, [00:04:00] we went back and said, “Listen, everything we’ve done seems like we’ve failed, but we haven’t. Actually, each one of these is a data point, and we’ve assembled these data points, frankly, like what not to do.

In many ways, that’s more valuable than what to do. When you get something that’s what to do, you just keep doing it, when it’s what not to do, you have to think and you have to pivot.” What we realized was, there is no place for a general interest site on the internet anymore. Secondarily, we realized that even the publishers in these verticals were doing crappy things. There was too many ads, sites were [00:04:30] too slow and junky, people forgot they we were in the business of delivering content and aid to people. The content was getting crappy.

We’re like, okay, we went back and said, “Okay, here’s what we’re going to do. We’re going to take About.com. We have two million pieces of content, we’re going to through a million and a half of them in the trash,” which was obviously a big deal. “We’re going to take the remaining half million in health, and in finance, and in food, and in home, and in travel, we’re going to arrange them into verticals, and we’re going to launch new brands out of About.com, and when we’re done, there will be no more About.com. The reason why we think this is going to work [00:05:00] is because, all of our content is, we’re not news, we’re not sports.

It’s very intent-driven. We help people do something with their time. Cook something, make something, diagnose something. We can make fast sites that are really valuable and make brands that resonate, take them out. In all of our arrogance, we think we can actually compete with WebMD. We think we can actually compete with Bon Appétit. We can compete with all these guys.” Then we went back to IAC, and we went back to Joey and to Barry, and I’ll never forget this meeting.

We were like, “Listen, we’re still making money, but a lot less than we [00:05:30] used to.” We want to take this brand that we thought was all of the value of the company, we want to throw out the trash. We want to compete against the best players in publishing on the internet with this new model that we just came up with, and, oh by the way, you got to let us lose some money to do it.” The answer, which was a very IAC answer, and I know you’ve spoken with Joey before, and you know that it was, “What took you guys so long? It took you two years, you could have come with this a year ago.”

That was the exact spirit of answer that we were looking for. From that moment, [00:06:00] from that meeting, which was November or December of ’15, we started to execute our plan. From the first launch of Verywell, which was our health site. It was the first site we launched. We’d launch it. There was a dip for two or three months until people started to figure it out, and the algorithm started to figure it out, and then it just started to go. Then the minute that happened, we knew we had something, and it was just a race to launch The Spruce in home and food, and The Balance in personal finance, and TripSavvy in travel, and Lifewire in tech.

They just all started to work. We’re like five for [00:06:30] five. Then, in a very IAC move, and I’ll continue this story past the answer to the question, we went and said, “Look, we know what we’re doing here. We’ve got this pattern recognition. Let’s find some other things. We are doing this with brands we’ve made up, let’s buy some real brands.” We went out and we started to do some acquisitions. We bought Birdie, which is a very well known Indie fashion brand. We bought something called MyDomain in the home space. Then we bought Brides from Condé Nast, and then we bought Serious Eats and Simply Recipes and Treehugger.

All of a sudden, we’re like [00:07:00] 12 for 12. Like, every brand that we’ve launched or bought, we’ve grown. We’ve grown in revenue. We’ve grown in audience. We’ve really improved, and we’ve got this formula. It’s going. You can see in our financial results which are public how quickly we were growing. We did not look like a publisher. We looked a lot like an internet company, although we are a publisher, to be very clear.

Then, to finish the story with the acquisition you opened with, we got to the summer, and for those of you who followed Meredith in the past, Meredith was half TV stations and half publishing assets. They sold the TV [00:07:30] stations to another group called Gray Television, and the publishing assets were there. We had a very similar conversation with BD and Joey about Meredith that we had at the time we broke up About.com, which is, “Guys, let’s take a look at this thing. It’s obviously heavy in print, but if you look very closely, this is a digital business masquerading as a print business.”

We brought in some of the smartest consultants in print. We think we know what to do with that going forward to make it a really nice complimentary asset, but what we want is Better Homes and [00:08:00] Gardens and Food & Wine, and Travel + Leisure, and People, and if we can run our playbook on these brands that have been historically played second fiddle to print properties, and it’s a really weird thing to say in 2022 that that’s what happened, but that’s really what happened.

Like, let’s get in there and let us do it. More importantly, this whole idea of pattern recognition that we can go back to is, if you map every one of the brands we acquired from Meredith, you can draw a straight line to one of our brands, and what it looks like, and what we had to do. Although it looks like we took a very big bite, we bought something [00:08:30] much bigger than us, we broke it into its component pieces, and we know what to do with it, know how to digest it. Now, we’re three months in. I think today’s just about 90 days. We’re deep in the integration mode, but we’re really excited.

We’re the biggest publisher in the world. We’re these guys that were these non-publishing guys that were very much outsiders trying to figure out what to do with About.com, and now are the biggest publisher in the world. It’s been a crazy ride.

Boyar: No it has, and I applaud Joey and Barry Diller for [00:09:00] giving you the chance. I guess to take the devil’s advocate, success is the worst teacher. What are you doing to ensure that you are taking this situation individually? Obviously, you had a great playbook of what you do and how to improve properties, but this is a huge acquisition. Is there anything you’re doing differently?

Neil: Yes. The first thing is, we are totally paranoid as operators, and this playbook that we used to launch VeryWell four [00:09:30] years ago looks virtually nothing like we do today. What we do is we have some guiding principles that we know work, and what we know works specifically on the internet, but you can define this more broadly to other media assets is, best content for everything we do. Again, our content is called Evergreen Help People Content. Every single piece of content we make, we endeavor to make the very best thing on the internet for that. If you do that, that’s something people will like.

The second thing we want to do is, our sites will be the best performing [00:10:00] sites on the internet, and they are, in terms of speed, that really drives performance. Then the third thing is, the advertising and monetization we use will always be respectful. When we launched– It’s continuous today, it will be two-thirds the number of ads on a typical competitor, maybe less, because you don’t need more ads to make more money, that’s a false choice.

You just need better ads that you can charge more for, and better ways to monetize you can charge more for. If we focus in each of these brands with our number one job is making users [00:10:30] incredibly happy, and the money will follow, build audiences. Our audiences are generally down the funnel because, you’re trying to figure out what color to paint your kid’s bedroom, we know a lot about you. Your router is too slow, we know a lot about you, you’re trying to cook paya, we know a lot about you.

Once you’re down the funnel, we give people the very, very best experience, that’s how we build brand, that’s how we build loyalty, and it works. Now, the formula for People magazine looks very different than the formula for Better Homes and Gardens, and the formula for Health.com, but those three [00:11:00] principles are the overarching principles that underpin– Overarching and underpin. I might have mixed things up there. It’s a bad metaphor, but they’re the things that support everything we do.

Boyar: What’s really interesting, and you had mentioned print, and I used to go to any doctor’s office, et cetera, and you would see a Better Homes and Gardens or whatever, Meredith magazine, I’m assuming that’s no longer the case, but what you’re doing now is super interesting, is you’re making it more of a premium product, better paper, that sort of thing. Can you take us behind [00:11:30] that decision?

Neil: Yes, for sure. I think historically, we’ve pretty much telegraphed what we’re going to do, and we’ve pretty much stuck to that. Again, it’s the same thing if you look at what HAS and other people have done. Historically, magazines functioned a lot like the internet in how they made money. If you’re Better Homes and Gardens, you printed a lot of magazines, you had a very large subscriber base to try and sell ads against a very large subscriber base. I think what happened over time is the demand for advertising in print has gone down.

However, people who’s willing [00:12:00]  to subscribe to Better Homes and Gardens are still very robust, but there was a delta in the circulation between the people willing to pay and what they needed to serve advertisers. The trick is to unwind that delta. We don’t necessarily want to give deeply discounted magazines to people or places if there’s no ads to support them. We want the people who love these brands to pay for them. It turns out, the people who love these brands want a more premium product. In many cases, they’re even willing to pay more than they’ve [00:12:30] been paying.

Just like people like reading books in print, just like people love vinyl records, people love magazines, I have the media consumption habits of like a 17-year-old, which is probably in line with my chosen occupation, but we get magazines at home. Obviously, you’re not going to have Meredith magazines, but before that, we got Food & Wine, because we liked it. I’m a big sports fan, I watch a Sixers game and flip Food & Wine because I don’t want my phone around.

There is a real demand for this, and I think what [00:13:00] we’ve seen is that, magazine properties that have a premium element– Look, it’s not a mystery that people don’t want parenting advice from a magazine anymore. That’s hard but Food & Wine, Southern Living, People, the cadre that we kept and we’re actually investing in, they have real audiences that really love them, and it’s an experience. As long as you give them a great experience, it’s not going to be our biggest business at all.

It’s probably not even going to be a growing business, but it can be a very profitable, complementary [00:13:30] business. We’re in the brand business, if we’re building amazing brands, Southern Living‘s magazine is amazing, and it’s incredible for that brand, and people love it. Is its circulation going to double from here? Absolutely not, but can it be a really viable, profitable piece of the mix? 100%?

Boyar: One of the things that you’ve said before the acquisition of Meredith is, you didn’t have the scale to get a big chunk of advertising dollars. To me, it seems strange, you had almost 100 million visitors to your site. What can you do now that you couldn’t do before? [00:14:00] Now you have about 175, probably, it’s grown a little bit since you last gave that stat, but what can you do now that you couldn’t do before?

Neil: This is my favorite question. When we were Dotdash, not only did we say we didn’t have scale but, there was one thing we said we didn’t have, we didn’t have the brands, and we had great brands, we loved our brands, but our biggest brands were four and five years old. Like The Spruce is the single biggest home brand on the internet, it’s five years old. Everyone knows Better Homes and Gardens, no one knows The Spruce.

The Spruce is bigger than Better Homes and Gardens. So, we had a branding issue, and we had a scale issue [00:14:30] because, we do something unique that others can’t do, and we like our chances. One of the things that we do is, we don’t need cookies or personal identifiers to target because of the nature of our content. If you’re on our site because your router is too slow, we know exactly what kind of ads to serve you. We know exactly what kind of commerce opportunities to give you.

You need to either fix your router or get a new one, it’s very simple. Same thing with painting your kid’s bedroom example. If you’re trying to paint a bedroom for a newborn, we know that, obviously, you just had a kid, we know that you’re in the market for home improvement, we know that that very [00:15:00] highly [unintelligible 00:14:58] with a new car, a new house and a new credit card. We can target really, really well. What the Meredith scale allows us to do is for the first time, a premium publisher can target contextually as well if not better than someone can target audience, and you can’t outbuy us, because we have so much scale to do that.

The second thing was, it now gives us these incredible brands to talk to advertisers, like Better Homes and Gardens is 100 years old this summer, and People‘s 50 years old. These brands are [00:15:30] special and beloved as leaders to talk to advertisers with. This is what we like the most, so it’s like, “Okay, is your content safe and good?” “Yes,” the 175 million users you referenced, every single one of them experiences only content we’ve created, edited, completely ours.

There’s no feed. There’s no fake news. There’s no politics. There’s none of that stuff that you don’t want your ad next to. There’s no weird videos, like none of that, we control all that experience. [00:16:00] Check, that’s premium. Can we deliver scale to someone? Check. Can we deliver audience to someone? Check. Do we have some of the best brands in the world? Check. All of a sudden, we are a viable alternative, and again, this isn’t part of the model we need to succeed, but I think it’s going to happen. We’re a viable alternative to Facebook. We’re a viable alternative to some these other places that frankly, it’s an interesting position for us in that, we’re talking to all these big agencies and having lunch with the head of this agency and that agency, they’re all rooting for us. [00:16:30] Everybody wants this.

Everybody wants a premium publisher that has the internet bones that understands how to target, and in a world where there’s intent-based targeting is better than this like audience cookie-based targeting anyway. We tell everyone like, “Look, we’re better than Facebook because we’re trusted. We can compete with Google, and again, obviously not on total scale, and we can’t take all the money, but we think a little of it.” Then we go for the question, we’re the answer. We’re closer to the customer than Google is. We have a really interesting opportunity if we [00:17:00] get this right, and we put it all together correctly.

Boyar: Let me explore that. That’s really interesting, especially what you mentioned about Google and Facebook, large consumer product companies which are big advertisers of yours, spend tens, hundreds, and in some cases, billions of dollars a year on advertising in the case of like a Procter & Gamble or something. There are really few places outside of Google and Facebook where you can efficiently and effectively spend that money.

Neil: Well, there’s a new one now. [00:17:30]

Boyar: Yes, I’m saying, is Dotdash Meredith now a viable number three?

Neil: Listen, I hope so. That is our long-term goal. We would like to be in the same consideration set, and I think we can be with our performance, and our brands, and our scale, and our safety, and knowing that you’re going to be contextually around things that look and reflect favorably upon your brands. If we can do that, we got a puncher’s chance to [00:18:00] take a couple of nickels out of these guys, which I think that we can do. Now, the number one thing we have to do is– And to be clear, we’re not competing for the direct dollars. That’s not what we do, but all of the branded dollars that go to these places that are performance-based, they’re brand-driven-base, I think we got a puncher’s chance to fight for. We need a sit at the table, and I think we’re going to get at it.

Boyar: I think one of the things that maybe investors probably don’t get, and maybe you can explain, is like, what does a conversation look like when you’re going to a consumer product company and you’re saying, “I want you to advertise [00:18:30] on Dotdash Meredith. It’s not like a small business going on Google, whatever the Google services.

Neil: No, no, no, we’re generally talking to near agency heads and CMOs, and things like that.

Boyar: Yeas, so what are you offering them?

Neil: I’ll work backwards. One of the really interesting things about our business is, our ads and programs have historically performed incredibly well. Because we started from a place where we didn’t have brands, and all we had was scale and performance, we had to go into these [00:19:00] places and say, “Give us a chance, give us a shot. You’re going to learn our brands, but I promise you, our stuff’s going to perform better,” and because our sites are fast, and because we have fewer ads, they invariably performed better than other publishers.

That was really positive for us, and it’s manifested itself in a way where you’ll hear Joey on earnings call say things like, “Every quarter, 23 of the top 25, Dotdash advertisers will repeat.” That’s just not a thing that happens to publishers. Meredith, not even close to that. It’s because of how well [00:19:30] we perform. Now, it also depends on what the metric somebody wants is, is it an auto guy that wants test drives, or you’re selling charcoal that wants to sell charcoal around July 4th?

What we have historically been able to do is through contextual targeting and through scale, and through sites that are so performant and ads that are so well-placed, we’ve been able to show real ROI better than other advertisers, including platforms for the vast majority of the people who [00:20:00] advertise with us, whether it’s pharma clients, or finance clients, or food clients, and that initial performance got us in the door, got our brands more familiar.

Now that we’re adding these brands and these scales, what we’re going to do to Meredith is we’re taking all the Meredith brands, and we’re putting them on our ads back, like a technical term for making, putting them on our sites that are going to make them as fast and as perform as ours. All of a sudden, we have all this scale that’s going to be top of market or better than the market [00:20:30] performance, 175, 180 million people a month.

These brands, we can talk to virtually any CMO in their language, “What do you want? Do you want test drives? Do you want brand awareness? Do you want to sell more of your new soup? What is the KPI you are trying to hit? Tells us that KPI, we will make a program to hit it for you.” I think because we came from a point where we had to hustle for every client, and perform, and perform, and preform, when you add [00:21:00] that into what Meredith has with these incredible brands, and this incredible scale, if we can keep our hustle, and we can keep our brains, and we can keep our performance, we love the combination. Frankly, that’s what we’re hearing.

It’s early days, we’ve done a few deals with advertisers that are one plus one is more than two. Frankly, we’re hearing back from advertisers, the few that we’ve gone out with together, exactly what we’d hope in some flavor of this, like, “Wow, we’d love to give you more money, but we never could before because you couldn’t get more,” [00:21:30] or like, “Oh, this really performs, you’re top of plan. Here’s the mid-quarter re-up.” “Oh, we can now buy programmatically across this whole thing. This is great. I can find more of my audience here at a good price.” Again, we really like our chances that we can do this.

Boyar: One of the challenges Meredith, they have this quality content, and it’s obviously fantastic. These magazines wouldn’t have lasted a hundred years if they hadn’t, but a lot of them look like a PDF of the magazine, and what are you doing [00:22:00] to make that so they’re going to be a digital-first company?

Neil: This may be in more detail than you want, but it’s interesting to talk about. One of the things that we were very different from Meredith is how we run each of our brands. Each of our brands has its own general manager, which is basically a mini CEO, has dedicated technology, dedicated content, dedicated design, dedicated product, which is like how you build the website, like dedicated sales.

Meredith was very matrixed [00:22:30] where every one of our sites looks incredibly different. It’s built on the same platform, like the Lego base is the same, but they can use whatever Legos they want to build it. Meredith, which is a decision they made, every single website is exactly the same, and none of them had individual leadership, so health magazine, health.com looks exactly like people.com.

That’s not a thing in 2022. It’s not a thing one can do anymore. If you look at our sites, like if you look at Verywell and The Spruce, [00:23:00] you have no idea that they were part of the same company because it doesn’t matter, because the teams are free to do what is right for their brands, and then share knowledge across teams. We are bringing that across all of the Meredith brands. We’re three months in, and we already have every leader for every brand in place. What we’re doing is the first thing we’re doing is we’re taking all the old sites, moving them onto our ad stack and tech stack.

Then we are taking all the technology people and moving them into brands, and all the design people and all the products people, and all the leadership and saying, “Have at it, figure it out.” [00:23:30] Better Homes and Gardens should absolutely be the best home site on the internet. We’ve got all the tools. We’ve got all the resources. Now we have the structure, go do it. Think Better Homes and Gardens, for instance, The Spruce is probably depending on the day, 50% to a 100% bigger than Better Homes and Gardens in terms of audience.

However, if you look at Google searches, eight times more people search for the phrase, Better Homes and Gardens than search for The Spruce. That’s our opportunity. If we can do the right job with that Better Homes and Gardens [00:24:00] given its brand history, given the print magazine, given anything, we think it will achieve what you’re calling it’s rightful place in the universe in hopefully a relatively short period of time. The thing that got us most excited about Meredith was when we really dug in and we saw this, and we saw this structure, because this like the opportunity.

The industrial logic there was always like, “Well, we’re so big over here that like each of our things has to look the same.” If you take people out, we were bigger than Meredith at Dotdash. [00:24:30] You don’t have to do it that way. As a matter of fact, it’s much more engaging and inspiring for a team to be like, “All right, I am a health expert. I’m going to make the best health site on the internet. I am competing with Healthline and Everyday Health and WebMD, and we are going to beat them, and we’re going to build amazing things that are just for us. If you can do that, you can really succeed.

I think we’ve proven we can be successful, frankly, with some brands we’ve made up, and then, some brands we’ve acquired, but now if we can do it with the best brands in the world, [00:25:00] we’re a little bit like, “All right, lookout.” We say this all the time, “We are going to happen to things, we do not want things to happen to us, and the first thing we’re going to happen to is the priority, cadence, and structure at which we run websites, like they’re going in the front of the bus, and they weren’t necessarily there, and they are now.”

Boyar: One of the things that we’re really excited about that doesn’t necessarily get as much investor intention, it gets some, is Meredith was super strong in [00:25:30] licensing, really have done a great job, and Meredith is a company we’ve followed since the ’90s, and Meredith had this, and still does, this great partnership with Better Homes and Gardens, and Walmart since, I think, 1998 or so. It’s grown. How big of an opportunity is licensing in your opinion?

Neil: Very, and it’s something that we have spent a lot of time on since we got here. One day, this incredible relationship with Walmart has been an incredible partner at Better Homes and Gardens. At Dotdash, we always [00:26:00] looked at Meredith. When we made Dotdash originally, when we had to take apart About.com, we’d accomplish them at our office when we took Meredith and we dissected every single property, and every single thing that they were doing. It’s like this thing of folklore here and now because we actually do own Meredith now.

One of the things we looked at then was this licensing business, and we always said to ourselves like, “Licensing is the true testament if you have a brand that people care about,” and they have brands that people care about, and they have an incredible licensing business. I think it needs some sun, light and water, which we’re going to give [00:26:30] it. We’d at the beginnings have some really nice licensing around The Spruce, and around Verywell, and we had a seven-figure licensing business here before we did this, which is like a mini fraction of what they’re doing and what they can do.

One of the things we haven’t talked about is, we’re learning a ton from them, and one of them is like, how do you leverage brands in other ways? If we’re not going to be a print company, what are we doing? We have this Food & Wine, and Southern Living, and BHG, and the Spruce, and Verywell, and Investopedia. All of them [00:27:00] have a real chance to have other revenue streams that look a lot like licensing, right? I think we’re going to put our name on it, but we’re only going to deal with things that we really believe in. Like the Walmart collection’s incredible for Better Homes and Gardens.

Honestly, we got to get the Better Homes and Gardens, like we have to focus on that as much as possible, because it’s so on brand and it’s so good that that’s the blueprint for everything else we’re trying to do. It’s funny, most people don’t ask us about this. If we get it right, it’s going to be a nice part of the plan going forward.

Boyar: It’s just unbelievable high margin [00:27:30] revenue that you can get, and why not do it?

Neil: High margin revenue, and look, it’s funny like, high margin revenue doesn’t live on its own, doesn’t just fall out of the sky, you get high margin revenue because you’re doing amazing things, because you have a magazine that is the best shelter magazine in the world, and you have a website that is the best home and shelter website in the world. If we can get to there, things like licensing, if run appropriately, they’ll take care of themselves. Our number one objective is, get these [00:28:00] brands thriving again, get them absolutely thriving. If we can do that, things like this blueprint that we have for Walmart, Better Homes and Gardens, we’re going to be able to replicate in a lot of places.

Boyar: Just shifting gears a little bit. One of the things that you’ve historically been really strong on is performance marketing. That’s a big part of your business. A lot of people have no idea what that really is. Can you explain that?

Neil: Yes, performance marketing is, that’s the term we use in our financial reporting. It’s essentially [00:28:30] e-commerce. It’s essentially us helping customers connecting with goods and services. If you are on The Spruce and you need a new blender for your small kitchen, helping you find the best blender and buy it. If you just had kids and you want a new credit card to get you the best  we can help you find the best credit card. If you need an online therapist because of something going on in your life, we can help you pick the best online therapist.

If you need a new couch, if you need a refrigerator, if you need anything, you need to learn how to make smoky eyes for the date you’re going on tonight, like, we are [00:29:00] very, very deep in the, I call it the guides, ratings, reviews, commerce, business, where if you trust our brands, you’re a young woman on Birdie, and you love Birdie and you love Birdie’s content, and they all make fun of me for using this example all the time, so I’m going to use it again so they can listen and make fun of me.

People like the woman who wants to do smoky eyes for her big date or for her big night out, to the extent that we are the people that can tell her what products she needs to do that and tell her how to do that. That is totally in line with the mission of the brand, and it’s a great way for us [00:29:30] to monetize. Because our audience is so down the funnel when they come to us normally, like how to do smoky eyes, or, again, same example just like, “My router’s too slow, I don’t need a router.”

It presents a real opportunity to connect to people with services in mind, in mental health. We’ve been pretty good at that, but I think we were fairly early on that because I think we recognized the power of the intent-driven audience. During the pandemic, that business went absolutely bonkers. That is a very big part of our business going forward. I think [00:30:00] it’s more than a third of our revenue now, connecting people. For us, we love it, because it’s totally editorial independent, no one that ever writes anything or reviews anything for us has any idea of any economic arrangement we have or we send somebody, we don’t care.

We often recommend things that don’t pay us. It doesn’t matter. We’re not like other publishers. We don’t order things in the way people pay us, we order things in the way we recommend them. With this acquisition, I think we probably have 75,000 to 100,000 square feet now of dedicated product testing space where we have 40 test kitchens in [00:30:30] Birmingham, Alabama, and probably another 15 or 20 in Des Moines, Iowa, where we’re testing, not only all these products, but like, virtually, every recipe that goes on our websites, and all of this stuff, and like, we do the same thing for all the home sites, and all the tech sites.

We can really take this seriously. We even think we have a chance to be the very modern consumer reports. The business is very similar to what like Wirecutter does and The New York times. There’s a lot of competitors in this space yet, but like everything else we do, there’s like no shortcuts to winning in the [00:31:00] commerce business. You do the hard work. You do all the work, you write the most comprehensive reviews, and people will trust you.

One of the interesting things we learned from Meredith, there’s a type of commerce they’re excellent at that we never really participated in, which is more of the deals type commerce, which is on People magazine, “Buy this dress that Jennifer Anderson wore last night, or this reasonable facsimile at this other place.” They are very, very good and very, very seasoned at that type of commerce, which is our stuff [00:31:30] really aligns with the intent of our users.

What they’re really good at is manufacturing intent at places where maybe there isn’t shopping intent, but like, you love Jennifer Anderson, and she looked great, and I want to own that dress, and we sell them that dress. That’s a surprisingly big business for them, it’s something we’re going to roll out across our sites, and we’re learning a lot from them on this. Look, a big opportunity for our type of commerce is, they don’t really do it this way on most of their brands. Like, there’s not that much commerce at Food & Wine or at any of these other places.

[00:32:00] It’s a way we can monetize without ads, and it’s something that customers actually want from us. They want our recommendations, they want to know what our editor’s like. They want to know what colors we like the best, it’s really interesting.

Boyar: IAC, their famous board and their playbook has historically been to spin out businesses once they’re able to operate on their own, they’ve done it many, many times. Most recently, Vimeo, I realize is a board decision, I totally get it, but there are any like metric the companies have said or something to figure out like, [00:32:30] now would be a good time where it’s appropriate?

Neil: To be clear, it’s not up to me. I think they’ve said in the past, when you get so big, there’s a compelling other reason to send you out of the nest, you get sent out of the nest, but the reason you’d need to be public or independent is, do we need capital? I think we’ve clearly just proven that we don’t need capital to execute a model, right? $2.7 billion is a lot of money. If you need a way to compensate people, and we have equity and data, we can do that. IAC has really great programs that make it look really [00:33:00] compelling for people. Do we need like the leadership of a board or outsiders, and like, I get to hang out with Barry Diller and Joey whenever I want, or maybe not whenever I want, but whenever they’re not sick of hearing from me, and that’s really valuable.

The IAC culture, which we really try to embrace, it’s not for everybody. I love it, it’s a lot of debate, a lot of standing up for what you believe in, like in many cases, they just want to know that you know, and [00:33:30] a lot of planning, and a lot of time, like I think BD calls it in an article once as creative conflict. Like, that room is not the easiest room, but if you enjoy being in that room and you enjoy having ideas and defending them, and you don’t mind when people are taking shots at your ideas, it’s the best place to work. There’s no other place in the world that would’ve let us mess around for two years with something, do as poorly as we did in the beginning, and that was pretty poorly.

Then turn around and tell us like, “Come on, guys, do the next thing, and take not as much money as you want, but as much money as you reasonably need [00:34:00] to do this. Then, literally, three or four years later, give us almost $3 billion to take this incredible shot, like IAC is the best possible place to work if you are an entrepreneur or CEO.

Boyar: You had mentioned Joey and Barry, I recently interviewed Joey late last year, and I asked him about the things he learned from working with Barry Diller. What he said was, “Think bigger, why settle for a small idea or category? Why not go after a big one?” Which I thought was pretty insightful, [00:34:30] and that led him to take a stake in MGM that’s been extraordinarily successful. Any insights that you’ve learned from Barry Diller that you want to share?

Neil: I think it’s, what Joey said applies directly to this. Are we in this business? Are we good at it? Good at it enough that we’re like, I guess have the confidence that we’re good at it, but like the self-awareness to know we have a long way to go and get better, and if we are, what are we doing [00:35:00] if we’re not going to take a shot here, what are we doing if we’re not going to do this? It’s all of that.

The other thing, there’s some really specific things that I’ve learned here. There’s some really interesting things that I’ve learned about managing people and managing organizations from these guys, which is, a 100% of the time you are better off finding your next leader internally than eternally. Meaning, look around the room, if there’s a job you need done and there’s someone who is going to– You think can have a shot at that job, even if they’re going to be over their head, [00:35:30] even if they’re going to be in the deep water, chuck it in the pool.

It’s way better than hiring from the outside because that disempowers all those that work for you if you bring. People from the outside fail more than people from the inside anyway. The organ rejection, cultural rejection, so our entire leadership team here has been– It’s the same team that was here when we sucked. Most of the people running our businesses are people that we brought in doing something completely different than they’re doing now. Like Tori Braham, who runs our commerce business. Who’s an absolute star and [00:36:00] responsible for whatever, a third to 40% of our revenue, she started out running a home vertical at About.com.

It’s just so smart and so good, and we’ve done this so many times. That’s the one thing now, are we insular, is that weird because we don’t go outside? We only go outside when we have needs to go outside. The effect that has on an organization, when everyone sees those around them are the people that can really advance, and that your career is not capped, and you can do anything. [00:36:30] Going back to the conversation, everybody owns some equity, and it creates an environment that is conducive for success, and sets you up to do the thing.

We never planned to buy Meredith. Were we ready to buy Meredith? Probably not, but had we learned how to think about something like buying Meredith? 100%. Whatever we don’t learn, we can ask, or we can be told, and we can– The stories always tell great and very smooth in retrospect, but we’re convincing some of the [00:37:00] smartest people in the world of what we want to do, and they have their own opinions, and nobody has better pattern recognition than Barry Diller. He’s seen virtually everything in media, and it might not be the exact same thing, but he knows, nobody’s better at building brands.

I don’t know, he gets to this place where he assemble learnings and the things you do, and you put into practice, and the culture. Like the culture of this place, once you get it right, they’ll invest in you, and go do it. It’s exactly what Joey said. The Meredith exactly– I listened to the podcast with Joe’s it’s exactly what he said to you. “If you’re going to do it, think bigger, think bigger, bigger, bigger, bigger, like let’s go. “That’s why we’re here now. Hopefully, not to our detriment.

Boyar: No, I don’t think so. It’s a great answer. Neil, you’ve been really generous with your time today, and thanks for coming onto The World According to Boyar to discuss the evolution of Dotdash, which is absolutely fascinating, and your recent acquisition of Meredith. As an IAC shareholder, I look forward to following your progress. Thanks for being on the show.

Neil: Thanks. Look, if anybody wants to [00:38:00] talk to me for an hour, I’m happy to talk to them at any time. Thank you. It’s been really fun. I really appreciate you having me on.

Boyar: I hope you’ve enjoyed the show. To be sure you never miss another World According to Boyar episode, please follow us on Twitter @boyarvalue. Until next time.

 

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IAC CEO Joey Levin on why his company took a 12% stake in MGM, which companies within IAC he is most excited about, lessons learned from working with Barry Diller, and how he approaches capital allocation.

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The Interview Discusses: 

  • Lessons learned from working with media mogul Barry Diller.
  • Why they decided to take a 12% stake in casino giant MGM.
  • Which businesses within the IAC portfolio he is most excited about.
  • How he approaches capital allocation at IAC.
  • Which stage he believes Angi is at in their fixed priced transformation.
  • Why he believes Angi’s “take rate” will increase with time.
  • IAC’s major competitive advantage.
  • Why he believes Care.com is a major opportunity for IAC.

About Joey Levin:

As CEO of IAC, Mr. Levin is responsible for the strategic leadership of IAC and its operating businesses and also serves on IAC’s Board of Directors. Prior to his appointment to CEO of IAC in 2015, Mr. Levin was CEO of IAC’s Search & Applications segment, where he oversaw strategy across IAC’s mobile and desktop software and media businesses. Prior to this, Mr. Levin served as Chief Executive Officer of Mindspark, an IAC subsidiary. Mr. Levin has also served as IAC’s Senior Vice President, M&A and Finance. Prior to IAC, Mr. Levin worked in the Technology M&A group for Credit Suisse First Boston (now Credit Suisse).

Mr. Levin is Chairman of the boards of Match Group, Inc. and Angi Inc. and also serves on the Board of Directors of Turo and MGM Resorts International. He graduated from the Jerome Fisher Program in Management & Technology from the University of Pennsylvania, with a BS in Economics from the Wharton School and a BAS in Engineering from the School of Engineering and Applied Sciences.

 

Click Here to Read the Interview Transcript

Transcript of the Interview With Joey Levin:

[00:00:00]
[silence]

Jonathan: Welcome to The World According to Boyar where we bring top investors, best-selling authors, and business leaders to show you the smartest ways to uncover value in the stock market. I’m your host, Jonathan Boyar. Today’s special guest is Joey Levin. Since 2015 Joey has been CEO of IAC, which owns a collection of largely online businesses such as Angi, Vimeo, online publisher Dotdash, Care.com, as well as the host of other smaller, faster-growing businesses. Joey is also executive chairman of Match Group, which until recently was controlled by IAC, is on the board of casino giant, MGM, where in August of 2020, IAC opportunistically invested $1 billion to acquire a 12% stake in the company.

Over the past five years under Joey’s leadership, IAC shares, if you include spin-outs, have compounded at an annual rate of 60% versus 17% for the S&P 500. Full disclosure, clients of Boyar Asset Management, as well as myself, own shares in IAC, as well as IAC controlled Angi Homeservices. Joey, welcome to the show.

Joey: Thank you. Thanks for having me.

Jonathan: Really excited about the interview. I guess I’ll just delve right in. IAC has a market cap of a little over $20 billion, Match’s market cap is a little below 40 billion. You’re CEO of IAC and executive chair of Match. You’ve accomplished this, and you’re only in your early 40s. How do you achieve this level of success at a relatively young age?

Joey: One step at a time, [00:02:00] I guess. I’ve been very fortunate to be a part of IAC, which is a dynamic business with a dynamic chairman and a philosophy that generally– There’s a lot of components, but probably one of the most central elements is to do things differently, try and create new ground or try and go against whatever is the status quo. Things like specific experience or age are less relevant at IAC than they might be at another place. The thing that matters at IAC is people being passionate about something that they’re working on, working really hard on it, and wanting to get a chance to succeed at it, which is something that we give people.

Jonathan: You mentioned an executive chairman. That’s obviously Barry Diller. What are some of the important things that he’s taught you along the way?

Joey: Always think bigger is probably a big one. You think you’re thinking big at something. You say, “Look at this little business that’s doing a few million dollars of revenue. We can imagine one day if we work a lot of things out, we could do a $100 million in revenue.” Most people would say, “Wow. Well, that would be quite an accomplishment for a little business.” We could say that to Barry, and he’d say, “Well, why bother then? Because there’s a much bigger opportunity. If you’re not going for a bigger opportunity than that, then why bother?” That boundaryless thinking has been really important to creating value at IAC and really important to consistently setting the bar and the ambitions higher.

If you start with small ambitions, [00:04:00] the best you do is achieve those. We’re trying to look bigger, go after bigger markets, bigger opportunities with bigger wins that could work out for IAC. That’s been a pretty important one. Also, the willingness to allow yourself to be challenged, to challenge others, and to be comfortable in that state of constantly challenging and being challenged. I don’t ever have any problem disagreeing with our chairman on anything we want to disagree on, nor certainly does he with me. That gets us along with all of our colleagues.

That I think gets us to better answers because if you just start with one and everyone agrees or doesn’t challenge it, then you don’t explore the nooks and crannies of it in a way that allow you to prepare better for the future or better for thinking about what could go wrong or things like that. That challenging culture is really at the essence of getting to better answers I think. Those are some of the important ones, but there’s a lot.

Jonathan: Speaking of thinking big, in August of 2020, you announced a billion-dollar stake in MGM. It’s now May 2021 and that investment, using share prices, increased by about 128%. You get shown deals every day and you obviously pass on most. I’d love to hear how you sourced the idea and what gave you the confidence to give it the green light.

Joey: MGM in particular was a period where we were hair on fire looking at opportunities [00:06:00] knowing that we had a very short fuse because this was March and April of 2020, no one knew what the future looked like, everyone was scared and our businesses were in fine shape. Some businesses declined meaningfully for a short period, but we knew we had a very strong balance sheet. We knew we had the ability to get to the other sideway. As we do always believe that, ultimately, things come back to normal relative to challenging situations.

We said, “We have a very short window to deploy capital here. Let’s make sure we don’t miss this window.” We were looking at ideas round the clock in that period to try and figure out where to go. One thing we realized early was that buying an entire company in that window was probably impossible. Boards of directors weren’t meeting in that window to say, “How do we sell the company?” The only ones that were, were ones who were truly out of money, truly bankrupt, or at a significant risk of near-term bankruptcy. We looked at some of those but didn’t see ones that fit.

We realized that if we were going to put a lot of capital to work in that window, it would have to be likely through public companies and minority investment public companies. In that context, we looked at ones that didn’t have a control shareholder where we could be a meaningful shareholder and where we thought we could add value in the company. Also, ones that were clear leaders in their category with very clear asset value and enough capital to get to the other side, whether their own capital or capital we could contribute. That actually narrowed the field pretty quickly.

Among those, MGM was an idea that I think originated with somebody from our board, Alex von Fürstenberg, who had been talking to somebody else [00:08:00] about the idea. I think we had talked about it a few times in passing, but that one was something that we started to get excited about. I think he was, if not the catalyst, certainly a meaningful catalyst in it. We were looking at that in the context of all the other things we were looking at and as we do with every idea, we went through this process I was referring, which is taking apart the idea and figuring out all the reasons why it wouldn’t work.

Could they run out of money? Would the world change in some meaningful irreversible way? All these things you go through and then get what they were doing strategically. At each step, we didn’t find a blocker. In fact, we found more exciting opportunities, which was the sum of the parts thing, which was something that we’re familiar with. They had, basically still do, three different public companies under the same umbrella. They also had this really interesting theme that’s been relevant for us, which is an offline to online migration through a joint venture they have called Bet MGM, where they are one of the top three players in the US for digital gaming which is a business that’s a multi-billion dollar market today probably be 10x bigger 5 years from now, somewhere in that neighborhood.

You’ve got a market, you’ve got a leader in a very established category with great cash flow, which is I think some downside protection, then you’ve got a digital upside opportunity which is just a huge growing category with tailwind and a leadership or a potential leadership position there. The combination of those two things, which was the cash flow and downside protection plus the upside optionality, was really all we needed to proceed. You add to that a seasoned, solid, strong management team, they just had a new CEO, but a [00:10:00] person who had been in the business for an eternity and who knew it backwards, forwards, upside down, and sideways.

That was a winning formula for us. That has, so far, worked out very well, very quickly. Probably we’ve joked internally, I’ve joked a little bit dangerously, which is generally to create a billion and a half dollars of value, we’ve had to work for years and years, decades, making mistakes harrowing moments, all the things that you do to get there, which are very rare. This one happened in a few months. We didn’t have to do much work at all. The management team on their own did all of that. We were just, sitting back observing.

Jonathan: How did you come up with $1 billion? I think you had about $4 billion of cash on the balance sheet around that time, roughly. Did it just sound like a nice round number or was there just a capital allocation decision there?

Joey: It was two factors. One, it was a little bit of nice round number of us saying, this is about in the neighborhood of what we’re comfortable with, but the other big factor was we were buying in the public markets. We could buy up to 4.9% quietly and then our goal after that was to buy as much as we possibly could before we had to disclose. I think it ended up being a little bit more than a billion, but a billion and change we put in and that got us to 12%. I think they had 10 days to buy– I can’t remember how it works. You have 5 or 10 days to buy, and we bought as much as we possibly could in that time, which got us to the 12%, which ended up being somewhere in the neighborhood of a billion.

Jonathan: You think MGM is more of an attractive opportunity, even though the valuation has gone up now that you have certainty over COVID vaccines or as much certainty as you can, as it was when you bought it, obviously at a much lower price, [00:12:00] but you had that visibility that the world’s not going to end?

Joey: Yes, absolutely. MGM, I think they said last quarter, they had bought back some of their own stock. That’s, I think, a testament to the answer to your question. Yes is the answer. Two things have worked out probably better than we thought. Number one, the pace of the recovery. We always believed it would recover and we always believed they have enough capital to do that, but the pace of the recovery has been faster. Two, the pace of acceleration at BetMGM in capturing share. Now, there’s still a lot of unknown at BetMGM.

Most significantly, all the businesses in this category are losing an enormous amount of money and continuing to lose an enormous amount of money because it’s very competitive, it’s hard to acquire customers, it’s expensive to acquire customers. I think MGM has some unique advantages that they’ve been successfully leaning into. Nonetheless, it’s expensive. There’s still a lot of unknown as it relates to what happens when all of this spending shakes out or settles down. For now, taking real share in what is a huge and growing category.

Our thesis was that the offline and the online work together, that they both enhance each other. In some categories, online destroys offline. In this category, I think online enhances offline. One of the best examples of that was the state of Michigan, it’s the state where MGM has the best property in the state in Detroit. The MGM was at the beginning, other [00:14:00] states we’ve been late joining, this one was at the beginning. The combination of being there from the get-go with a physical property, and the success that we’ve seen there demonstrated how this whole ecosystem can work together in MGM’s favor.

I think that was really, really compelling. That a little bit validated the thesis, probably more than a little bit validated the thesis and that’s been a positive too. When we look at it overall, I think we feel stronger now than we did going in.

Jonathan: In your letter, right after the stake was announced discussing the deal, you left it pretty open-ended on how you would assist MGM. What have you been doing to help? I know obviously, you’re on the board as well — You obviously have great expertise on internet-related businesses. Are you actively engaging with them?

Joey: Very much. I had a call with them last night. Wherever they need us is the answers to specific examples, we’ve trying to help with talent. We’ve helped with sourcing or recruiting some folks. With some of the technology questions that MGM needs to answer for itself and also through the joint venture where and I see employee has joined the board of the BetMGM joint venture. With ideas and direction and helping with the storytelling, all that we’re trying to be helpful with, but we’re not doing anything really ourselves.

We’re passengers here with a team that’s very capable and doing well, doing it all on their own. It’s just us, we’re here to help when they need us and whenever they call, which they do sometimes, we [00:16:00] chip in.

Jonathan: You’re about to spin off Vimeo I think this week or so. Right now the most valuable piece of IAC after the spin-out will be your stake in Angi, your cash, Dotdash and obviously your MGM stake as well. You have a lot of lesser-known companies under the umbrella. Which are the ones that you’re most excited about that investors really should be paying more attention to?

Joey: I really am excited about all of them. If I want to pick out some that you haven’t mentioned that are fun right now, you take one called Turo. Turo we’re the largest minority shareholder, but own a meaningful stake in the business. I’m on the board along with my colleague Mark Stein. The businesses in a fantastic macro situation right now, which is, they’re in the business of peer-to-peer car sharing. If you think about Airbnb as it relates to hotels or vacation homes. Turo does similar for cars.

As a owner of a car, you can generate income from your car and as somebody who needs a car, you can get the most unique set of car inventory anywhere from Turo, generally at a pretty attractive price too relative to the rest of the market. What’s happening macro is two things that are really helping the business, besides the general situation which is Turo’s a much more engaging experience, much better experience. Once you use Turo instead of a traditional rental car, you really don’t ever want to go back to a traditional rental car. [00:18:00] What’s leading to a lot of discovery right now is, number one, there’s a lot of more, it’s called local mobility.

People are less getting on planes. Airplanes are starting to recover, but still even domestic travel on airplanes is still down, so people are taking cars, they’re taking cars for trips and sometimes they use fun cars for trips. That’s really helping Turo. By the way, even in that context, the rental car companies are based in airports. When there’s less people in airports, we don’t need the airports to operate our cars, they are spread out all over the place. The airports also all want to take a tax on the consumer to use cars in airports. We, fortunately, avoid some of that infrastructure by being a different kind of company.

Long-winded, the two macro things that are happening, one is the local mobility, the second one is that because during this crisis, a lot of the car companies sold off their fleets, and now with the chip shortages, the OEMs can’t make new cars, they can’t replace those fleets. You see these stories about the rental car companies charging insane prices for access to cars because the supply and demand aren’t lining up. We have supply and we can grow our supply. We don’t need to go to the OEMs and buy 1,000 of the same car at a time. We’re finding this all the time. Somebody whose operation is working picks up a second car.

Sometimes they buy a second car, sometimes they get a second car from their sibling or their brother-in-law, or father-in-law, or somebody who’s not using a car or who only use the car part-time. They realize that this is a yielding asset and that all these things are unused and they can do it. The business is seeing fantastic growth right now, which is a lot of fun. I think the way it’s transforming [00:20:00] the categories, something that’s going to be very– It is already and will continue to be something that is very beneficial for consumers. That’s a fun one, but we’re, again, minorities there.

We’re also in this category that I think is fascinating, which is matching temp labor with employers. This category lately has gotten a lot of tangential noise because of what’s happening with stimulus and what’s happening with unemployment benefits, and whether people are going to work or not in these light industrial jobs. What this platform does is it matches workers with employers. That traditionally happened, really still today, almost entirely offline. There were resumes, there were interviews, there were phone calls, there were literally physically going to pick workers up at a certain location and move them to another location.

Now in a small way, because it is still very small, but I think if you fast-forward a few years, then we’ll all be down with software, it’s just a better way of doing it. Knowing whether somebody is available to work, knowing whether somebody is proximate to a work location, knowing whether somebody is commute could be half-hour shorter, knowing whether their commute could be a few dollars cheaper. All these data points, knowing their propensity to show up on time, their ability to operate a certain kind of machine. Most of those things are actually relatively binary.

There’s not a huge amount that’s accomplished in an interview in jobs like that. You’re qualified for the work, you’ve done the work and you’ve either demonstrated or not an ability to show up and show up on time for that work. Software is going to be better at judging that than people are at judging that. That’s the idea with this platform is to match the workers with the work and really help the workers [00:22:00] in that context get better jobs, better-paying jobs that are closer to their home, that are more convenient for whatever they need to accomplish and getting rid of a lot of the hassle that really adds no value in that ecosystem.

We’ve got one business doing that in the light industrial space and we’ve got another business doing components of that, not in the same way, in the healthcare space. I think that it’s a pretty interesting category for us. That’s a fun one.

Jonathan: IAC is known for taking businesses, as you mentioned just now, that are primarily currently conducting most of their business offline and transitioning them to online. You’re doing with those businesses that you just referenced. You did it with Ticketmaster, Expedia, Match Group, Angi. Are there really any major categories left for IAC to enter that haven’t meaningfully transitioned from offline to online?

Joey: I thought for sure we’d be out of gas on this strategy by now or five years ago and there’s still a lot more. There’s the one we were just talking about temp labor. It’s almost entirely offline right now. Even Angi is probably still 10%-ish online, definitely less than 20% online. Healthcare is another huge one. We’re basically nowhere in healthcare other than a bit through this employment business. Healthcare is still significantly offline. Food has only in the last few years moved online. The pandemic was a big catalyst for that, but food just probably over the last three years moved massively online. It was otherwise offline.

Offline to online is a little bit– We still talk about it and it’s still, I think, a great way to look at it, but it’s a little bit old news in the [00:24:00] sense of what does offline to online mean anymore? There are different evolutions of online. Another big theme for us has been in a few of our businesses that we’re in that we’ve considered entering is the first amazing moment in going online, you might remember, but most people probably don’t, is this thing of there’s a list of all the available information online. That was transformative when you could find all the information, whether that was in travel or whether that was in ticketing or whether that was just in search, with Google offering you 10 billion results on any query.

Now, what’s happening is, just having the information is not– that’s obviously table stakes. In fact, that can get annoying. What you really want is the curation. You really want to go down to one answer or a couple answers and that curation is a whole other evolution in these businesses where you see disruption from the person providing the lists or the entity providing the list, the entity providing the match and, ultimately, the entity providing the transaction. In all of our businesses, probably Angi most pronounced is, we’re trying to enable that transaction online. That’s another evolution.

Jonathan: As I mentioned earlier and as well-known, you’re about to spin off a Vimeo. You have about $3 billion in cash. Do you have a preference of how you’re going to use it? Do you anticipate any of your current businesses needing a lot of cash, or you think it’s going to be spent on acquisitions? How do you see your use of capital going forward?

Joey: It’s probably not likely a huge amount of capital in just P&L losses. I do think one thing we have been doing with Angi and probably will continue to do is reinvest profits in Angi, but probably not. [00:26:00] Not likely going below zero in those businesses to reinvest, at least not a significant amount of cash into those businesses. We’ll invest into businesses and reinvest P&L, but I wouldn’t say materially more that way. That really leaves acquisitions or new acquisitions, acquisitions in our existing categories, or acquisitions of our own business, which is another word for share repurchases.

We’ve gone through periods where there was after the 2008 spinoffs where we span off four businesses in that period. I think we bought back over a few years basically half our shares. That’s one option. Another option is getting into new businesses and buying more businesses. I think both are possibilities and both are something that we analyze pretty regularly and we’ll continue to analyze regularly.

Jonathan: I guess when Anjali, who is currently leading Vimeo, came to you when it was a much smaller company with a new vision for it, you ended up plowing a lot of money into growing it to where it is today. What gave you the confidence to aggressively invest in that business?

Joey: The big thing that Anjali did was, she convinced us that it was– she really made the case for it being a much larger market than we originally thought. With the tools business, the services business, software as a service business had been Vimeo’s business for a very long time. We thought it was a small cottage business and we needed a really a big ambitious business. That’s what led us into the entertainment business, building our own streaming service. We knew that it was a big market, there were some big players in that market, eventually [00:28:00] ended up being basically every player in that market, but there were some big opportunities there.

What Anjali showed was that, actually, the market for people that needed those services were not just the software as a service video software as a service, were not only the most highly talented filmmakers, which was the bulk of Vimeo’s paying user base at one point, it was really anyone who could use video in their business. When we realized that, it became worthy of significantly more investment and significantly more acceleration. That’s what led to certainly the next $300 million of capital going into that business under her leadership.

Jonathan: For every Vimeo grand slam success, I imagine there has to be a lot of failures. How do you know when it’s right to walk away from an investment? You walked away from the streaming part of it and with the benefit of hindsight that was a great move because you have some deep-pocketed players. How do you know when to walk away?

Joey: The streaming business never really made it out of the crib or the womb or something if we keep going with the analogy. That was relatively easy. We’re investing in things constantly. When you see some sign of traction, you keep going, and when you see no traction, you pull back. You have to think about it differently. The way we think about it is, it certainly ties to the scale of the business. We have a big business, take Ask.com for example. We bought Ask Jeeves at some point. We bought that business for a billion and nine and at that time it was doing about 75 million EBITDA. [00:30:00] There was no question that we lost the search battle.

We lost that probably not that far after we bought the business, we lost to Google. Google was certainly winning when we bought it. Google was probably winning to a greater degree than we even realized when we bought it. We lost that. Instead of pulling out of Ask because there’s not really an easy way for us to do that as the owner of the asset, there weren’t a lot of people interested in buying it at that point and there wasn’t really a viable path to selling it. For us, it was, “Well, we have to make this business work in a different way, so we have to reinvent.”

We don’t usually have the option. For example, as a passive investor, you could buy something under a thesis, the thesis doesn’t work out, you sell it the next day. That’s not available for us. We may buy something, own something, we were trying and it’s not working, well, then we try something else and then we try something else and then we try something else until we find something that works. We did that with About.com, we did that with Ask Jeeves, we did that with basically every single one of our businesses. We’ve disrupted ourselves and tried something new rather than pulling out completely.

We don’t usually have the option available to pull out completely. We can pull out of a strategy completely and we could do that frequently, and we can pull out of something small, but if it exists as a business and it had a reason to exist as a business, then we ought to be able to pivot it and change and adapt and explore new alternatives until we find the thing that’s working. That’s on us to do that. We don’t really give up or cut things loose in that context.

Jonathan: Just want to focus a little bit on Angi, where you own roughly 85% of the company, [00:32:00] You’re making a big bet on fixed price services. It’s really complicated trying to figure out how to charge for jobs, sight unseen across different markets. How close are you to getting this right in terms of execution? How much further do you need to go? It’s really hard.

Joey: It is really hard. I think we’re close in the sense that we’ve proven it in certain parts of the market and far in the sense that we haven’t proven it in other parts of the market yet. You always learn more things good and bad as you scale further. You have certain assumptions on your ability to automate things. Sometimes you find you can do more things that you didn’t realize you could automate, and sometimes you find you can do less things that you were counting on to automate. We’ll go through those realizations over time, but if you focus just on the homeowner and the homeowner experience.

We’ve determined with certainty that for the vast majority of homeowners, when they get the full experience, they’re going to be happier. Full experience means you go online, you find the service you want, you pay for the service you want, that service is completed, and you’re done. You skipped the step where you have to negotiate, you skipped the step where you have to evaluate different providers for the service, and you skipped the step where you have to chase the person down to show up or finish the job or all that stuff. That is really a magical experience.

When you know you can deliver a magical experience relative to the incumbent, then everything else from there is just engineering to optimize that magical experience. Once you’ve seen the magical experience and delivered the magical experience, then you know the direction you’re headed with very high confidence, and you know there’s [00:34:00] no turning back from that direction. All you have to do at that point, I say all you have to do like it’s easy, it’s very hard, but all you have to do at that point is optimize. That is the phase that we’re in right now.

We talked about this how we change frequency. If you’re coming in and doing a fixed price job, what we call now Angi Services, if your first experience is an Angi Services job that gets fulfilled, your frequency, with a couple of other things built into there, change your frequency by 4x. That is transformational. I allegorize that to a bunch of other experience that we’ve admired, like Amazon Prime. When I first signed up for Amazon Prime many years ago, I remember saying, “Well, we get a package every now and then, and we like Amazon. I feel like I know that it’s $10 to ship something, so if I ship a few things, maybe one thing a month, it’s going to work out that we’ll be close enough with this two-day shipping.”

What happened is, we went from that to, we have a package from Amazon at our house four times a week, probably at least. The transformation was that you could rely on it. Once you can rely on something, then your behavior changes meaningfully. I believe that that same opportunity is available within home services. Right now, the average person does six to eight jobs and we get a little under two of them. I think the right number of jobs could be a multiple of that. Our portion of those could be also a multiple of what it is right now00:35:48]. That’s the behavior that we’re looking for.

We’re starting to see some of the early signs of that. That leaves me pretty optimistic about it. That’s why we’re putting in the [00:36:00] level of capital that we’re putting. I think that the faster we go, the better. Meaning a lot of these gains, a lot of these marketplaces are about building up liquidity on both sides of the marketplace. You got to keep the service professionals engaged and happy, and you got to keep the homeowners engaged and happy. The best way to do that is to keep more volume moving through the system. That’s what we’re trying to do right now.

Jonathan: Right now for Angi, your take rate or the amount Angi receives from a job, I think it’s a little less than 10% for the fixed price services. If you look at a company like Uber, they get roughly 20% or so. Is achieving a higher take rate over time realistic?

Joey: I’m not sure you’re right on your estimated take rate on the fixed price services. It’s going to be higher than that. The answer on take rate overall is yes, I do think it goes up over time because I do think we add incremental value over time to the service professional. We can actually start to make their operation more efficient and save them real costs and share in the savings with the service profession. You may not need a receptionist or a calendar person to be making or booking the calls, or a salesperson to be going out and doing the sales.

You could be more efficient with just people doing the work, and by the way, people doing the work in a finite geographic space, which saves on travel time and things like that, optimizing the schedule, optimizing the payments, not having to do invoice and collections, and things like that. You take a lot of those nuisances out of the equation for the service professional, you can start to justify a higher take rate because everyone’s doing better. The loss there [00:38:00] is the inefficiency and the unpleasant part for both sides. That added happiness is generally going to be added opportunity to share in the economics.

Jonathan: IAC is famous for not holding things forever. You let them go and break free. I’ve always thought that a major home improvement company like Lowe’s, which you do have a partnership with Angi, should own part of. I think it makes sense for both sides. In your mind, does it make sense for Angi to be a standalone, or would it be better to partner with a larger organization, or you’re just trying to achieve what you’re trying to achieve?

Joey: I always default to we’re on our own. We’re always open to things. If somebody calls and says something that makes sense, we certainly listen, but our mentality always is and always has to be we’re on our own forever. You’re right that we’ve spun off a lot of businesses and plan to spin off a lot more businesses. Our philosophy, when we get into something is we own it forever. Spinning it off doesn’t mean we don’t own it anymore. It just means our shareholders own it directly. Same owners before the spin as the owners after the spin.

Now, in reality, of course, some people trade in and some people trade out, so it’s not going to be all the same owners. Our thought is, when we buy something, we buy something to own it forever, we buy something for our shareholders to be able to own it forever, and we do that really efficiently. That forever mindset has been a massive competitive advantage for us, in that, very few other people operate with that mentality. [00:40:00]

Jonathan: No, absolutely. Short-termism is rampant. I know we’re running out of time. I just wanted to touch briefly on Care.com. You bought it not too long ago. Before you bought it, the site had some major safety issues which was profiled in a Wall Street Journal story, which I guess gave you the opportunity to purchase the company. They had a lot of hard problems that they needed to address. What gave you the confidence that you could right that ship?

Joey: A similar situation, in that, we looked at the Care’s market position, which they were, I don’t know, 30x the next competitor on audience. They were the default brand in the category, based on the genericness of their name, but also the brand equity that they had built in that area. Is a very large category, which we felt and we’ve been at least right on this part is that the category has a natural tailwind to it, not just offline to online migration, but also more of society feeling a responsibility to help in care, childcare, and senior care.

We’re seeing this on the enterprise side with the growth in the enterprise business at care, and we’re seeing this in government in the discussion in some of the infrastructure bills that are coming out around care. We’re seeing the necessity of this in what’s happened to the workforce, the makeup of the workforce over the course of the pandemic, and particularly women in the workforce. Now, they’ve borne much more of the brunt of childcare than men in the workforce. People are realizing, enterprises are realizing, government’s realizing this is a problem that we have to solve.

We looked [00:42:00] at that combination of things and said, “This is a really attractive place to be.” Generally, our view is that mistakes are fixable, the company made some mistakes in the past, those could be fixed. I don’t think that they fundamentally undermined the principle of what could be accomplished in that category. I think they just made some mistakes and we had the ability to work on fixing some of those. I think we made progress on– It’s impossible to be perfect, but I think we’ve made progress on a lot of those. We’re seeing that come through in the numbers a bit.

Jonathan: Has the pandemic changed the company’s prospects in your opinion?

Joey: Yes, it has. In a business like Vimeo, that came through in real-time where growth rates tripled, or whatever, overnight. In care, it’s perhaps an even bigger impact, but slower because it awakened the world to our responsibilities in helping with care. Now people are seeing that that needs to now translate into the business and people engaging with the right product to solve these problems. The spotlight on carrying the responsibilities around care is there in a way that would not have otherwise come. That’s going to, I think, be really important to the growth of that business.

Jonathan: Joey, you’ve been more than generous with your time. I want to thank you for being on the show and telling us more about your fascinating career as well as your vision for IAC and Angi in the future. We look forward to watching IAC’s and Angi’s progress. Again, thanks for being on.

Joey: Well, it’s my pleasure. I’m looking forward to all that too. I hope to see you again.

 

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