People Incorporated (IAC) Earnings Call Transcript & Summary

Neil, thanks for being here. We're really excited to have Neil Vogel, CEO of Dotdash, here with us today. If you need my disclosures, please reach out to corporate access. They can provide you with those. And for anyone who would like to ask questions, I believe you can submit the questions through the window you're looking at, and then it will hit my e-mail. Otherwise, you can just e-mail me directly at nicholas.jones@citi.com. But Neil, thanks for being here today.

Thanks for having me.

Maybe just to kick things off for people who are a bit newer to the Dotdash story, can you just give us a brief overview of kind of the publishing strategy for Dotdash today and how it's evolved?

Oh, sure. I'll give you the one point. Now if it's too basic or remedial, tell me, and I can give you a different version. But basically, if you look at the Internet, there are 3 types of content that publishers or otherwise put forth. And we call it like nice to know, want to know and need to know. Nice to know sort of like social content, whatever, like Facebook or Twitter or TikTok. Want to know is like news, sports, a wrap-up of why Jalen Hurts was so awesome in the Eagles game yesterday, but we don't do that either. What we really do is need to know content, which is content that helps people, helps people -- it helps them in their lives, helps them decide whether they need a Roth IRA or a regular IRA. It helps them decide what kind of recipe to make their vegan blueberry pie with. It helps them decide how to deal with their diabetes and to learn things, diagnose things, fix things. And this is very valuable content. And it is a very, very, very large use case on the Internet, and that is exclusively what we focus on, for the most part. But the majority -- the vast majority of what we do is that. And when that is the type of content you do, you end up with an incredibly valuable user. In other words, you get users and viewers or whatever you want to call them, that are at a point of taking action. It can be a small action like what I'm cooking dinner or it can be a more important action, like what am I doing with my hair tonight for a date, which is actually quite an important thing to do, or something even more like how do I deal with a health condition. And when you have an intent-driven audience that trusts you, 2 things happen. One, you build these really deep relationships with people that like you, who understand you. And two, you're learning an awful lot about people without cookies and without needing information to help advertisers reach them. And that's been very effective for us. The second thing that happens is when people are trying to solve problems and do things, it turns out, they want to buy things and sign up for goods and services. And when they trust you and when you present recommendations in an editorial way that is unimpeachable and incredibly honest, they trust you for that. And you can help them sign up for goods and services, which in turn gets you paid. And we started this business from the sort of like the ashes of a very old business called About.com 4 or 5 years ago. We launched a bunch of our own brands, and we went out. And once we figured out the model in a very IAC-type model, we started acquiring brands. So now we've got 13 different brands, 14 different brands across 20 or 25 different domains. We're growing like crazy. We've had a really interesting run because what we do is super simple. We help people, and we help people by providing them with the very best content for what they need, on the fastest possible site you can use with fewer ads any of our competitors have. And one of the things we talk about sometimes, but not enough, is when we decided -- when we took a look at the Internet 4 or 5 years ago, we thought everything was wrong with it, a lot of what other people thought was right with it. We thought viral content was worthless. We thought when people were playing with ad mode and other things, it's just like not good for users. So we just took a new approach. We said we're going to make fast, beautiful sites that help people. It's not 19 ways to know you grew up in Chicago. It's really, really important stuff that helps you get through your daily life. We're going to do it on fast sites. We're not going to engage you with ads. We're never going to do a pop-up. We're never going to do a pre-roll. We're never doing rolling stuff. And it turns out it works. Users like that, algorithms like that, social channels like that, and it's been -- we've been on a really nice run.

That was great. That was a great overview. Maybe just touching on the fast load times and low ad load, I mean, can you maybe expand on that strategy a little bit? I mean can -- is kind of the strategy held? Are you finding that you could potentially add more ad load? Or can you get faster? Any additional color there?

Yes, I don't think -- it's funny, we don't look at monetizing through ad load because that's sort of like -- that's like a fool's gold approach to the Internet. What happens when you have too many ads is users don't stay for nearly as long. They don't come back nearly as much. And those ads end up being less valuable because there's too many of them, and people just don't interact with them. There's super simple math. Like we believe, and I don't know if this is true or not, but we believe there's like a finite number of like clicks or interactions in any human being. And if you give them 20 options versus if you give them 5 options, the ones with 5 options are going to be more valuable, and they are. So if you have 2 ads on a page as opposed to 6 ads on a page, the 2 will perform much better. Mixed that with our traffic is not browsing. People are not hanging out. Like when you're trying to understand how to deal with a friend of yours leukemia diagnosis, that is not -- you're not looking at Kim Kardashian pictures. And when you're trying to decide like how to plan your wedding after not being able to get married for a year, like that is a very engaged experience. So people engage with our ads. It allows us to target. Our ads are extremely high value, like I know we do incredibly well in the programmatic markets relative to other publishers. We do really well in the premium markets relative to other publishers. I mean the main problem is a lot of our brands aren't like old and seasoned enough yet. So we still like lose deals to people that you've heard of that are 100 years old, like Good Housekeeping, Better Homes and Gardens. The Spruce is much bigger than either one of them, but we lose deals to them because people are still learning what The Spruce is. But the ad strategy is something that like it got us here, and there's no reason to stop. People really like it. The ads perform much better than other publishers, and that's a bit of our secret formula. Not sure -- I noticed another thing, like if you add another ad, it may not make you any money because it may make the value of the ads you currently have less. So that's not really a lever that we pull. It's sort of like a rule of the road for us, and it works.

Got it. Got it. Maybe switching gears a little bit to the content strategy. How has that evolved over time? What's working in the current market given everyone's kind of at home and sticking it -- they're stuck on their phones or computers? Is there any mix shift in content spend between kind of the new and refreshing existing?

Yes, I think it's -- I have talked about this before, the -- it's always a balance for us between new content and refreshing content, right? Like a very simple example is we don't need a new blueberry pie recipe. We have, frankly, we have enough of them, but we need to make it better. We need to add nutrition information when we can. We need to add a vegan option when we can. We need to add step-by-step photos when we can. We need to add a GIF that shows you how to make the crust when we can. So we spend an awful lot of money constantly upgrading our winners and improving our losers. And there's an interesting thing that we say, there's a few other publishers that look at life this way also that not all of our content makes us money, but all of our content supports the content that makes us money. So for us to be successful at recipes, we have to have every permutation of that blueberry recipe, but only 1 or 2 of them may be popular. But to get the trust and to get the user loyalty, you have to have all of them. So we go very wide. We're probably more than half of our dollars are spent on library versus new content. But that's not true in every domain. In some of our younger domains, you spend way more money in new content than old content. It depends on the state of the library. So if you look at Simply Recipes, which is a site we acquired, which is a fairly big library -- or let me say, a fairly comprehensive library, it may be less; where a Byrdie, which is a younger site, which is doing great, we're probably doing a whole lot more new content. And beauty also moves a lot faster than sort of like cooking bits. So again, we always look at content and say, we need to be able to make the best thing on the Internet on this topic. If we can't, we need a path to do that. And if we don't see a path to do that, we can't compete with this content. And that's generally what we're doing. And look, it's expensive, and our content is expensive. And we never look at -- we're not like other publishers who will come to you and say, well, we're so good at making content. It costs $0.05 every time we write something. We don't do that. we're much more concerned with -- we take a look at an area of content or a corpus of content and say, well, is this something we want to do? Is this an area we want to be in? And if it is, you then have to do it all. And that's generally how we have been approaching content.

Is there -- kind of like ad rates have been ticking up, and everybody has been focused on digital advertising throughout COVID. Is the same happening to cost of content? Is it -- are you finding it to be more expensive to create similar content than in pre-COVID environment?

I think the content is relatively similar. I think there was a period during COVID where it was just -- it wasn't so much a cost savings. It just got really hard to make things. I mean you weren't shooting video, whatever, in February of last year. I mean maybe you were in like Texas or something, but you generally weren't shooting video. So it got harder to make, not necessarily more expensive, which I guess translates to more expensive, but we just made less of it. So we had some lighter costs last year that we'll have this year. But we are like heavily investing to catch up. I'm not sure on a unit cost basis, things cost anymore. Things for us have always been fairly expensive, but it's definitely in the range of acceptable to us. The one thing you have seen -- we have seen coming out of COVID is -- and you've heard this, this is like almost a cliche thing to say. COVID was like 5 years of Internet growth in 1 year. But coming out the other side of COVID, now the market is weird. Like it's very strange. People's behavior is adjusting. They're -- they can -- they're outside more. They don't -- like no one's -- last year, everybody in America was baking bread. Nobody is baking brand anymore because other things to do than bake bread. But that's okay because we're so broad and diverse. We're just seeing all kinds of new patterns as schools start in person again, and so you see like how people using it during the day is different. And people are slowly trickling back to an office or being less remote or going out more or they can go to a market now and they don't have to buy everything online like what's happening. So what we're seeing is like, I guess, like a rotation might be the word, I'm not sure what the right word is. But you're seeing a shift towards -- we're somewhere between COVID and normal behavior. We're kind of like in between, which leads to -- it's just like -- it's just strange.

Yes. I know that makes a lot of sense. Maybe a good segue to this question around the kind of major brand buckets or verticals. It's kind of been health, finance, lifestyle has been kind of a mix of Dotdash properties. How do you think about these? And is there room to expand in others? Or is there a reason that kind of these are the main buckets because it kind of -- are the categories to create this pool of content? How do you think about that?

We've always said, and we've talked about it before, we are very interested in content verticals and that where quality content wins and matters. We're helping people make decisions, and they need to be commercially viable verticals for us to invest in at the level that we invest. And as you said, we are health and we are finance. We're very deep in finance. We're very deep in health. Health is our Verywell brands, primarily. And finance is Investopedia and a millennial site or sort of millennial site called The Balance, which is they're both doing fairly well. And then in lifestyle, we are -- which we've been really focused on, that's sort of like home, food, beauty and style, tech, travel, we lump it. As we've said before, we're roughly 1/3, 1/3, 1/3 each one, may be a teeny bit bigger in some of the lifestyle stuff now just because of some of the acquisitions we made and some of the like legitimate growth we've had there. And a bit of that was depressed last year, but the traffic was good during COVID, but the business was not. Now the business is sort of like recovering, like Brides is our runaway hit of the year because people -- we got like 2.5 years of weddings happening in 1 year. So that's been fairly fun, and everybody wants to get married in the barn, as I've said. So that requires a lot of like online research, which has been great. But we like these verticals. And the interesting thing, if you look at any one of our brands, be it Verywell or The Spruce or Lifewire in tech or if you add all of our food brands up, they're still like 1/3 of the size of the market leader, like maybe half the size of the market leader when you put it together. So each one of our verticals, we're not #1 in scale in any space in which we compete. And usually, we're like fairly distant. And even if it looks like we're close in terms of scale, like in finance, we're not there yet in the categories where we want to be. Like we're not winning in finance yet on credit card content. And we're not winning on a lot of this really valuable stuff that like we're coming, like we're going to do it. Like we're working our a**** off, excuse my language, to win on these things using our formula and our model. And look, as we've proven in health, and I think Verywell, we launched 5 years ago from almost from like a standing start out of whatever health content we had on About .com, we're now, depending on how you measure it, we're now applauded the third biggest health site on the Internet, the third biggest series of health properties on the Internet, addressing consumers, like 30 million people a month using this thing. Like we went into the hardest category online, and we said we're just going to do it better and we're going to do it in our own voice, and we're going to win. And we have been doing that. And we're methodically doing that in all of these verticals in which we're competing. There's anything in some of the lifestyle categories where the competition is fierce, obviously, but the rigor with which they make content isn't what we're used to in finance and health, that gives us a bit of an advantage because we can do some things that other people just historically haven't been set out to do, and we can do it. Like in beauty, where you talk about makeup or something in the store, we can have that content medically reviewed by a doctor to make sure that, oh, what we're saying about that thing is actually -- what we're saying about that anti-aging cream is actually correct or incorrect based on what this doctor is saying. So it gives us a real advantage. But it's a way of saying that we've got tons of organic growth in each of our verticals. If you see the acquisitions we've made to date, we bought Byrdie and Brides as a way of getting into the sort of like beauty business, call it the beauty and style business, and we love that business. I would say we're definitely looking for more things there. We started in food with part of The Spruce brand, and we bought a bunch of stuff, Liquor.com and Simply Recipes and Serious Eats. And we really like green and sustainability, so we bought TreeHugger. You can see like we either are doing add-ons or we're buying small properties to get into new verticals. We love the verticals. I think you're much more likely to see us buy things that add on to verticals than totally new things. But we'll be opportunistic, and it's part of like the IAC magic. IAC is pretty good at that.

Great. No, that's really helpful. Maybe switching to exiting COVID. You had mentioned everybody was making bread. Now they're not, but now everybody is doing research on weddings because a bunch of people have been waiting to kind of host the weddings they want. So what kind of trends are you seeing? Is there -- do you feel like you have a good portfolio that can kind of capture, depends on swinging the other way, as people maybe want to get out more and worry about makeup or like a party or things like that?

Yes, I think we were doing great before COVID. And then we did surprisingly well during COVID. I think everybody did well. The market was a bit roaring, and costs were down. But I think what we have -- and we have really large corpuses of content in all of these verticals. It kind of like works when it rains and it works when it's sunny. It just depends. So if our bread-making content is down, like our barbecuing and grilling content is going to go way up. And you see that repeatedly in every one of our verticals. I think the thing that's interesting is we're much more affected by like overall traffic levels than anything else. I mean I think one of the ways when we started this business and set out to do this, we knew we didn't want to just be a health site or just be a finance site or just be a travel site. We knew diversity would help us. We knew it would help us learn audiences, but we knew it would help us when things were not awesome. And in COVID, when our travel business lost 80% of its traffic in like -- and basically all its revenue, it didn't matter because we picked up the growth so much in food and finance, which was rocking through COVID because uncertainty is a really good time to be in finance media. And we've seen that happen repeatedly in any market condition. And like who knows what's going to happen next? Like nobody can predict anything. But we love our portfolio. I think the diversity of industry in which we're in has been helpful. And the second thing is the diversity of how we make money is really important also. And we don't look like a lot of other publishers this way, where north of 30% of our revenue is transactionally driven. We help someone buy a blender. We help someone sign up for online therapy. We do something where we get paid a commission or sign-up fee or something to help people make decisions. Now we do it with absolute editorial integrity, but that gives us a lot of protection against the strange market. So during COVID, when the ad market, particularly in the lifestyle brands, just out crushed, our commerce and transactional business grew. We were growing nearly 100% on some quarters, like it was crazy. But actually, it wasn't crazy. It was sort of by design. And by being diversified across industries and being diversified across revenue sources, right, we can do premium ad sales, so we can do programmatic ad sales. We can do all the stuff in between like PMPs. We can do simple e-commerce. We can do complicated lead generation stuff. Like we can do all of these things that we think we're pretty well set up for varying market conditions. I mean we're obviously susceptible to overall -- the wins overall. But we like our chances. Like you look at a lot of other publishers, they got really beat up during COVID. We did not because we -- there aren't many people that do what we do, compete in the really hard technical categories of consumer publishing like health and finance. And some of the like -- I call it softer, but I don't mean softer, but some of the more lifestyle-ly categories, like food and beauty and travel and sort of like Texas in between, we're pretty good at both of those things, which is a very different workflow, and we're very proud of that, and it's helped us a lot.

So given how nimble the content and the monetization is, how do you expect the ad trend to be allocated from here? The focus -- performance marketing has become a very hot topic throughout COVID. Do you see it being geared more towards video, given video...

Yes, well, we're doing a bunch of video. I think what you see, and if you just like sit in the seat of the CMO, when things are hard, you want to spend your money a lot closer to results. And when things are better, you're much more willing to do like big fancy branding things. And we're set up to do both, and we love both. Look, to be very frank and honest, we are better at the stuff that requires performance than we are at getting winning the huge branding things. It's because a lot of our brands are newer. What some of the acquisitions have helped us do, and we're kind of there in food now, is we can get into every conversation with our scale and with our brands. But we're still winning on performance and then keeping people because they decide they like the brands. I mean we're increasingly getting the big branding deals, but we're not there yet. It's one of the great opportunities of our business to get our brands stronger, to get to the place where we can win these big branding deals. I think I've said this to you before, if you're in health and you're in pharma and you're launching a new, whatever, new prescription product, a new D2C product, nobody ever got fired for giving WebMD or Healthline all their money. If you gave all of your money to Verywell, we're not sure that that's going to totally -- like to be honest, we're not there yet. But we're on the plan. Now we've got to be the guy that wins that plan. And we're getting dollars, but we now will be the guy that gets the primary dollars. And that's what we're pointing towards, and I like our chances.

Yes, yes. No, that makes sense. Well, then maybe beyond kind of stronger performance marketing, how do you think about ad rates from here? I think ad rates have been increasing. Do marketers start to really zero in on roll ads then start to moderate kind of the spend at some point? How do you feel about ad rates today exiting COVID?

No, I think when people see stats that ad rates are increasing, the only stats that you should ever believe or surveys of programmatic rates because publishers never -- it's also impossible to tell what premium CPMs are, like no one is telling you the truth and like it's all blended up. But if you look at programmatic markets, rates are definitely up. And I think rates are up twofold. One, well, so there is -- one is there's more demand in programmatic markets. Two, the economy for these sorts of ads, the people who buy programmatically are much more lifestyle people than like finance or health or other like high-value things for the most part. So you're seeing -- a little of it is supply and demand. And the third and the last little part of that is because of the uncertainty in the world, ad buys are getting later, closer towards market because people don't really know what's going on. We don't know anything. So a lot of that money will move programmatically because that's easy to get into and get out of. The other thing we're seeing, which is just like anecdotal, and some of the stuff that we're seeing, you saw at the beginning of COVID, where you have advertisers that want to spend money, but they don't have the right creative now because they had a big campaign for fall, and it was a little bit of like the get-out-of-jail, back-to-school campaign. And all of a sudden, it doesn't feel like we're going to jump back to school. So the tone is wrong of some of the things. So those -- there's just like weird issues in the market bouncing around. But you're going to see programmatic rates go up. But the short story is it's a lot of just -- I mean it's obviously wider in scope, supply and demand, but I can explain to you why the demand is increasing while the sort of like the supply is -- supply is probably increasing a little bit, too, because things are moving over from premium dollars.

Great. Great. Well, let's switch gears a little bit to Dotdash's user acquisition strategy. I know typically, Dotdash does not pay for traffic. So can you talk about the trends you're seeing around unique visitors? And has there been any changes in how you approach user acquisition?

Not really. I mean it's -- we are trying to build brand and loyal audience. And the way you build brand and loyal audiences, you give people an incredible experience. And we've talked a lot about in the past, if you talk to the New York Times, their objective is to get someone to stay there as long as they can and engage and read all the stuff. That's not our objective at all. The objective is if somebody comes, we want to give them the answer or the help or the assistance or the confidence that they need to go about and do their thing. And if that visit is 10 seconds, great. If that visit -- but it's usually more like, if it's a lot longer than that, which it generally is, like that's great, too. And in terms of user acquisition, we haven't really seen a significant change in how we do things. We're not, clearly, we're not sexy. We're just really good at executing this. We're really good at making great content. We're really good to give people great user experiences. I think what you've seen a lot from us is we are learning how to play and put our brands in other environments. Our social footprints have grown massively. We don't need them on a P&L basis to help us -- to help with revenue. We need it for branding. So that's been really helpful. But our acquisition strategy is the same. We also get a lot of traffic from Google, but we also get a lot of traffic from people in places that care about good content. Like we get a lot of traffic from Pinterest. We get a lot of traffic from our own e-mails. We get a lot of traffic from Footwork. We get traffic from Apple News. We get traffic from all these places where they want to -- if there is an algorithm out there that wants to help you and wants to send you to where content matters, we're going to do great with them. We'll do a little -- we do okay with Facebook, don't really care. But like Twitter, we couldn't care less. It's not like Facebook. We generally don't care. It's not for all. That's not what we do. Like that content is not valuable, not where we play ball. It's not -- you get no intent signals from it. You don't know who's reading it. It's just not interesting to us.