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Dotdash has the answers for media investors

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You may have never heard of digital media company Dotdash, but the owner IAC / InterActiveCorp IAC 0.97%

you are probably making money anyway.

Dotdash describes three types of online content: fun to know, like what your friends are doing on social media; want to know, including current events and sports; and need to know, for example if your cough could be something more serious.

Dotdash specializes in the third. Its 14 brands include Investopedia, The Spruce, Brides and Simply Recipes. Have you ever wondered what exactly is ‘adjusted’ about ‘adjusted EBITDA’ or how not to reduce your laundry? Creative wedding venues? How to make lasagna for 10 people? If you’ve had a question online in the past few years, there’s a good chance you’ve found your answer through one of Dotdash’s brands.

Dotdash, formerly known as About.com, has a history dating back to the 1990s. It was acquired by IAC almost 10 years ago. Few people know the company by name, even though they recognize its individual brands. That may soon change. Dotdash is still small, accounting for just 7% of IAC’s total revenue last year. But with the recently completed Vimeo spin-off, Dotdash is now the fastest growing and most valued wholly owned asset remaining under the IAC umbrella. JPMorgan analyst Cory Carpenter estimated last month that excluding IAC’s minority stake in MGM, its controlling stake in Angi Inc.

and in cash, Dotdash now constitutes about 55% of its value.

Competitor BuzzFeed Inc.’s plans for a public listing have turned heads in digital media after a few difficult years, putting Dotdash’s recent performance in a positive light. Last month, BuzzFeed, whose portfolio includes brands such as HuffPost and Tasty in addition to its list-heavy namesake brand, said it would go public through a merger with a blank check company. The deal, which includes a $ 300 million acquisition of youth entertainment and media company Complex Networks, is valued at $ 1.5 billion.

Dotdash generates less revenue than BuzzFeed, but it seems to be doing more. According to one investor, BuzzFeed and Complex managed a combined adjusted earnings before interest, taxes, depreciation and amortization margin of just 4% last year. This compares to Dotdash’s nearly 31% margin on the same basis. Strong margins, coupled with strong first-half revenue growth, have analysts at six different banks valuing Dotdash at just over $ 1.9 billion on average, a bonus for BuzzFeed despite its small size.

In addition, it is possible that Apple‘s

Recent changes to iOS privacy could increase Dotdash’s value proposition for advertisers if they choose to branch out from major social media platforms, which will see their ability to track user activity outside of their platforms. decrease in the short term. Dotdash, which makes money through a combination of advertising and “performance marketing” or commerce, claims that users access its branded platforms with intent to buy, just like they do on Pinterest ..

This means the business doesn’t need a lot of third-party data to show its value to advertisers. When users are looking for something like “best diet for early-onset diabetes” or “resort wear for summer in Hawaii,” Dotdash is armed with plenty of information to help its advertisers understand how and when to best target these users. .

Dotdash’s overall business has been relatively resilient throughout the pandemic as users have looked to the internet more than ever for urgent questions answered with many businesses shutting down in person. But it saw a year-over-year decline in display advertising in the spring and early summer of 2020. This deceleration has made comparisons particularly easy so far this year, with Dotdash increasing the number of Total business averaged over 56% for the first half of 2021. Even as revenue growth slows, analysts expect strong margins for the foreseeable future.

Dotdash might not generate the “buzz” of its flashy media competitors, but investors should start asking a lot more questions.

Write to Laura Forman at [email protected]

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