With his Match Group on course to become its own company, billionaire Barry Diller is turning his attention to video-streaming site Vimeo LLC to step up growth for his holding firm, IAC/InterActiveCorp. (IACI:US)
While Vimeo is still a fraction of the size of IAC’s two other major units, the video site’s chief executive officer, Kerry Trainor, is now one of the business heads reporting directly to Chairman Diller. IAC announced the reorganization yesterday.
Unlike competitors such as Google Inc.’s YouTube, Vimeo makes money by charging for subscriptions to upload high-quality video, which customers can then sell or rent to viewers. Revenue climbed 60 percent in the 12 months through September to $40 million, making Vimeo an emerging star within a company that grooms its internal units for potential spinoffs.
“They view Vimeo as one of the best assets of the company,” said John Blackledge, a New York-based analyst at Cowen Group Inc. “They are trying to raise the profile, hence aligning direct reporting to Barry.”
After yesterday’s reorganization, Trainor joins the chairman of Match Group and the CEO of IAC’s search and advertising unit in reporting to Diller. Shares of New York-based IAC surged (IACI:US) after the announcement on speculation that Match, the operator of dating sites Match.com and OkCupid, is being primed for a spinoff. The search unit, meanwhile, has entered a rocky period as it adjusts to changes in the algorithms Google uses to point users to sites.
That leaves Vimeo, which has more than 400,000 paying subscribers and no advertising revenue.
“It certainly reflects that Vimeo continues to grow and become more of a part of IAC’s story,” Trainor said of his new prominence in the company’s hierarchy.
Vimeo got its start in 2004 by a group of filmmakers who needed a place to share their professional and personal videos. At the time, Vimeo was a project owned by Connected Ventures LLC, which also oversaw comedy site CollegeHumor.com. Then in 2006, IAC acquired (IACI:US) 51 percent of its parent, bringing Vimeo into the ranks of Diller’s holding company.
To help boost sales, Vimeo added an on-demand video service this year -- charging filmmakers as much as $199 a year to upload videos they can then rent or sell to viewers. The resulting programming carves a niche between YouTube’s cat videos and Netflix Inc. (NFLX:US)’s streamed series. Academy Award-winning filmmaker Malcolm Clarke submitted a documentary on the world’s oldest piano player and holocaust survivor, “The Lady in Number 6.” Lighter fare includes the comedy “Sox: A Family’s Best Friend,” about a dog with special powers.
Sondra Martin Hicks, the founder of HeartStone Pictures and a filmmaker for 30 years, posted her Cine Golden Eagle Award-winning docu-drama about a church shooting in Daingerfield, Texas, “Faith Under Fire,” on Vimeo On Demand. She chose Vimeo because she can charge for her films and doesn’t have to go through a long process to try to get her work on Netflix.
“The digital revolution has been a gift to independent filmmakers,” she said in an interview from Houston. “You don’t have to be from Hollywood anymore.”
Since March, Vimeo On Demand has amassed more than 4,400 videos from filmmakers like Hicks. The on-demand service is an attempt to draw a larger audience and lure more paying subscribers who want to make money off their videos.
“That to us is the lead step in terms of starting to monetize our audience,” Trainor said. “We are extremely bullish on it.”
In October, Vimeo hired Greg Clayman to the newly created position of general manager of audience networks. His experience as the former publisher of New Corp.’s now-shut digital newspaper the Daily and executive vice president of digital distribution and business development at Viacom Inc.’s MTV could help him attract a paying audience to the site.
That kind of personnel move has made IAC comfortable putting Vimeo directly under Diller’s purview instead of reporting toGreg Blatt, the IAC CEO who’s moving to Match Group full-time.
“They are at the point in terms of their maturity as leaders and their experience on the job that they don’t need the same level of assistance that they have had,” Blatt said in an interview.
While Vimeo has gained momentum, it’s still puny compared with IAC’s bigger businesses (IACI:US). The search-and-advertising business, with companies like About.com and Ask.com, accumulated more than half of IAC’s $2.8 billion in revenue last year, while Match.com drew about a quarter.
Video may be a tougher market for IAC than dating, where IAC is the dominant competitor, said Brian Barish, president of Denver-based Cambiar Investors. The online-streaming industry features a diverse and powerful set of competitors, from Google to Amazon.com Inc. to Netflix.
“I’m not convinced at all that you have a natural monopoly in the video business,” Barish said. His firm oversees about $9 billion, including IAC shares (IACI:US).
Still, Vimeo boasts more than 22 million members that have registered to watch and view videos. In October, Vimeo was the ninth-ranked video site in the U.S. for total unique viewers, according to ComScore Inc.
As the video-sharing business has grown, IAC has highlighted (IACI:US) Vimeo more to investors -- reporting revenue figures for the first time last quarter.
“IAC sees itself as a company that owns and operates a very important video property and asset,” said Scott Kessler, an equity analyst at S&P Capital IQ. “They want to explore ways to create and add more value there.”
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