Ladies and gentlemen, good day, and welcome to the ANGI Homeservices Report Quarter 3 2019 Results Call. At this time, I would like to turn the conference over to Mr. Glenn Schiffman, the CFO of IAC. Please go ahead, sir.
Thank you, operator. Good morning, everyone. Glenn Shipman here, and welcome to ANGI Homeservices' 3rd quarter earnings call. Joining me today is Joey Levin, Chairman of ANGI Homeservices and CEO of IAC and Brandon Ridenour, CEO of ANGI Homeservices. Joey and I will also address any questions you may have on IAC's 3rd quarter results.
Similar to last quarter, supplemental to our quarterly earnings releases, IAC has also published its quarterly shareholder letter. We will not be reading the shareholder letter on this call. It is currently available on the Investor Relations section of our website. I will shortly turn the call over to Joey to make a few brief introductory remarks and then we'll open it up to Q and A. Before we get to that, I'd like to remind you that during this call, we may discuss our outlook and future performance.
These forward looking statements typically may be preceded by words such as we expect, we believe, we anticipate or similar such statements. These forward looking views are subject to risks and uncertainties and our actual results could differ materially from the views expressed today.
Some of these risks
have been set forth in both IAC and ANGI Homeservices' 3rd quarter press releases and our reports filed with the SEC. We'll also discuss certain non GAAP measures, which as a reminder, include adjusted EBITDA, which we'll refer to today as EBITDA for simplicity during the call. I'll also refer you to our press releases, the IFC shareholder letter and again to the Investor Relations section of our websites for all comparable GAAP and full reconciliation for all material non GAAP measures. Now let's jump right into it. Joey?
Thanks Glenn. Thanks everybody for joining. We entered this year with plans to accelerate revenue growth and really invest through our P and L in the form of higher margins, which is something we're doing for the first time in a really long time to accomplish that. And we did that for a few reasons. We saw opportunities and continue to see big opportunities in our addressable markets.
We have fantastic leaders in fantastic categories and we wanted to press those competitive leads. And we really like the price of internal investment more than the price of external investment opportunities. And as we're nearing the end of the year, we feel very good about that decision. We're seeing the accelerating revenue growth we are looking for. We like our position as we end the year start to end the year going into next year.
And we have real high confidence in the business in including at ANGI where we had a bit of a bumpy quarter last quarter and we're feeling good about our outlook now from here. Obviously, we're on the in the middle of a discussion with the special committee of Match and that to the extent that happens could be a big transformation for our business. And it's a really exciting time for us at IAC because to the extent we can pull that off, if we go back to the period of rebuilding, which is a phase that we love that we I think we can do well in and starting to focus on some new and interesting things, we can pull that off. I'm sure you all have a lot of questions, so let's transition that to questions starting with the first now.
Our first question will come from Dan Salmon with BMO Capital Markets.
Hey, good morning, everyone. Thanks for taking the questions. Joey, maybe if I could just start with, which as you noted in the letter, the process will take longer. Maybe just any color you could add to us as the process changed? Has it just been a little longer than expected?
Would just love a little color on that? And then maybe Brandon, just obviously your search business stabilized. If you could just catch us up on that, but a big picture question I'd love to ask you is, how do you view fixed services as a what is success for you in that business? One of the metrics we noted here in the letter was the 133 tasks on the platform. Is that something we should be thinking about?
Do you think about it as a sort of what it makes up of the total business? I'd love to hear more about that. Thanks.
Thanks, Dan. So just one little correction. I didn't say longer than we expected. I said longer than we would like. These processes always take longer than
we would like.
Once we sort of have a point of view, we like to just march forward, but that's not how it works in this case. So it is going to take a little longer than we'd like. And in terms of how long that takes, I think we don't have an update on that in the past We've done demand. This is different for various reasons, but that's taken a few quarters and that is I don't know if this one will be the same, but that is what things have taken in the past. And we're in, as I said, active discussions with the special committee.
So I would hope that we will have an update relatively soon on whether we can reach an agreement on something there or not. I don't expect that phase to take meaningfully longer, but we'll see. It's hard to predict how these things go.
Yes. And this is Brandon. On search, the team did make really great progress, particularly around paid search. We saw I think I alluded to this last quarter where we were testing and pulling some new technologies and tactics, particularly around bidding. We made really good progress throughout Q3 in that area and are seeing good results.
So we expect to more or less complete our conversion to this new platform, if you will, over the next two quarters. I really think paid search, there's a lot of opportunity there and I expect that to be more of a tailwind next year. Within the organic search arena, I would call it stable. I don't think we made up lost ground. We do have a plan going forward that we're optimistic about.
But as we all know that environment works a little differently in a little different pace. Overall though, we're pleased with the progress we made around search, generally speaking. With fixed price services, in terms of how we think about this and what we view as success, one thing I would just remind us all, we actually started down this path in 2017. So this has been a long time in formation. The acquisition of Handy has allowed us to materially accelerate our efforts in this area and really governed by what we're seeing as we put it in the hands of customers.
There are 2 ways to look at what success means. First of all, just in terms of the experience, we're looking at the purchase rate, the conversion rate by homeowners, we're looking at their satisfaction levels and we're looking at repeat use. What is this deeper richer experience mean for consumers in terms of their frequency of use of our service and their long term loyalty? Right now, all the early data, while early looks really, really positive on all of those fronts, exceptionally positive, which is why we've leaned into it so heavily and gone so much quicker than what we communicated last quarter. In terms of what does it look like in terms of the impact on our business, the 133 tax already represents about 35% of the total volume of service requests we get.
And that's not by value, in terms of the frequency and just pure volume of those requests. And why that's important is that we're able to offer this experience to a pretty large percentage of our customers and we simply think it's going to be a superior experience both for them and ultimately in terms of the relationship it creates with us. What do we wanted to do for our business? Those 133 tasks cover 1,000,000,000 and 1,000,000,000 in GMV. The grand question here is how much of that GMV can we get processed through this experience.
We talked last quarter about having 40% of our requests that we were unable to fulfill and unable to monetize. That's obviously the clear and obvious opportunity. Those amount to a tremendous portion of those billions in GMV and we don't know the answer yet, but our goal is to scale this as big as it can possibly get and to process as much of that transaction value as we can through this service.
Great. Thank you very much everyone.
Thanks, Chad.
Thank you. Our next question comes from Jason Helfstein with Oppenheimer.
Two questions. One kind of a follow-up and then an IT question. So I mean overall, it seems Google has become less reliable for SEO, more expensive for SEM, not just home services, but travel, other verticals as well. Just longer term, how do you think about moving the tenants away from Google? You mentioned some partnerships in the letter.
Would you inexpensive traffic or potentially more brand spending? So just maybe longer term after you finish this platform conversion. And then on the IAC, once the company is recapitalized, what verticals will you pursue M and A? And should we think of the minority investment in Toro as a one off or will you consider minority states in the future? Thanks.
With regard to Google or thinking about how do we address long term diversification, obviously, we don't want to be overly reliant on any one source. Over the last 12 months, we've brought in more than 26,000,000 individual project requests for consumers. So we're doing a phenomenal job on customer acquisition. We are well diversified, but we can always do better. We are excited about the 2 partnerships we announced with Realogy and Nextdoor.
Both of those are great brands and very large audiences that have obvious relevance to us. And so we're going to keep pressing on finding new avenues to acquire customers. But Google continues to be a good place to acquire customers and we don't expect that to change. The long term solution here or I'll even call it the medium term solution is to acquire customers, get them into a much stronger product ecosystem that is a lot stickier and that drives a lot more repeat use. We have a ton of innovation in the pipeline for the coming year that we believe is going to do just that.
Obviously, we think this fixed price experience and we know from the early data is achieving that. But we are also going to be driving a lot more of our business to our mobile app where we already see materially higher repeat use and customer loyalty. We've got an extraordinarily strong and aggressive strategy to drive accelerated penetration of our mobile app into our homeowner base. And that's really the answer is, it's not about getting away from Google, it's about acquiring customers in Google and everywhere else and keeping them. And that's where our focus is.
And then I'll add a little bit to that and then I'll answer your other question, Jason, on ISE. I mean, I think we've talked about this before. The key in all of these businesses is to make your experience more compelling to go direct. And everything that Brandon talked about, I think, takes big leaps forward in making that experience easier, more efficient for a consumer to go directly to us to get something done. And I think some of the things that the channels that we've relied on or other players are doing are actually making it less compelling to go through their platforms.
And I think that that could be a long term benefit for us. In terms of new verticals, I think it's something we're very actively looking at, something we've always candidly very actively looked at. I think there's a finer point on it in a imagining of a post match world and an area where we're highly capitalized with cash. But that doesn't change the discipline of buying new verticals where we think we can add value and where we think there's large addressable markets with leaders and where the as we say, the future is obvious, meaning there's things that we know consumer behavior will evolve in a certain direction because of existing things and evidence and those are things that we're looking for. I think as always, we're going to prioritize capital in our existing verticals because that's where we have the best advantage.
I think we've done little M and A at Dotdash with nice success so far. We're going to continue to look for opportunities there. We seem to be able to integrate things relatively quickly and add value relatively quickly there. We just did a small one for IC, but relatively big one for Vimeo in terms of an acquisition with Magisto. And so that's going to take a little bit to digest.
I don't expect much M and A at Vimeo in the near term. And so new verticals will be a factor. In terms of minority investments, that's not a pattern. And we've said that last quarter when we did the Turo investment, we feel great about the Turo investment. We feel great about the progress in that business.
But we are prioritizing capital in areas where we can have control and we think that that's the best place that we can put things to get a return.
And Jason, in addition to obviously M and A in our existing verticals or new verticals, a lot of organic growth in the portfolio. And you saw that across the board given the strong results this quarter of Vimeo and Dotdash and the continued strong results at Mosaic. As you know, we have 6 verticals, our growth verticals. The slowest grew 22% this quarter on the top line. And if and when we spin off Match, we'll have 5 verticals, the slowest of which grew 22% this quarter, all of which have single digit market share and all of whom compete in markets that are 100 of 1,000,000,000 of dollars in size.
Thank you. Our next question comes from Ross Sandler with
Barclays. Question on the spin details. So we can all see the negative value that you have for core IEC, the core IEC stub. You laid that out in many prior quarterly letters. And you noted in the letter this time that the 2,008 core stub created nearly 3 fourths of the value that you see today.
So if this is the same playbook, I guess, what's the market missing? And what will you guys do post spin to help unlock some of that hidden value? And then the second question is, you laid out the framework for the spin in the addendum. I guess, what do you view as the ideal amount of cash in a perfect world for new IEC and the ideal amount of debt for Match post spin? Thank you.
Yes. Ross, it's a valid question. I'm not going to answer the last one. What we've said is comfortable cash and that's a pretty wide range you could imagine there, but I don't think it's appropriate to answer that right now given where we are in the discussion. In terms of relative to 2,008, it is a it's really interesting.
I mean, I'm more confident now than I remember being in 2,008 thinking about it. We have 3 businesses right now that are doing each $50,000,000 a quarter in revenue are about to Vimeo, Dotdash, Mosaic and those businesses are growing nicely. When we I think we had 2 by the way, I'm excluding Andy from that. You add Andy that's obviously 4 and 1 comfortably well north of that. When you look at 2,008, I think we had 2 business at that level of scale and the momentum was not in our favor then.
There was also some general macro issues going on in the market at that time, but the momentum on each of those individual businesses wasn't really significantly in our favor. I really like the momentum behind the businesses I'm talking about now, Angie, obviously, Vimeo, Dotdash, Mosaic. And we've got some little bets and we had some little bets then too. I mean then Vimeo was a little bet and it's probably that no one was really paying attention to. There was a bunch of other ones.
Many of those failed. We've got a bunch Some of the things that drives value of the permits that they're Some of the things that drives value of the factors in the negative stuff are kind of general concepts, meaning people not understanding a lot of different businesses or not wanting to bet at the same time on a number of different businesses at once. I think it's possible that that persists. Our goal is to be as clear as we can on the prospects of the businesses that we own, the metrics of the businesses that we own, that people can see what it is and be able to make those conclusions. And then there is the set of tools that we've deployed for the past decade and for the next few decades of unlocking value over time when businesses need a public currency or should be spun or whatever.
Those are tools that we can use. We can use subsidiary equity to get deals done. We can use different balance sheets and use different currencies. All those things are tools that are at our disposal and will continue to be and do over time unlock value. And of course, there's a big one if we fail in all of that, which is share repurchases and that was also a very big tool over the course of the last decade.
And we talked I think in the letter about how the share count has come down over that period. It's come down almost in half,
I think, something like that. Yes.
So I think hopefully that answers your question, Ross, but any others? No, I think we lost Ross. So we'll go to the next question.
Our next question comes from Eric Sheridan with UBS.
Thanks so much. Brandon, maybe coming back to the topic of where we're going over the medium to long term with ANGI. A lot of initiatives on both the demand side, the customer relationship side, as well as continuing to build out the supply side. We'd love to just take a step back and maybe you could frame what you see as some of the biggest initiatives you're trying to unlock to sort of realize the value and potential for ANGI medium to long term as a business? And how investors are supposed to think about some of the investments you're making over the short to medium term to bridge to sort of the goals over the longer period of time?
Thanks so much.
Sure. So we're ending Q3 with good momentum at our 2 largest businesses. Obviously, Angie's List returns to growth for the first time in a very long time. That's an important milestone and reflects success in the investments we've been making there that we've been talking about and we expect to see Angie's List grow from here. HomeAdvisor also finishes with strong momentum.
We are seeing strong sales performance. Obviously, we've made progress in search. We expect to see both of these businesses modestly accelerate again next quarter. As we look forward to 2020, we're really focused on a couple of things. Joey said this earlier, but it rings true and important, which is we are laser focused on creating an exceptional experience for homeowners that is unrivaled by anything that exists today or has ever existed.
And tied to that, but also critically important of its own right is bringing on far more service provider capacity. These two things together solve a lot of problems for us as a business. Being able to monetize through additional service provider capacity, all of the requests are going unmonetized today, provides a much better experience for our customers, substantially improves the economics of those transactions, improves the margins of the overall business and gives us far more buying power as a business to go out and drive further growth. So that's critical. We've talked about fixed price and that's certainly one means to accomplish both of those goals.
But we have a lot of other very similar investments we haven't talked about publicly yet that are oriented around the same problems and are focused on achieving the same outcomes. Separately, through a better experience for consumers and through a stronger product ecosystem including through the app, we are very, very focused on acquiring customers and keeping them. And we believe that a differentiated experience that is superior to anything else including traditional word-of-mouth style referrals is the key to doing this. Obviously, again, as we think about improving repeat use, it solves the same sort of economic problems in the business. It makes our marketing investment look substantially better.
It improves our buying power and obviously over time also impacts the margin profile of the business. The investments we're making are obviously rapid. They're happening right now. And as I mentioned earlier, we've been investing in Angie's List throughout the year. We're seeing that pay off.
We've accelerated our investments, particularly in fixed price, but in a few other areas as well against capacity. And the way we're thinking about that frankly is we're letting the results guide our decisions. I think last quarter I said we will launch 100 tasks by Q1 of 2020. We're at 133 by Q3. So we're almost 6 months ahead of where we thought we would be.
And that is driven by the results we're seeing and I guess our excitement around the results we're seeing. Next year, it's all about how fast we can scale. I think more than anything this experience, the deep experience around fixed price services. A lot of that will be governed by consumer interest and engagement. And as we roll this out and put it make the opportunity available to more consumers and more of our acquisition channels, we will see how fast it scales.
But if it scales faster, we will invest faster. And that's really the way we're thinking about investment around fixed price services. We continue to have investments in other parts of the business. I think we will continue to invest in Angie List, although probably not at the same pace as this year. And then we have investments in other areas including the acquisition of of fixed last year and international.
And to translate that into numbers, that strategy obviously and that roadmap underpins our significant confidence in our 20% to 25% revenue growth rate on a long term basis including next year. And on margins, as we've said, we're not optimizing for margins short term, but every one of those initiatives will help us drive towards our long term margin targets.
Great. Thanks for the color, guys. Thanks.
Thank you. Our next question comes from John Blackledge with Cowen.
Great. Thanks. Joey, we got a lot of questions on the spin process. Just curious if you can offer color on kind of like the steps and timing once there is an agreement on the spin? And then just on ANGI, with the paid search stabilizing, Glenn, maybe could you give us color on what that implies for ANGI margins next year?
Thank you.
Sure. In terms of steps, there's a few key components which we laid out in the letter. One is moving the again, all of this is caveat by saying is a proposal and we need to reach agreement with the special committee, which we may not. But the steps that would be consistent with what was outlined in the proposal are 1, moving the converts, what I'm calling the converts are actually exchangeable notes and related hedging instruments. But we'll just simplify by calling it the converts, moving that moving those to ANGI in exchange sorry, moving those to Match in exchange for Match shares.
And that's relatively straightforward. The other two components are a dividend from Match to IAC of some amount. And a third thing that is potentially that may not happen, but a potential equity offering, which has the effect of IAC selling shares in New Match and those shares getting swapped, which in the separation ended up with IAC having more cash and New Match having fewer shares outstanding. All of those things in theory happen kind of roughly at this or could happen kind of roughly at the same time. There's work to do to prepare for all of those things.
And that is a that is I think maybe the best I can do. I don't know, Glenn, maybe we're a little bit limited in what we can say here. I apologize for that. And I want to have a real complete update for everybody soon, which I'm hopeful we can get to. But right now, we're just a little bit limited in what we can say.
I don't know
if you want to you've
got more to add to that.
No, I think it was well said and timing. Joe, you addressed that earlier when we've done spins in the past. They've taken a couple of quarters to be complete. So I think that again, as Joey said, we'll update you when we can. In terms of margins next year for Angie to translate everything Brandon just walked through, Margins are dependent on 3 things.
1 is our overall revenue growth because ex marketing we create real incremental margin in the business. Ops, G and A, sales, all of our other costs grow well below our revenue growth given obviously the strength of the business and the scale of the business. So that would be one factor. The second factor is the investments we make. That's in our international business, which is still losing money.
That's in fixed, that small business we bought in early 2019, that's handy and that's our fixed price initiative. And as Brandon said, as we see success, we may continue to invest into that. And then 3rd, it will depend on marketing. Partially, that's the choices we make. And as you know, we're partial to investing in category expansion, given the opportunity in front of us.
And we're going to want to broadcast the fixed price offering given the rollout there and then how effective we are. And as Brandon said, we're making real progress, but it's early days indeed. I think all that adds up. We'll give you obviously our outlook early next year. But I think all that adds up to margins not increasing and maybe depending on the elective choices we make potentially even margins could come down.
Something that may skew the margins a little bit and we'll of course transparently walk you through that is in all likelihood the accounts are going to force us towards gross revenue recognition transactions on our platform and the fixed price transactions on the platform because we will underwrite and we will backstop and guarantee those transactions. So the margins may be a little muddled next year because of that, but we'll obviously walk you through it and attempt to reconcile that for you.
Thank you.
Thank you. Our next question comes from Brent Thill with Jefferies.
Good morning. Julie, on the Vimeo growth acceleration, if you could just comment what you're seeing there and the progress enterprise side that would be extremely helpful.
Sure.
So one component
or meaningful component of the Vimeo growth acceleration is we completed the Majisto acquisition. So those numbers are in there now. So that accelerates the business, continues to grow nicely without the acquisition, but that's certainly a driver of acceleration. The enterprise business is I think still the fastest growing component of Vimeo and so we're really excited about that. And just to interesting stat we got the other day is that 60% of Fortune 500 companies have someone with a Vimeo account.
And that doesn't mean that we have a active relationship at the corporate level with those companies. What it does mean is that people are using it and there is a big opportunity for us there. We got to get organized of course on how to pursue that, which we've been doing in terms of building the enterprise sales force, organizing the enterprise sales force. We still weighted heavily towards inbound inquiries. We have to nail the operation on outbound sales.
But we view that as real validation in terms of the size of the market and the size of the opportunity. And remember, this is a $50,000,000,000 TAM that we think Vimeo is playing in here. We think video, I keep saying this to everybody, but video is a relevant narrative tool for all enterprises, entities, events, individuals and we're trying to make those tools very easy and I think we're succeeding on doing that for a pretty wide audience. We've got to pull that through in the business, but it looks compelling in the numbers right now.
Thank you.
Thank you, Brian.
Thank you.
Our next question comes from Kunal Madhukar with Deutsche Bank.
Hi, thanks for taking the question. 2, if I may. 1 on ANGI, one with regard to the outlook for 4Q. There seems to be a Q over Q decline in the revenue growth rate. How much of that is because you're lapping Handy?
And how much of that is for other reasons? And then on Vimeo, as you go out and as your enterprise sales force kind of goes out and meets with potential customers, Who else do you see in the room? Who are the key competitors? What is the value proposition? And how are you differentiated?
Thank you.
Yes. On the Q4, Guy Kunal, you're exactly right. It's the handy comp. And that's a couple of points of growth. The other small thing we're seeing, as you recall in the Q1 of last year sorry, Q1 of this year, we shut off certain marketing channels that drove revenue and service requests.
That was as a result of a slight uptick of those revenue that revenue and those service requests in the Q4. So we're also obviously comping against that. That will be a tailwind as we roll into 2020. But it's those two things and that's a couple of points of growth. So absent that, it's actually not a deceleration.
And then further to that, if you strip all that out and you look at the core Angie's List business and you look at the core HomeAdvisor marketplace business, we're actually accelerating and the acceleration started in the Q2 of this year.
And on the competitive landscape for enterprise, it's actually pretty wide. There's a wide range of things that we see. So there's the some of the older players in this category who built like very custom solutions for enterprises, which were expensive and took a lot of time and were hard to maintain. And we're seeing a preference in everyone thinks they want custom to start and then you sort of show that the cost differential and the feature differential and the ongoing maintenance differential and we're seeing a lot of people go to, okay, I'd rather be on a platform than have this complicated custom build. So that's one area.
People do things themselves historically. They put together a bunch of different solutions to make something work. And so having that sort of simple end to end certainty solution we found is a good antidote to the self built solution. And then for a lot of folks it's new. They've had they just haven't used video to tell the story that they're telling.
The enterprise area is we've got both OTT customers, over the top customers. That means people who are essentially building a channel. And our platform works very well for people who are building a channel and that a lot of times going to compete against the custom solution that is generally much more expensive. And then the other is enterprise and that's usually where there isn't an incumbent, where they just haven't been communicating whether it's their employee base or their customer base, they haven't felt a need to communicate by video. They've generally been communicating by text or by pictures and now they've seen the opportunity to communicate by video and that turns out to be compelling.
But there's not sort of 1 big or 2 big folks that we see as incumbents or other voices in the room right now.
Thank you.
Thanks, Dan.
Our next question comes from Brad Erickson with Needham and Company.
Hi, thanks. Just a couple on Angie. First, for both of these partnerships with Realogy and Nextdoor, can you talk about some of the key aspects that I guess were attractive to both parties from your perspective? I think obviously many of us could offer an opinion there, but it would be good to hear that from you. And then second, can you just remind us sort of why 40% of unmonetized leads has been so persistent?
Like if you had to bucket the top 3 or 4 things that that's caused by be a useful reminder as you obviously look to drive that number lower with things like fixed price and on demand? Thanks.
Yes, great questions. So on the partnerships, both of these partnerships are very attractive and we started with Nextdoor. Obviously, Nextdoor has a phenomenal audience of neighbors. About 20% of the requests that happen on Nextdoor have to do with local services in some form or fashion. So it's incredibly relevant audience for us to get exposure to.
We think of this as a long term strategic partnership. I think the opportunity to do some really innovative things there is quite exciting. Obviously, neighbors are on there sharing word-of-mouth recommendations, but there are a number of ways that we can add value to those wants additional options or whether it be that in some cases, that there needs to be a backstop for these recommendations. I would look at that as a partnership that will continue to innovate and grow over time. Realogy is really a completely different animal.
Realogy is involved in more real estate transactions than any other in state in the U. S. And what we're doing with them is effectively offering the seller of a home the opportunity to fix up that home presale to generate either a higher purchase price or a faster sale. This is a win win win for all 3 parties involved. Obviously, the owner of the home gets those benefits.
We get the opportunity to form a relationship there and help manage the process of home improvement. And then this is a service overall that is attractive in terms of Realogy being able to serve its customers. We are excited about the early results with the Realogy partnership. It was just in a few markets, but we are expanding quickly based on what we've seen. And with that partnership, it's a little bit of a market by market expansion.
One of the things that's exciting about it is it really gets us in not only into this sort of offline relationship, but into the relationship around real estate transactions where there's just an enormous amount of home services demand that's generated. And you can't always expect people to jump online. Some of this stuff is happening offline as we all know. In terms of the 40% of unmonetized leads that we talked about last quarter,
I don't know that I
would call it stable. I would say that is a number that has largely grown over time. It's a really there's only one explanation and it's really simple, which is, if you look over the last 5 or 6 or 7 years, we have grown really fast as a marketplace, but we've always grown faster on the consumer demand side. And if you're growing consumer demand at 30% or 40% or 50 and service providers are growing at 20% or 30%, that catches up with you. Over a 5 year period, it really makes itself felt.
The solution is as straightforward as the problem, which is we need more service providers with more capacity. And we're making good progress with our traditional product. We're seeing good momentum there, as I mentioned earlier, from a sales standpoint. But the real answer is we've got to have more products and more offerings to bring more providers in to participate. The fixed service product that we've been talking about is just such an example.
In the case of fixed price services, we actually go out to providers and offer to pay them to do a job, which is quite a bit different than our traditional product where they have to pay us. You can imagine how that could be compelling for a service provider and how it might enable us to tap into service providers that perhaps are resistant to our traditional product. We are in fact seeing good success doing just that. And that's one example where we are tapping into new segments of service providers and bringing completely new capacity online, we are going to be chasing quite a few of these in parallel to solve what's a pretty big problem and one that as we solve it will have an enormous impact on the economic profile of the business.
Got it. That's great. Thanks.
Thank you. Our next question comes from Youssef Squali with SunTrust.
Great. Thank you very much. Two quick questions. 1, either Brandon or Ghislain, can you as you guys push the fixed price offering more aggressively next year, I was trying to understand maybe the economics of the model relative of that product offering relative to the traditional offering? In other words, is it margin accretive, margin dilutive?
I know I think, Glenn, you talked earlier about having to change the revenue recognition there. So just maybe help us understand how those things work at least short term. And then Joey, as you go through with the spin with I was just trying to understand how you think about business models that you may be interested in. Historically, you guys have had a bias to marketplaces. Is there any reason to believe that that's not the case this time around?
Thank you.
Yes. This is Brandon. I'll start on the fixed price margin question. The reality is offering 133 different types of services and 40,000 zip codes on this fixed price basis is an enormous problem to solve. As we scale it, the faster it grows, the more it will initially cost us, right?
That's just essentially the way it works. And a lot of that just has to do with building up capacity to perform these jobs in so many micro locations. What I can say is that in our most mature categories where we've been offering fixed price the longest, the margins are extremely compelling. And if you compare the take rate of our traditional business relative to the take rate we get on these mature fixed price services, it's substantially better. And I'll turn to Glenn to add more color.
Yes, that's exactly right. After the start up cost to spool, to figure out how to price the job, to spool up the demand and get the infrastructure in place, it is going to be accretive to our long term margins. One, we attack those 0 accepts and we just change the whole price value relationship with the SP without that incremental cost of marketing. Again, for these 40% 0 sets, we've already paid marketing to get that. 2, Brandon referenced, it's the take rate.
Our take rate, as you know, on our marketplace matching is around mid single digits. Our take rate is higher simply because our win rate is so higher for the SP. The job is guaranteed. And then when Brandon says we open up SP capacity, that is also majorly margin accretive because we don't have to rely on our sales force, which is of course quite effective, but it's also expensive for sure. And all this product innovation among the many things that it does, it's going to drive repeat rate, it's going to drive down the 0 accepts and it's going to increase SP retention.
And those are the 3 most powerful margin drivers that we have in our P and L.
In terms of post spin interest, marketplaces is still exciting for us. It's a, I'd say, a preference, not a rule. We have said we like businesses where scale improves the product, not just the price. That is, I think, our most successful businesses in our past and current meet that test. So that is something that we will look for.
But if we find a new vein that's exciting, that's possible too. Some of the dynamics that we've seen in marketplace businesses are things that we think we can do a nice job identifying and we think we can do a nice job amplifying. And so that does favor marketplace businesses, but does not require marketplace businesses, I guess I'd say.
Okay. Thanks guys.
Thank you. Our next question comes from Douglas Anmuth with JPMorgan.
Thanks for taking the questions. First, Brandon, just want to follow-up on paid search. Can you just help us understand where you've stabilized now relative to last quarter and then also perhaps 6 to 12 months ago? And then, Joey or Glenn, just want to shift gears and talk about Dotdash. You talked about having emerging brands in 7 high intent categories here.
Can you just talk about the key priorities for 2020 for the business? Thanks. Yes. Just to reiterate on paid search, last quarter I mentioned that we were testing some new tactics and bidding technologies. In Q3, we migrated a fairly significant portion of our activity to a new bidding platform where we've seen substantially better profit profile.
We really completed the majority of that toward the end of Q3. There's quite a bit of work left that we expect to drift into Q1, But I would expect by the end of Q1, we are largely completely migrated. I don't what we've accomplished doesn't bring down costs, it improves profitability, which is fine with us. We can't control the cost in that ecosystem, but we can what we have been able to do is control the profitability of our investments and it looks like it's going to be very favorable.
In terms of Dotdash, we kind of look at each vertical as a huge opportunity. So just picking one, which is health. We're doing a nice job in health. I think we're ranked 3 or in the top 5 when you look at audience in health. And there are some very, very big players ahead of us there in terms of both revenue and profitability.
And we've been very focused on innovating in product in this area. We've been, as we said, focused on having the best content, precious content and fewest ads, which means in all of these areas and health being 1, in some ways we're looking at undercutting the competition on price because the number of ads is effectively or the kind of way you monetize these ads is effectively the way you price the content and you price the service because we really only monetize with that. Now we monetize with other formats of advertising. I think of e commerce as a format of advertising where we're sending audience on to other sites that monetizes on their sites. But really the way we built this product allows us to undercut the competition on price and we're going to continue to do that.
And I think that we can do that sustainably because we're doing that, I think comfortably, profitably today. So there's health, big players in front of us. Finance, there's huge players in front of us, several of them. And we were doing very well with Investopedia and The Balance and we're going after the people who are bigger than us with bigger audience and bigger revenue. And again, doing that with the freshest content, the fastest sites and a few of that.
Beauty is another one, homes another one. All these are multibillion dollar categories of advertising online where we think we can deliver really compelling content and a really compelling service. So it's when we think about just 2020, it's more content, more and better content in our existing categories. And then we're going to continue to look for either new verticals or new additions in our existing verticals. So we've done that in some categories already.
And I think we've got a few in beauty right now and we'll keep looking in that area for more.
Great. Thank you, both.
Thank you. Our next question comes from Mike Ng with Goldman Sachs.
Great. Thank you for the question. I just have 2. First, in the letter, you guys talked about how ANGI could benefit from remaining inside IFC for the time being. Could you just elaborate on what those benefits are?
Is it helping to think about broader strategic initiatives or is it about M and A? And then just on the second question, Glenn, I was just hoping you could clarify the ANGI margin outlook for 2020. I think you mentioned that they may be a little bit muddled next year because of some of the investments. Just any additional color there would be helpful. Thanks.
Sure. In terms of the benefit of being Angie's benefit of being in IT, I probably should answer that one and then Brandon, of course, Brandon to answer that one in the room here. But it is one of the things that we've talked about Angie doing right now is investing in the business and that what we've done over the course of 2019 and I think we'll continue to do over the course of 2020. Some of that is easier with a very large shareholder who's very aligned with you on the size of the long term opportunity in the category and the ability to take more share and the ability to deliver a really compelling consumer product. And we have that sort of outlook and that patients and I think that can work well for ANGI in this phase of its evolution, especially as we look at a particular new product around fixed price.
That's one thing. The other is, I do think we there is, Angie will have plenty of operating flexibility, whether that means M and A or whether that means something else, I'm not sure. But we have the sort of firepower and the wherewithal to do lots of aggressive things in this category and we'll continue to look to operate that way.
Yes. On the margin point, on the last call, I said don't expect margin improvements. And on a steady state basis, steady state revenue basis that is, we don't think margins are going to increase. And depending on again the decisions we make to invest more aggressively in fixed price, to invest in marketing, to invest in a lot of the growth initiatives that Brandon talked about, margins could go down on a steady state basis. And then if you layer in the gross revenue recognition, obviously, the numerator is higher.
So on the same EBITDA base, the margins would through that just math, the margins would slightly go down. We'll update all of this obviously when we share our outlook in February as we're working on our plans now, our marketing plans and our investment plans. But it will be very much investing into success next year as opposed to this year where margins came down given some of the volatility in the ecosystem and our reaction to it.
Great. Thank you very much.
Thank you. Our next question comes from Victor Anthony with Aegis Capital.
Hey, guys. Thanks for putting me on. Just a follow-up, there was an earlier question about the economic impact of shifting the business to fixed price. So first, you also mentioned, I guess, the low single digit take rate of the traditional business. Why shouldn't the take rate for fixed price eventually be in the teens, maybe high teens, given that other non fixed price businesses, other Internet marketplaces tend to have any high-tech rates?
That's one. You've also talked about in the past that onethree of the GMV is easy to convert. I think you're already there, I think, to fixed price and the next onethree is probably harder to attain. You also talked about 1,000,000,000 dollars of GMV has shifted. I'm kind of curious exactly the mix, the GMV mix between the 1 third to 1 third and 1 third, if that makes sense for you guys?
And lastly, I guess the trade off to building supply for the fixed price business versus migrating existing SPs and then what's the trade off there? Thanks.
Sure.
So I certainly think the take rate
in the team seems very achievable. I do think it depends on the individual project. The smaller the project, the less materials that are required for a project, I that the higher the take rate can ultimately be. Obviously, as you get into larger, more complex projects that have supplies and materials involved, that changes things a bit. But mid teens seems extremely reasonable and I think we all believe that here.
The onethree, onethree, onethree was more about the number of tasks. And I do think we obviously we've gotten that first third live a lot more quickly than we thought. I think we are obviously going to also pursue that next third, but it's a little too early to comment on that at this point. In terms of GMV, I don't think we're ready to break out sort of what the percentage of the GMV are.
I can only tell
you that we have an enormous amount of untransacted or potential GMV that's going on monetized. And there's a ton of it in this first one third of transactions that we're enabling. Obviously, you get into higher value projects and those make up a large part of our untapped GMV as well. But we've made great progress in enabling the 1st third of transactions. We will certainly be making efforts towards that second third, but just aren't there yet.
And I think we have we've debated this quite a bit internally, but I think we have I think it's important that we perfect the experience around this first third of transactions that we've enabled. They do represent 35% to 40% of the requests that we receive for consumers. And our goal, more important than just processing the GMV, which is obviously desirable, is to create an experience that just knocks people's socks off. And so we want to really get this 1st period of transactions right. We've got them live.
We still got a lot of work to do to perfect that experience and then we'll move on from there. What was the last question? Yes. Building supply, yes. So when your supply constraints as we are, obviously, we want to roll out new products that appeal to new segments of SP that we're having a hard time getting, fixed price does that.
It doesn't mean that we can't also offer those jobs into our traditional network and I'm sure we will do that as well over time. But a quarter goal of ours is to bring a lot more providers into this marketplace as participants and we're seeing really, really, really good success with fixed price out of the gates on that front. I would expect us to extend that to the entire network over time as scale grows.
Thank you.
Thank you. Our next question comes from Ygal Arounian with Wedbush Securities.
Hey, thanks guys. So, just to ask
on your service requests growth came in, accelerated nicely, comps were a little bit easier, but still accelerated nicely. We're above our expectations. And just wanted to kind of hear a little bit more about that in light of some of the marketing challenges. Was it search kind of coming back and improving? Was it the other distribution partnerships that you've developed?
Just kind of what's leading to growth there and expectations?
And then also on the distribution point,
Rettfin last night mentioned Rettfin Home Services that they're building out to service their iBuying network and led the partnership with Realogy. Just wanted to get your thoughts on partnering with the iBuyer community. There is obviously a ton of supply there. Are iBuying margins just too slim for them to kind of to give that business out and partner or is there an opportunity for
you guys to create efficiency
in that model for them and take part of the share? Thanks.
Yes, that's a great question.
Let me address the second one first. I think iBuying is interesting. However, the transaction volumes are still relatively small when you think about the scale we're at. We actually think the traditional brokerages and the partnership we have with Realogy, it just offers a much larger slim margins in high buying, I mean, they may need to do this themselves. So I'm not sure exactly how big of an opportunity that will be for us.
But at this point, the scale of it is too small to warrant our attention. We have bigger opportunities in other places.
By the way, to put a number on that, I mean, just think about it for $100,000,000 for every $100,000,000 of capital that goes into iBuying, you have $200,000 average home price, let's say, that's 500 homes. It just when you think about relative to 26,000,000 or whatever our number is, I think over 20,000,000 homeowners that are coming through our platform. It's just very small.
Yes, that's right. And then on SRA growth, the answer is a little bit all of the above. We did see real progress on paid search, But our proprietary channels also did really well. And then we have these new partnerships, which are nascent but important. Glenn, do you want to add more color on that?
Yes. And just taking a step back on we get a lot of questions on SB growth and SRR growth. And just remember, the marketplace business is driven by SP growth, the one side of the marketplace, SP growth and revenue per SP. And on the other side of the marketplace, it's SR growth and revenue per SR. And they're not going to be linear or frankly predictable.
There's a lot of levers that, of course, the management team, Brandon and his team, pull to optimize. It also is task mix that throws some of those relationships asunder. It's also what the ecosystem what's going on in the ecosystem at the time and also the year over year comp. Our goal for all 4 of those metrics obviously is double digit growth. We've been real strong on revenue per SP.
You saw that a record $1200 this quarter, up what 16%. All that will support our 20% to 25% long term growth rate here. But again, they can undulate around every quarter. Next quarter, we'll probably see a slight dip in SP growth. We'll probably see a slight dip in SR growth, again, given the comps, but we'll make that up on revenue per SV, revenue per SR.
I'm not foreseeing a price increase. It's as we get more and more efficient about matching supply and demand, which we are getting with all of our liquidity.
Hey guys, thanks for squeezing me in here. Just a quick one on Vimeo. I'm wondering if you could provide some color on your product pipeline as we look to 2020. What are some of your key focus points here? And then a quick one on cap allocation.
I mean, you guys were pretty active this quarter on the ANGI buyback. We'd love to hear what your priorities are as you look to 2020, particularly with ANGI trading at these levels. Thank you.
Yes. On buybacks, we don't really comment on forward projections of buybacks. We did buyback, I think, about 1% ANGI in the quarter, which is I think a third of our authorization and something that we look at and we'll always look at. In terms of Vimeo product, big push for us right now is around video creation. And that is starts with the Magento acquisition, but we've got a big integration to pull off right now too in terms of integrating that into the core Vimeo product.
And that does a few things for us. 1, it allows us to sort of manage the full customer life cycle in video, but importantly, it allows us to talk to customers earlier. In other words, right now, when we're out looking for customers of Vimeo, we're trying to find people after they've made a video before they found a place to keep that video and do some other services that we offer them for that video. And we've been very successful there, but that's a relatively narrow window in which to capture some to find somebody. When you think about video creation before they've created video.
And as I've said before, we think many entities, every entity almost needs video right now, but many of them haven't gotten started or afraid to get started, don't think they have the talent or the team to get started or the tools to get started. And we can kind of offer all of them all of that right now in one package. So we think from a marketing perspective that starts to really open up opportunities for us. And that's what our big focus is certainly right now and I'd say for 2020 getting that product integrated and live and really seamless for users. I think we're over a lot of time here.
So thank you all very much for joining. Thanks for all the questions and we hope to have updates for you all soon. Thank you.
Thank you. Ladies and gentlemen, that concludes the ANGI Homeservices report Q3 2019 results call. You may now disconnect and thank you for joining us this morning.