IAC (IAC) Q2 2025: Google Traffic Falls to 28% as Off-Platform Audiences Expand Revenue Base
IAC’s core media business, now People Inc., is actively diversifying away from Google dependency, with off-platform and data-driven revenues driving digital growth despite search volatility. Robust execution on audience expansion and new ad targeting capabilities are offsetting margin pressure from investments and AI headwinds. Management is signaling confidence in the new model, but the pace of margin recovery and the durability of non-Google channels remain key to the forward thesis.
Summary
- Audience Diversification Accelerates: People Inc. is reducing reliance on Google, expanding off-platform and addressable audiences.
- Margin Pressure from Strategic Investment: Elevated spend on new products and channels weighs on near-term profit leverage.
- Forward Focus on Data and Direct Monetization: Management is betting on proprietary data and direct advertiser relationships to drive future growth.
Performance Analysis
People Inc., IAC’s largest wholly owned business, delivered 9% digital revenue growth in Q2, with core sessions up 2% and off-platform channels contributing an increasing share of both traffic and monetization. Google search now accounts for just 28% of traffic, down from 52% three years ago, reflecting the company’s deliberate pivot toward audience and revenue diversification. Approximately a third of digital revenue is now non-session-based, including licensing, performance marketing, and syndication.
Adjusted EBITDA margin contracted to 24% in the quarter, as strategic investments in new products (such as Decipher Plus, a first-party data ad targeting platform), technology, and channel expansion outpaced near-term revenue gains. Management expects margin recovery in the second half, with guidance for Q3 digital margins of 25-28% and a return to margin scale in Q4. Care.com, IAC’s second-largest business, showed early signs of stabilization post-relaunch, with engagement metrics improving after a period of consumer revenue erosion.
- Session Mix Shift: Non-Google sessions grew at a 29% CAGR, offsetting search declines and supporting overall audience stability.
- Off-Platform Monetization: Licensing, Apple News, and performance marketing posted strong double-digit growth, validating the multi-channel strategy.
- Margin Compression: Increased investment in data products and new channels temporarily reduced digital EBITDA margins by 500 basis points YoY.
Management reiterated full-year digital revenue growth guidance of 7-10%, but trimmed the high end of EBITDA guidance due to higher investment and healthcare costs. Capital allocation activity was muted as IAC prioritizes M&A and strategic divestitures over additional buybacks in the near term.
Executive Commentary
"We have a term we use internally called Google Zero. What happens if Google goes to zero? What happens if Google no longer sends us traffic? Well, I think we're going to be very healthy."
Neil Vogel, CEO of People, Inc.
"People in digital margins have been steadily scaling over the past few years with higher revenue... The increased costs that reduce those margins derived heavily from the strategic investments Neil talked about across new products, technology and channels, everything we're doing to set the business up to grow."
Christopher Halpin, COO & CFO of IAC
Strategic Positioning
1. Google Independence and Audience Diversification
IAC’s People Inc. is proactively managing search risk by building owned and off-platform audiences, including email, print, events, syndication, and social platforms (Apple News, YouTube, TikTok). Management’s “Google Zero” scenario planning reflects a deliberate strategy to reduce exposure to algorithmic volatility and AI-driven search disruption. The company’s diversified traffic sources are now supporting both audience growth and revenue stability, with core sessions up and Google’s share dropping sharply.
2. Data Monetization and Decipher Plus
Decipher Plus, People Inc.’s proprietary first-party data targeting platform, is positioned as a key growth lever, enabling advertisers to reach intent-based audiences across the open web, not just IAC’s owned sites. This expands the total addressable market by 4-5x and opens new revenue streams in connected TV (CTV) targeting. Early results are promising, and management expects material contribution to 2026 numbers.
3. Product Investment and Margin Trade-Off
Near-term margin pressure is a direct result of investment in new products, technology, and marketing, particularly for Decipher Plus, My Recipes, and the People app. Management is explicit that ROI is expected within quarters, not years, and margin improvement is forecast for the back half. The company remains disciplined, investing behind proven success rather than ahead of it, and expects to return to historical margin levels as new channels scale.
4. Care.com Relaunch and Marketplace Revitalization
Care.com, the leading online care marketplace, relaunched its product and brand in June, addressing longstanding deficiencies in user experience and marketing. Early signs show growth in direct navigation, sign-ups, and subscriptions after a multi-year decline. Expansion into senior and pet care verticals is now a priority, with management targeting improved conversion and repeat usage as the path to TAM capture.
5. Capital Allocation and Portfolio Simplification
IAC is actively evaluating M&A and potential divestitures to unlock value and address its holding company discount. Management is balancing opportunistic buybacks with a focus on deploying capital into defensible businesses less exposed to AI disintermediation. The company continues to see value in its own shares but is prioritizing external opportunities in the current environment.
Key Considerations
This quarter marked a strategic inflection for IAC, with management underscoring both the risks and opportunities of a shifting digital media landscape. The pivot away from Google and toward direct, diversified, and data-driven monetization is central to the long-term thesis. Investors should weigh:
Key Considerations:
- Search Platform Volatility: AI overviews now appear on 50-55% of relevant Google searches, further reducing click-through rates and underscoring the need for alternative audience strategies.
- Non-Session Revenue Growth: Licensing, performance marketing, and off-platform channels now contribute a third of digital revenue, reducing single-channel risk.
- Margin Recovery Timeline: Margin improvement is dependent on successful scaling of new products and ROI from recent investments, with Q4 expected to show leverage.
- Care.com Execution Risk: Revitalization is in early stages; sustained improvement in consumer metrics is critical for segment growth.
- Capital Deployment Discipline: M&A and divestiture activity could reshape the portfolio and valuation, but timing and execution remain uncertain.
Risks
The primary risk is that off-platform and data-driven monetization may not fully offset ongoing declines in Google-driven traffic and secular print erosion, especially if AI-driven search disruption accelerates. Margin expansion is contingent on timely ROI from product investments, and Care.com’s turnaround is not yet proven. Competitive intensity in digital media and care marketplaces, as well as macroeconomic and regulatory headwinds, could further pressure results.
Forward Outlook
For Q3, IAC guided to:
- 7-9% digital revenue growth at People Inc.
- Digital EBITDA margins of 25-28%
For full-year 2025, management maintained guidance:
- People Inc. digital revenue growth of 7-10%
- Adjusted EBITDA range lowered at the high end to $330-340 million (from $350M prior)
Management highlighted several factors that could shape the outlook:
- Continued investment in new data products, apps, and audience channels
- Higher healthcare costs impacting back-half margins
Takeaways
IAC’s strategic pivot is gaining traction, but the durability of non-Google channels and the pace of margin recovery are the main variables for investors.
- Audience and Revenue Diversification: The company is successfully reducing Google dependency, but must prove these new channels can sustain growth and margin scale.
- Execution on Data and Product: Decipher Plus and Care.com revitalization are early but essential bets; their contribution to growth will be closely watched.
- Capital Allocation as a Catalyst: Active M&A and portfolio simplification could unlock value, but execution risk remains high in a rapidly evolving digital landscape.
Conclusion
IAC is navigating a complex digital transition, with strong management conviction behind audience diversification and data monetization. The next quarters will test whether these strategies deliver sustainable growth and margin recovery as legacy search and print channels fade.
Industry Read-Through
IAC’s experience foreshadows a broader industry reckoning with AI-driven search disruption and the declining power of Google as a traffic source. Publishers and digital media companies must accelerate diversification, invest in first-party data, and develop direct-to-consumer and off-platform monetization strategies. The success or struggle of Decipher Plus and similar data products will be a bellwether for the viability of non-Google ad targeting. Care.com’s marketplace evolution highlights the importance of product experience and vertical expansion in online services, with implications for all digital marketplaces facing large but underpenetrated TAMs.