As a leading player in home verticals, IAC’s ServiceMagic is a company we watch with interest — especially as IAC intends to split into five pieces. Arguably, it is the one company at IAC that really does straddle its home mortgage and real estate businesses (i.e., RealEstate.com, LendingTree) and entertainment businesses (i.e., Ask and Citysearch).
ServiceMagic was founded in 1999 by two of the execs behind Einstein’s Bagels. IAC purchased the 500-person company in mid-2004. It now claims a network of 40,000 businesses, and monthly service requests from 200,000 consumers. Businesses pay ServiceMagic on a lead basis, with leads costing anywhere from $6 to $50 per job, based on the job’s value.
In IAC’s carefully worded earnings announcement yesterday, the company said it has stepped up marketing by expanding its sales force and marketing efforts, resulting in a 9 percent jump in the number of its service providers, and a 20 percent increase in customer service requests. The increased customer acquisition costs, however, cut into its profits.