TREE
#Let me give you the history of SEO at LendingTree.
LendingTree has never been, call it, a trick company.
And by the way, as old-time SEO was all about tricks.
So we wanted to get real customers to come to LendingTree because they really wanted to come to LendingTree.
And we started that, fortunately, with TV advertising.
And we grew digital as a ---+ very successfully ---+ much later, under <UNK>'s leadership when he got here many years ago.
And then we became a digital powerhouse.
We were never great at SEO because it was all about tricks.
So the acquisition we made is not about that.
It's about producing very, very, very high-quality content that consumers actually want, that is meaningful to them, that actually helps them; it just so happens, Google likes.
So that's the way we approach SEO, is we want to create high-quality content for consumers, and if it just so happens Google likes it, and Google likes it because lots of other people like it and link to it, that's where we want to go.
So I think we will, over time, build an earned media operation here with more and more people who can speak honestly and clearly in specific areas.
And that's our strategy.
Sorry, merging what.
I got the My LendingTree part.
So, it will be both.
There's no reason to ditch a brand when you have one, but then you can move the product.
So I would assume, for example, just like we did with our credit card acquisition, we compared ---+ we continued to run the CompareCards brand and we migrated ---+ we gave the LendingTree brand to them, too, because two brands are better than one; but, boy, are we going to use the My LendingTree brand.
And then we get CompareCards for free, if you will.
The same thing would be true with Magnify Money.
We've always wanted, at LendingTree, a high-quality content team that could create great content that is usable for consumers, like I talked about.
So yes, we'll do that under the LendingTree brand.
And in deposit accounts, you'd expect to see us (technical difficulty) LendingTree.
That's the reason ---+ one of the key reasons we can obviously do these acquisitions so profitably and pencil them out really well, in addition to the great management team, and our leadership on doing this.
And by the way, we look at a hell of a lot more than we buy.
But it's because we have the LendingTree brand and we know that we can put these products on LendingTree, and it's going to add incremental revenue to the Company with no additional cost.
Good question.
We're ---+ <UNK>, you take that first.
Yes, look; over time, we have been able to expand EBITDA margins.
We have done a really good job controlling how we scale our staffing and our cost as a business.
We have definitely grown that more slowly than we have revenue and VMD.
Over time we would expect those ---+ and we've said ---+ to be kind of in the mid-20s in the long-term.
And we still think that's achievable.
Right now, we're really leaning into growth in offline investment and things like that.
So that puts a little bit of a short-term squeeze on VMM margins, which affects EBITDA.
But over time, those should expand back to normal levels.
And as we ---+ some of our businesses mature a little bit, we expect those margins to expand as well.
So I think it's completely on track to our long-term goal.
And the other thing I would add to that is, like some other successful companies, like ---+ even like an Amazon, we could have operating margins where we want them to be, and we can almost decide, and we will always communicate it with you.
I don't like ---+ this Company, one of our philosophies is we don't look at percentages; we look at dollars.
And unlike a lot of investment-laden other companies where, for example, those ---+ your cost of goods sold, which for us is marketing, effectively ---+ variable marketing margin as a percentage, I would drive down as long as the dollars are going up.
Because what that shows is that we can find more profitable ways to advertise, that we're advertising more and more offline; but more importantly that we have crazy demand from the lenders.
So that margin going down but the dollars going up is actually a good thing.
And it's a good thing for other leading Internet companies that have pulled this off.
I actually think the same thing on the operating margin line, is that we should actually focus on dollars, not percentages, but we should always be very clear as to why.
So for example, as <UNK> said, I would expect operating margins going on our business to continue to improve.
At the same time, we really care about how ---+ the after-tax cash flow that we're generating for this Company and how fast that is growing.
And if we could find investment opportunities that might decrease our percentages, but they're going to increase the pace of our dollar growth, we will do that.
But we will always call it out and make sure that investors understand it.
And as I've said before, I view this not only as a CEO, but for me it's also a significant investor.
So I'm sitting on your side of the call, too.
And I'd hope you guys would have the same view, that the higher the profit growth is, the better.
Oh, gosh.
You just hit on one of the age-old challenges of LendingTree that goes back to probably 2000, when we bought a company called HomeSpace, which had a realtor referral network which we turned into RealEstate.com, which was one of the earliest home listing sites that unfortunately isn't part of our business anymore.
Purchase mortgage ---+ because we had realtor referral network because of the problem that you just talked about.
And it's not going to take a lot of investment, but expect to see some of those tools coming back.
So for example, many customers come to LendingTree ---+ over half of our purchase customers come ---+ and, by the way, I've been working on this one for 20 years, so I know this one like the back of my hand ---+ they come without having a home identified.
Those people we have to incubate.
And our incubation tools ---+ some of which we had before, we got to regain those muscles ---+ will come back again, where we're able to continue to engage customers.
And a very key part of that is what you said, which is keeping the realtor informed.
So expect to see that through technology in keeping the realtor informed.
And then the lenders now are applying a lot of those same tools.
And now you've got realtor networks and other things that exist out there that we can also leverage.
So I believe we're ---+ 18, 19 years ago, even 10 years ago, probably even two years ago, where purchase mortgage conversion rates were always inevitably low ---+ the fact that lenders are now so focused on it, the fact that that's where they ---+ that's the pond they have to go fish in.
They are improving their processes, they are improving their pricing, they are improving their technology, and they are listening to us.
They are listening to our advice on our end, and it's getting better.
So yes, there is a bit of [consumer meet].
I don't want to change consumer behavior.
What we actually need to do is merge in with the existing consumer behavior.
Because I don't think you're going to change the consumer behavior of using a realtor.
There's so many different loan products in there, it's kind of hard to use that metric reliably to understand pricing.
There's all kinds of mix shifts and other things.
I'd say, in general, we are seeing good traction on the revenue per lead, the coverage, the match rates, matches per.
And so we feel really good about our monetization overall.
I would caution you of ever using that revenue divided by loan requests as a meaningful indicator, because there are just too much mix shifts going on in there.
And just to add to that, from my IAC days, and when we had a search engine ---+ granted it wasn't Google, it was Ask.com.
And even with Google, you'll see revenue per query ---+ which is the measure there, which would be analogue to us ---+ can bounce around so much because of mix shift.
So for example, you could see revenue per query ---+ for revenue per request go down for us because we're driving a lot more personal loan business highly profitably.
And that's gone up versus our mortgage business, but our mortgage business might be going up, where revenue per request is much higher because it's a higher loan product.
So there could be noise in that.
But that is one number that we've actually been talking about and giving that in con ---+ because we can put context around it for like some other companies in the search space or in the travel space, which are the closest analogues to us.
So, the way I would think of this, and there's actually ---+ I would refer you to a much more detailed page in our Investor Relations deck where we talk about the core market, the served market, and the expanding market.
What you are seeing right now is basically what you saw in travel in 2002.
And after September 11, travel companies needed to go online because the travel market was in the dumps.
Lenders now need to lend.
And over the past few years, as they now need to lend coming off of 2007, they are increasingly turning to digital.
If they go to digital, they can do their own search advertising.
But they bump up against people like LendingTree who have been doing it for 20 years and have better online brands and better monetization.
Or they can come to people like LendingTree, and we can just give them the customers that they want at the price they are willing to pay at the volumes they want.
Which, that's a pretty darn good deal.
It's basically the same deal we have with Google when we're doing search marketing there.
And it's what we do with all of our other advertising partners.
We're basically an advertising partner.
So you keep adding more lenders to that, and then you keep adding ---+ and then you keep improving conversion rates, and that's basically how it works.
Absolutely.
So pricing is dictated by the lenders.
But to your market share point, that is actually a really key indicator, and expect to see us talking about that.
We look at market share in a couple ways.
We look at it as our percentage share of total originations.
We know what our lenders are originating, but they are closing.
And we know what the originations are, because they are reported.
We have seen share significantly increase of the share of originations.
That roughly from 0.7%, for about 15 years in mortgage, to now a little over ---+ right around 2% of all the mortgage in the United States.
And we could take you through each one, but I don't have them in front of me.
That's really the biggest change.
And that's happening because of lender shift online and because of online moving from search and other types of advertising into the comparison-shopping businesses.
And then pricing, you asked about.
Pricing is dictated by lenders in a bidded model based on their conversion rates, which as I said, have been improving.
It's funny; we've seen this ---+ we've talked about this with lenders over the last 20 years.
And in many lenders over the years have done studies looking at credit performance.
I could actually refer you to one lender in the home equity space, interestingly.
His view ---+ we've never heard credit performance from LendingTree being worse than overall credit performance.
And I've heard it be better many times.
And I think that is really because of the filters.
It's because you can, through LendingTree's technology, which goes back to what Rick Stiegler built 20 years ago, is the fact that you can match precisely the types of consumers that you want.
And you can ---+ and obviously you are using learning in that from where your credit from the best credit losses.
So I think, on average, it's better.
Honestly, I don't know.
And I'm going to give you a big, fat I-don't-know on that one, because we're always honest with you.
I would bet ---+ if I'm guessing, every mortgage lender can do HELOCs.
And, however, the mortgage companies doing HELOCs in the past they are basically, in the most instances, selling those to banks.
What we saw in the past was banks doing HELOCs at very low rates and highly automated.
It's what I talked about before.
So every mortgage company can do them; I don't know how many mortgage companies will.
What I'm (technical difficulty) is the return of highly automated home equity loans.
And when you see that, then this thing is going to sing.
Now, in the meantime, it's singing already because basically any mortgage lender can switch over.
And these are easier loans to close, as I talked about before.
Oh, gosh.
There's so many.
I think for what the specific thing that you say that ---+ said ---+ is I think our biggest learning is that we should be in everything, even if it's small.
Because someday it's going to change, and we might make a change, or the industry might make a change.
But we got to place some small bets because they don't cost anything to do it.
And let me illustrate that for you.
Home equity loans have been on our site forever.
There was no home equity business, roughly, from 2007 until a couple years ago.
But we didn't take home equity off the site.
It was still a good little business.
Auto loans are not a fast grower for us because of the interference with auto dealers.
Guess what.
Someday we're going to solve that.
And the auto ---+ we're going to be sitting here talking about the auto loan business taking off.
Personal loans have been on our sites since 1997.
It was one of the first loan products.
And we used to have one lender that we had to fax them to and they got back to you five days later, so we didn't have very good conversion rates.
But personal loans have been on our site.
We never had credit ---+ the only difference there is we never had credit cards on our site.
And we didn't have credit cards on our site because LendingTree is true to our consumer model.
And the credit card technology was never far enough along where consumers could actually really compare multiple options.
And it's still a bit ---+ it's still a click-out model, but it's getting better and better every day.
And there's more ---+ and the tools are better.
So we looked at credit card for years, and we didn't do it because it took till now that the consumer model is right.
The same thing is true in insurance.
You can't, in the United States, like you can in other countries, get fully bindable quotes from multiple insurance companies online.
So that's the LendingTree model.
So to fill out a form and give you the names of four insurance companies, like, that's not too exciting.
So we did a partnership with Answer Financial, and we think they have the best user experience.
And we think, as the user experience comes around, the minute you can do what you can do in the UK in the US, LendingTree will be, I think, the biggest, baddest thing in insurance on the Internet.
So, it's essentially this: we're constantly ---+ every time we're doing advertising, we're looking at the expected value of the revenue stream and we're ---+ and the revenue coming in.
I could tell you right now, if LendingTree wanted to, we could sit here on the call and say that My LendingTree makes money on advertising, but it makes it over time.
However, a LendingTree form, when we advertise mortgage, that makes money in a second or in a minute.
So we want to continue to improve the monetization of My LendingTree and get the product precisely right before we jam on the advertising.
And that's because we're pushing our teams internally to not take the easy way out to say, oh, we're just going to do a bunch of brand fluffy stuff that will pay off over a couple of years, because we're more disciplined than that.
But when we do it, we're going to be the leader in it.
And it's basically going to happen when the expected value gets to the point where we think we can step on the gas.
We don't ---+ the good news is, to your second point, we don't need lenders to be ready for it.
Because the leads coming off of My LendingTree will not only be exclusive, because we're just telling you the deal that can save you money; they will also convert much higher for lenders.
And we're already seeing that, so they are going to be much more value to us.
So back to those three circles, it's better for the consumer, it's better for the lender, and it's more money for us.
And we're just going to keep plugging away until the monetization gets good, and then we're going to step on it like a NASCAR car.
This is <UNK>.
I can take that.
No, absolutely not; it is absolutely ---+ all you need to do is go on to Google Trends, do a search on personal loans, do a search on credit cards, do a search on buy a home, and you'll see that Q4 is for our three large categories, very seasonal in Q4.
And so the guidance in Q4 has zero to do with any sort of negative headwinds or anything like that, and 100% to do with just completely expected and normal seasonality.
And the only other thing I'd add to that, too, is media prices go up typically in Q4 around the holidays, so you get squeezed out of media.
And so you end up with lower volumes.
And then lenders know that, so lenders staff down for it, and that's Q4.
It's everybody.
And refer you to our IR deck.
We got a number of names in there.
The Goldman Sachs guys are recently up.
I think what we're seeing in the personal loan space is just like what we saw in migration over the early days.
It starts off with the early adopters, which in this ---+ well, the early adopters were the traditional guys years ago that I referred to, so let's leave them out.
But the early adopters of the Internet were the so-called marketplace lenders.
And now that same business model can move to other entities.
A lot of Internet companies who are looking to create a marketplace lending platform, they switched to technology platforms.
They are selling these to lenders.
They are not that hard to build.
And as technology gets better, more and more lenders can do these profitably.
And then it doesn't become a processing question; it becomes a risk question for the lender.
Do they think there's good enough risk and return based on their own credit analysis.
So the beauty of this industry over time ---+ which we have betting on, and we've seen ---+ is that the cost to transact a loan transaction goes down because people get replaced by technology, and it gets smoother and smoother.
As that cost go down, conversion rates go up and lender desire goes up because they are making more money with the advent of technology.
It's just like what you saw in Google.
It's just like what you saw in travel.
And as technology is now being applied in this industry, lenders now can open this channel in the same way that we can open the TV channel, because that's profitable for us.
So that's the analogy there, and we're just continuing to see it.
I just want to once again thank all of our shareholders for your trust and faith in us; thank our employees for the great work they've done; thank our lenders for just continuing to improve, and for their partnership and trust; and obviously the millions of customers we serve every day.
And other than that, I have nothing I can say, because I think the numbers this quarter really speak for themself.
And so, thank you, and we will see you again in three months.
