Management Overview

IAC operates more than 35 leading and diversified Internet businesses across 40 countries... our mission is to harness the power of interactivity to make daily life easier and more productive for people all over the world. IAC includes the businesses comprising its Media & Advertising segment; its Match and ServiceMagic segments; the businesses comprising its Emerging Businesses segment; and certain investments in unconsolidated affiliates.

All references to "IAC," the "Company," "we," "our" or "us" in this report are to IAC/InterActiveCorp.

For a more detailed presentation of the Company's operating businesses, see the Company's annual report on Form 10-K for the year ended December 31, 2008, as amended.

Results of Operations for the three months ended March 31, 2009 compared to the three months ended March 31, 2008

Set forth below are the contributions made by our various segments and corporate operations to consolidated revenue, operating income (loss) and Operating Income Before Amortization (as defined in IAC's Principles of Financial Reporting) for the three months ended March 31, 2009 and 2008 (Dollars in thousands).

                                             Three Months Ended March 31,
                                             2009        Growth       2008
           Revenue:
           Media & Advertising            $   167,620        (22 )% $ 215,538
           Match                               90,060         (1 )%    90,536
           ServiceMagic                        31,353          8 %     28,948
           Emerging Businesses                 44,022          1 %     43,763
           Inter-segment elimination           (1,045 )       87 %     (8,129 )

                   Total                  $   332,010        (10 )% $ 370,656

                                            Three Months Ended March 31,
                                            2009        Growth       2008
            Operating Income (Loss):
            Media & Advertising          $     1,088        (97 )% $  31,299
            Match                              9,742         37 %      7,136
            ServiceMagic                       2,003        (64 )%     5,610
            Emerging Businesses              (12,700 )      (36 )%    (9,308 )
            Corporate                        (33,257 )       27 %    (45,845 )

                 Total                   $   (33,124 )     (198 )% $ (11,108 )

                                                   Three Months Ended March 31,
                                                   2009        Growth       2008
     Operating Income Before Amortization:
     Media & Advertising                        $    10,134        (73 )% $  37,529
     Match                                            9,941         (2 )%    10,139
     ServiceMagic                                     2,801        (54 )%     6,149
     Emerging Businesses                            (11,056 )      (41 )%    (7,825 )
     Corporate                                      (14,988 )       45 %    (27,356 )

             Total                              $    (3,168 )       NM    $  18,636

Refer to Note 6 to the consolidated financial statements for reconciliations by segment of Operating Income Before Amortization to Operating Income (Loss).

Consolidated Results

Revenue

Revenue in 2009 decreased $38.6 million from 2008 primarily as a result of a decrease of $47.9 million from Media & Advertising, partially offset by an increase of $2.4 million from ServiceMagic. The decrease from Media & Advertising was driven by a sharp decline in network revenue, resulting from the discontinuation of relationships with certain partners that took place during 2008 in conjunction with the renewed Google agreement, and fewer queries across proprietary properties, particularly at Fun Web Products and Ask.com. Partially offsetting these declines is the continued growth in partners and queries at the Ask toolbar business and the favorable impact from the acquisition of Lexico, which includes Dictionary.com and Thesaurus.com, on July 3, 2008. The increase in revenue at ServiceMagic reflects a more active service provider network and a 13% increase in service requests driven by increased marketing efforts.

Cost of revenue

                                              Three Months Ended March 31,
                                              2009       % Change     2008
                                                 (Dollars in thousands)
         Cost of revenue                    $123,609      (10)%     $137,835
         As a percentage of total revenue      37%         4 bp       37%


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bp = basis points

Cost of revenue consists primarily of traffic acquisition costs, compensation and other employee-related costs (including stock-based compensation) for personnel engaged in data center functions, the cost of products sold and shipping and handling costs. Traffic acquisition costs consist of revenue share payments to partners that have distributed toolbars and/or integrated paid listings into their websites and similar arrangements with third parties who direct traffic to our websites.

Cost of revenue in 2009 decreased $14.2 million from 2008 primarily due to decreases of $15.1 million from Media & Advertising and $4.3 million from Match, partially offset by increases of $3.6 million from ServiceMagic. The decrease in cost of revenue was primarily due to decreases of $18.6 million and $4.3 million in traffic acquisition costs from Media & Advertising and Match, respectively. Overall traffic acquisition costs from Media & Advertising during the quarter decreased as a direct result of a decrease in network revenue, partially offset by growth in distribution revenue included as a component of proprietary revenue at IAC Search & Media. The decrease in traffic

acquisition costs from Match was due primarily to improved economics from agreements with certain domestic distribution partners. Partially offsetting these decreases was an increase in traffic acquisition costs from ServiceMagic as growth in service requests from paid channels outpaced growth in free requests.

Selling and marketing expense

                                              Three Months Ended March 31,
                                              2009       % Change     2008
                                                 (Dollars in thousands)
         Selling and marketing expense      $122,213        7%      $113,766
         As a percentage of total revenue      37%        612 bp      31%

Selling and marketing expense consists primarily of advertising and promotional expenditures and compensation and other employee-related costs (including stock-based compensation) for personnel engaged in customer service and sales functions. Advertising and promotional expenditures include online marketing, including fees paid to search engines, and offline marketing, including television, radio and print advertising.

Selling and marketing expense in 2009 increased $8.4 million from 2008 primarily due to increases of $5.4 million from Media & Advertising, $2.1 million from Emerging Businesses and $1.0 million from ServiceMagic. The increase in selling and marketing expense from Media & Advertising is primarily due to an increase of $6.7 million in advertising and promotional expenditures, including those associated with the NASCAR partnership, partially offset by a decrease of $1.0 million in compensation and other employee-related costs. Selling and marketing expense from Emerging Businesses increased primarily due to increases of $0.9 million and $0.7 million in advertising and promotional expenditures and compensation and other employee-related costs, respectively. Also contributing to the increase in selling and marketing expense is an increase of $0.9 million in compensation and other employee-related costs from ServiceMagic primarily related to the expansion of its sales force.

General and administrative expense

                                               Three Months Ended March 31,
                                               2009        % Change     2008
                                                  (Dollars in thousands)
        General and administrative expense    $73,634        (9)%      $80,594
        As a percentage of total revenue        22%         44 bp        22%

General and administrative expense consists primarily of compensation and other employee-related costs (including stock-based compensation) for personnel engaged in finance, legal, tax, human resources and executive management functions, facilities costs and fees for professional services.

General and administrative expense in 2009 decreased $7.0 million from 2008 primarily due to a decrease of $11.4 million from corporate, partially offset by an increase of $3.1 million from Match and $1.3 million from ServiceMagic. The decrease from corporate is principally due to the inclusion in the prior year period of $8.6 million in expenses related to the spin-off of HSN, Inc. ("HSNi"), Interval Leisure Group, Inc. ("ILG"), Ticketmaster Entertainment, Inc. ("Ticketmaster") and Tree.com, Inc. ("Tree.com") (the "Spin-Off') as well as a decrease in non-Spin-Off related professional fees. General and administrative expense from Match increased primarily due to $3.3 million in expenses in the current year period associated with the pending sale of Match Europe to Meetic. The ServiceMagic

increase in general and administrative expense was primarily due to an increase of $0.6 million in compensation and other employee-related costs.

Product development expense

                                              Three Months Ended March 31,
                                              2009        % Change     2008
                                                 (Dollars in thousands)
         Product development expense         $18,088       (16)%      $21,452
         As a percentage of total revenue      5%         (34) bp       6%

Product development expense consists primarily of compensation and other employee-related costs (including stock-based compensation) that are not capitalized for personnel engaged in the design, development, testing and enhancement of technology.

Product development expense in 2009 decreased $3.4 million from 2008 primarily due to a decrease of $3.1 million in compensation and other employee-related costs from Media & Advertising which is due in part to a 6% decrease in average headcount at IAC Search & Media.

Depreciation

                                              Three Months Ended March 31,
                                              2009        % Change     2008
                                                 (Dollars in thousands)
         Depreciation                        $16,214        (6)%      $17,259
         As a percentage of total revenue      5%          23 bp        5%

Depreciation in 2009 decreased $1.0 million from 2008 primarily due to certain fixed assets becoming fully depreciated during the period, partially offset by the incremental depreciation associated with capital expenditures made during 2009 and 2008.

Operating Income Before Amortization

                                                Three Months Ended March 31,
                                                2009       % Change     2008
                                                   (Dollars in thousands)
       Operating Income Before Amortization   $(3,168)        NM       $18,636
       As a percentage of total revenue         (1)%          NM         5%

Operating Income Before Amortization in 2009 decreased $21.8 million from 2008 primarily due to decreases of $27.4 million, $3.3 million and $3.2 million from Media & Advertising, ServiceMagic and Emerging Businesses, respectively. These decreases in Operating Income Before Amortization were partially offset by a decrease of $12.4 million in corporate expenses due in part to the inclusion in the prior year period of $8.6 million in expenses related to the Spin-Off.

The overall decrease in Operating Income Before Amortization reflects lower revenue from Media & Advertising, a shift in mix to lower revenue generating service requests and increased traffic acquisition costs from ServiceMagic, and increased operating expenses from Emerging Businesses primarily related to The Daily Beast and InstantAction.com.

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Operating loss

                                              Three Months Ended March 31,
                                              2009      % Change     2008
                                                 (Dollars in thousands)
         Operating loss                     $(33,124)    (198)%    $(11,108)
         As a percentage of total revenue     (10)%     (698) bp     (3)%

Operating loss in 2009 increased $22.0 million from 2008 primarily due to the $21.8 million decrease in Operating Income Before Amortization described above and a goodwill impairment charge of $1.1 million, partially offset by decreases of $0.5 million in amortization of non-cash marketing and $0.3 million in non-cash compensation expense. The amortization of non-cash marketing referred to in this report consists of non-cash advertising secured from Universal Television as part of the transaction pursuant to which Vivendi Universal Entertainment, LLLP ("VUE") was created, and the subsequent transaction by which IAC sold its partnership interests in VUE.

At March 31, 2009, there was $141.5 million of unrecognized compensation cost, net of estimated forfeitures, related to all equity-based awards, which is expected to be recognized over a weighted average period of approximately 2.7 years.

Other income (expense)

                                                  Three Months Ended March 31,
                                                  2009      % Change      2008
                                                     (Dollars in thousands)
       Other income (expense):
         Interest income                         $3,728       (54)%      $8,073
         Interest expense                       (1,464)        88%      (11,978)
         Equity in (losses) income of           (1,847)        NM        5,779
         unconsolidated affiliates
         Other income                             146         (99)%      9,817

Interest income in 2009 decreased $4.3 million from 2008 primarily due to the impact of lower average interest rates and from a reallocation of investments during the second half of 2008 into lower yielding treasury and government agency funds. Interest expense in 2009 decreased $10.5 million from 2008 as the amount of outstanding debt decreased year over year due to the extinguishment of $734.2 million of the Company's 7% Senior Notes due 2013 (the "Senior Notes") in connection with the Spin-Off. The remaining outstanding principal of the Senior Notes at March 31, 2009 is $15.8 million.

Equity in (losses) income of unconsolidated affiliates in 2009 decreased $7.6 million from 2008 primarily due to the inclusion in the prior year period of $7.2 million related to the equity in earnings of our former investment in Jupiter Shop Channel Co., Ltd., a Japanese TV shopping company.

Other income in 2009 decreased $9.7 million from 2008 primarily due to gains of $6.6 million included in the prior year period related to the increase in the value of the derivative assets received in connection with the 2007 sale of Home Shopping Europe GmbH & Co. KG, and its affiliated station HSE24, and created in connection with the Expedia spin-off.

Income tax provision

In 2009, the Company recorded an income tax benefit for continuing operations of $2.7 million on a pre-tax loss of $32.6 million, which represents an effective tax rate of 8%. This rate is lower than the federal statutory rate of 35% due principally to an increase in the valuation allowance on deferred tax assets related to losses from equity investments, non-deductible transaction costs related to the pending sale of Match Europe to Meetic, interest on tax contingencies and state taxes, partially offset by foreign income taxed at lower rates. In 2008, the Company recorded an income tax provision for continuing

operations of $4.0 million on pre-tax income of $0.6 million. The effective tax rate was higher than the statutory rate of 35% due principally to non-deductible costs related to the Spin-Off, interest on tax contingencies, a write-off of a deferred tax asset related to executive compensation and state taxes, partially offset by foreign income taxed at lower rates.

At March 31, 2009 and December 31, 2008, the Company had unrecognized tax benefits of $369.4 million and $372.6 million, respectively. Unrecognized tax benefits for the three months ended March 31, 2009 decreased by $3.2 million due to the effective settlement of certain prior year tax positions with the Internal Revenue Service ("IRS") relating to the reversal of deductible temporary differences. The Company recognizes interest and, if applicable, penalties related to unrecognized tax benefits in income tax expense. Included in the income tax benefit for continuing operations for the three months ended March 31, 2009 is a $2.6 million expense, net of related deferred taxes of $1.7 million for interest on unrecognized tax benefits. At March 31, 2009 and December 31, 2008, the Company has accrued $53.5 million and $49.7 million, respectively, for the payment of interest. There are no material accruals for penalties.

The Company is routinely under audit by federal, state, local and foreign authorities in the area of income tax. These audits include questioning the timing and the amount of deductions and the allocation of income among various tax jurisdictions. Income taxes payable include amounts considered sufficient to pay assessments that may result from examination of prior year tax returns; however, the amount paid upon resolution of issues raised may differ from the amount provided. Differences between the reserves for tax contingencies and the amounts owed by the Company are recorded in the period they become known.

The IRS is currently examining the Company's tax returns for the years ended December 31, 2001 through 2003. The statute of limitations for these years has been extended to December 31, 2009. Various state, local and foreign jurisdictions are currently under examination, the most significant of which are California, Florida, New York and New York City, for various tax years beginning with December 31, 2001. These examinations are expected to be completed by 2010. In early 2009, the IRS commenced an audit of the Company's tax returns for the years ended December 31, 2004 through 2006. The statute of limitations for these years has been extended and this examination is expected to be completed in 2011. The Company believes that it is reasonably possible that its unrecognized tax benefits could decrease by $13.0 million within twelve months of the current reporting date primarily due to the reversal of deductible temporary differences which will primarily result in a corresponding increase in net deferred tax liabilities. An estimate of other changes in unrecognized tax benefits, while potentially significant, cannot be made.

Discontinued operations

Discontinued operations in the accompanying unaudited consolidated statement of operations include HSNi, ILG, Ticketmaster, Tree.com and Entertainment Publications, Inc. ("EPI") through March 31, 2008, and Quiz TV Limited and iBuy for all periods presented. Results from these discontinued operations, net of tax, in 2009 and 2008 were income of $1.2 million and $55.9 million, respectively. The 2009 amount is principally due to the income of iBuy. The 2008 amount is principally due to the income of Ticketmaster, ILG and HSNi, partially offset by losses of EPI and Tree.com.

In accordance with Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142"), we review the carrying value of goodwill and indefinite lived intangible assets on an annual basis as of October 1 or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. We determine the fair value of a reporting unit based upon an evaluation of its expected discounted cash flows. This discounted cash flow analysis utilizes an evaluation of historical and forecasted operating results. The determination of discounted cash flows is based upon forecasted operating results that may not occur.

Certain reporting units are currently operating in dynamic industry segments. These include IAC Search & Media and InstantAction.com. If actual operating results of these businesses vary significantly from anticipated results, the future impairments of goodwill and/or other intangible assets could occur. To illustrate the magnitude of potential impairment charges relative to future changes in estimated fair value, had the estimated fair value of each of these reporting units been hypothetically lower by 10% as of October 1, 2008, the aggregate book value of goodwill would have exceeded fair value by approximately $140 million at IAC Search & Media and $4 million at InstantAction.com. Had the estimated fair values of each of these reporting units been hypothetically lower by 20% as of October 1, 2008, the book value of goodwill would have exceeded fair value by approximately $330 million at IAC Search & Media and $8 million at InstantAction.com.

In addition to the discussion of consolidated results above, the following is a discussion of the results of each segment.

Media & Advertising

Our Media & Advertising segment consists primarily of our search business, which includes Ask.com and other destination search websites through which we provide search and related advertising services, and toolbars and applications through which we promote and distribute these services, Citysearch, a leading online local city guide, and Evite, an online social planning website.

Revenue decreased 22% to $167.6 million, primarily due to a sharp decline in network revenue, resulting from the discontinuation of relationships with certain partners that took place during 2008 in conjunction with the renewed Google agreement. The full impact of this discontinuation will be fully anniversaried beginning in the second quarter of 2009. Revenue declines also reflect fewer queries across proprietary properties, particularly at Fun Web Products and Ask.com, as well as a decrease in revenue per query at Ask.com reflecting fewer clicks per visit as users find what they are searching for sooner due to the relaunched site's improved user experience. Offsetting these decreases was the continued growth in partners and queries at the Ask toolbar business and $4.6 million of revenue in 2009 related to the acquisition of Lexico on July 3, 2008, which includes Dictionary.com and Thesaurus.com. Citysearch revenue declined reflecting a difficult display advertising environment.

Operating Income Before Amortization decreased 73% to $10.1 million, primarily due to the lower revenue noted above and an increase of $5.4 million in selling and marketing expense, partially offset by decreases of $18.6 million in traffic acquisition costs and $3.5 million in product development expense. Contributing to the increase in selling and marketing expense is an increase of $6.7 million in advertising and promotional expenditures, including those associated with the NASCAR partnership, partially offset by a decrease of $1.0 million in compensation and other employee-related costs. Overall traffic acquisition costs during the year decreased as a direct result of a decrease in network revenue, partially offset by growth in distribution revenue included as a component of proprietary revenue at IAC Search & Media. As a percentage of revenue, traffic acquisition costs associated with network revenue generated from integrated paid listings are lower than traffic acquisition costs associated with distribution revenue generated from partners who redirect traffic to the Ask.com landing page. The decrease in product development expense is primarily due to a decrease of $3.1 million in compensation and other employee-related costs, due in part to a 6% reduction in average headcount at IAC Search & Media.

Operating income decreased 97% to $1.1 million, primarily due to the decrease in Operating Income Before Amortization described above and increases of $2.3 million in amortization of non-cash marketing and $0.4 million in amortization of intangibles related to recent acquisitions.

Match

Revenue declined slightly to $90.1 million, reflecting a 15% decrease in international revenue per subscriber, due primarily to the unfavorable impact of foreign exchange rates. Total revenue grew 6% and international revenue grew excluding the impact of foreign exchange rates. International subscribers grew 1% during the quarter driven by several markets, most notably the United Kingdom and Japan, partially offset by declines in Spain and France. The decrease in international revenue was offset by a 9% growth in U.S. subscribers.

Operating Income Before Amortization decreased 2% to $9.9 million primarily due to an increase in general and administrative expense, partially offset by a decrease in cost of revenue. The increase in general and administrative expense is due primarily to the inclusion in the current year period of $3.3 million in expenses associated with the pending sale of Match Europe to Meetic. On February 19, 2009, Match.com and Meetic, a leading online dating company based in France, entered into an agreement for Meetic to acquire Match.com's European operations. As consideration Match.com will

receive a 27% stake in Meetic, plus a €5.0 million promissory note. Contributing favorably to the reduction in cost of revenue is a decrease of $4.3 million in traffic acquisition costs due to more favorable economic terms under agreements with certain domestic distribution partners.

Operating income increased 37% to $9.7 million in 2009, despite the decrease in Operating Income Before Amortization discussed above, primarily due to a decrease of $2.8 million in amortization of non-cash marketing.

ServiceMagic . . .