Management Overview

IAC operates more than 50 leading and diversified Internet businesses across 30 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, as amended, for the year ended December 31, 2008.

Results of Operations for the three and six months ended June 30, 2009 compared to the three and six months ended June 30, 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 and six months ended June 30, 2009 and 2008 (dollars in thousands).

                                    Three Months Ended June 30,               Six Months Ended June 30,
                                   2009         Growth       2008           2009        Growth       2008
Revenue:
Media & Advertising             $   168,587         (10 )% $ 186,325      $  336,207        (16 )% $ 401,863
Match                                88,291          (5 )%    93,282         178,351         (3 )%   183,818
ServiceMagic                         42,400          18 %     35,871          73,753         14 %     64,819
Emerging Businesses                  41,494         (15 )%    48,538          85,516         (7 )%    92,301
Inter-segment elimination              (727 )        93 %     (9,852 )        (1,772 )       90 %    (17,981 )

        Total                   $   340,045          (4 )% $ 354,164      $  672,055         (7 )% $ 724,820

                                 Three Months Ended June 30,               Six Months Ended June 30,
                                2009         Growth       2008           2009       Growth        2008
Operating Income (Loss):
Media & Advertising          $     9,145         (69 )% $  29,761      $  10,233        (83 )% $   61,060
Match                             28,397          45 %     19,626         38,139         43 %      26,762
ServiceMagic                       5,680         (36 )%     8,906          7,683        (47 )%     14,516
Emerging Businesses              (10,249 )       (12 )%    (9,131 )      (22,949 )      (24 )%    (18,439 )
Corporate                        (29,066 )        48 %    (55,596 )      (62,323 )       39 %    (101,441 )

     Total                   $     3,907          NM    $  (6,434 )    $ (29,217 )      (67 )% $  (17,542 )

Three Months Ended June 30, Six Months Ended June 30, 2009 Growth 2008 2009 Growth 2008 Operating Income Before Amortization:

Media & Advertising                $  15,908         (56 )% $  35,850      $   26,042        (65 )% $  73,379
Match                                 28,546          25 %     22,865          38,487         17 %     33,004
ServiceMagic                           6,709         (29 )%     9,445           9,510        (39 )%    15,594
Emerging Businesses                   (9,263 )       (19 )%    (7,810 )       (20,319 )      (30 )%   (15,635 )
Corporate                            (16,155 )        57 %    (37,423 )       (31,143 )       52 %    (64,779 )

      Total                        $  25,745          12 %  $  22,927      $   22,577        (46 )% $  41,563

Refer to Note 7 to the consolidated financial statements for reconciliations by segment of Operating Income Before Amortization to Operating Income (Loss).

Consolidated Results

Revenue

For the three months ended June 30, 2009 compared to the three months ended June 30, 2008

Revenue in 2009 decreased $14.1 million from 2008 primarily as a result of a decrease of $17.7 million from Media & Advertising. The decrease from Media & Advertising was driven by a decline in revenue per query across proprietary properties, partially offset by 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.

For the six months ended June 30, 2009 compared to the six months ended June 30, 2008

Revenue in 2009 decreased $52.8 million from 2008 primarily as a result of a decrease of $65.7 million from Media & Advertising, partially offset by an increase of $8.9 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 in 2009 from the acquisition of Lexico. The increase in revenue at ServiceMagic reflects a more active service provider network and an 8% increase in service requests as well as the contributions from the businesses now comprising ServiceMagic International, acquired October 29, 2008, and Market Hardware, acquired January 23, 2009.

Cost of revenue

For the three months ended June 30, 2009 compared to the three months ended

     June 30, 2008

                                               Three Months Ended June 30,
                                               2009      % Change     2008
                                                 (Dollars in thousands)
          Cost of revenue                    $106,721       0%      $107,156
          As a percentage of total revenue      31%       113 bp      30%


     ---------------------------------------------------------------------------
     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 revenue in 2009 decreased $0.4 million from 2008 primarily due to decreases of $5.0 million from Match and $3.3 million from Emerging Businesses, partially offset by an increase of $7.6 million from Media & Advertising. The decrease in cost of revenue from Match was primarily due to a decrease of $4.9 million in traffic acquisition costs resulting principally from more favorable economic terms under agreements with certain domestic distribution partners and the sale of Match Europe to Meetic, an online dating company based in France, on June 5, 2009. Cost of revenue from Emerging Businesses decreased primarily due to the absence of ReserveAmerica in the current year period following its sale on January 31, 2009. Partially offsetting these decreases was an increase in cost of revenue from Media & Advertising, due in part to an increase in traffic acquisition costs.

For the six months ended June 30, 2009 compared to the six months ended

     June 30, 2008

                                               Six Months Ended June 30,
                                               2009     % Change     2008
                                                 (Dollars in thousands)
          Cost of revenue                    $219,643     (7)%     $237,435
          As a percentage of total revenue     33%       (8) bp      33%

Cost of revenue in 2009 decreased $17.8 million from 2008 primarily due to decreases of $9.2 million from Match and $7.5 million from Media & Advertising. The decrease in cost of revenue was primarily due to decreases in traffic acquisition costs from Match and Media & Advertising. The decrease in traffic acquisition costs of $9.2 million from Match was due to the factors described above in the three month discussion. Overall traffic acquisition costs from Media & Advertising during the period decreased as a direct result of a sharp decline in network revenue at IAC Search & Media.

Selling and marketing expense

For the three months ended June 30, 2009 compared to the three months ended

     June 30, 2008

                                               Three Months Ended June 30,
                                               2009      % Change     2008
                                                 (Dollars in thousands)
          Selling and marketing expense      $118,902       2%      $116,792
          As a percentage of total revenue      35%       199 bp      33%

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 $2.1 million from 2008 primarily due to increases of $5.7 million from ServiceMagic and $3.1 million from Media & Advertising, partially offset by a decrease of $4.6 million from Match. The increase in selling and marketing expense from ServiceMagic is primarily due to an increase of $4.7 million in advertising and promotional expenditures associated with online marketing. The increase in online marketing is a direct result of the growth in service requests from paid channels outpacing growth in free requests. Also contributing to the increase in selling and marketing expense from ServiceMagic is an increase in compensation and other employee-related costs, due in part, to the continued expansion of its sales force. Selling and marketing expense from Media & Advertising increased primarily due to increases of $2.5 million in advertising and

promotional expenditures and $1.3 million in compensation and other-employee-related costs. Included in the increase in advertising and promotional expenditures from Media & Advertising are costs associated with the NASCAR partnership as well as marketing costs related to an ad campaign to rebrand the Ask.co.UK website. Partially offsetting the increase in selling and marketing expense is lower advertising and promotional expenditures from Match primarily due to a decrease in television advertising and online marketing.

For the six months ended June 30, 2009 compared to the six months ended

     June 30, 2008

                                               Six Months Ended June 30,
                                               2009     % Change     2008
                                                 (Dollars in thousands)
          Selling and marketing expense      $251,802      6%      $238,113
          As a percentage of total revenue     37%       462 bp      33%

Selling and marketing expense in 2009 increased $13.7 million from 2008 primarily due to increases of $10.1 million from ServiceMagic and $8.5 million from Media & Advertising, partially offset by a decrease of $4.6 million from Match. The increases in selling and marketing expense from ServiceMagic and Media & Advertising as well as the decrease from Match are primarily due to the factors described above in the three month discussion.

General and administrative expense

For the three months ended June 30, 2009 compared to the three months ended

     June 30, 2008

                                                Three Months Ended June 30,
                                                2009      % Change     2008
                                                  (Dollars in thousands)
         General and administrative expense   $68,970       (25)%     $91,387
         As a percentage of total revenue       20%       (552) bp      26%

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 $22.4 million from 2008 primarily due to a decrease of $25.1 million from corporate, partially offset by an increase of $2.9 million from ServiceMagic. The decrease from corporate is principally due to the inclusion in the prior year period of $12.6 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 decreases in compensation and other employee-related costs, including stock-based compensation, and non-Spin-Off related professional fees. The decrease in compensation and other employee-related costs is primarily due to decreases in bonus expense and non-cash compensation expense. General and administrative expense from ServiceMagic increased primarily due to increases of $1.3 million in compensation and other employee-related costs and $0.4 million in professional fees.

For the six months ended June 30, 2009 compared to the six months ended

     June 30, 2008

                                                Six Months Ended June 30,
                                                2009     % Change     2008
                                                  (Dollars in thousands)
         General and administrative expense   $142,604    (17)%     $171,982
         As a percentage of total revenue       21%      (251) bp     24%

Product development expense

For the three months ended June 30, 2009 compared to the three months ended

     June 30, 2008

                                               Three Months Ended June 30,
                                               2009      % Change     2008
                                                 (Dollars in thousands)
          Product development expense        $16,422       (4)%      $17,054
          As a percentage of total revenue      5%         1 bp        5%

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 $0.6 million from 2008 primarily due to a decrease of $0.3 million in compensation and other employee-related costs from Media & Advertising.

For the six months ended June 30, 2009 compared to the six months ended

     June 30, 2008

                                                Six Months Ended June 30,
                                                2009     % Change    2008
                                                 (Dollars in thousands)
           Product development expense        $34,510     (10)%     $38,506
           As a percentage of total revenue      5%      (18) bp      5%

Product development expense in 2009 decreased $4.0 million from 2008 primarily due to a decrease of $3.4 million in compensation and other employee-related costs from Media & Advertising which is due in part to a 4% decrease in average headcount at IAC Search & Media. Also contributing to the decrease in product development expense is an increase in costs being capitalized in the current year period related to the development and enhancement of the company's search technology and products.

Depreciation

     For the three and six months ended June 30, 2009 compared to the three and
     six months ended June 30, 2008


                                                              Six Months Ended June 30,
                          Three Months Ended June 30,
                          2009      % Change     2008         2009     % Change    2008
                                             (Dollars in thousands)
  Depreciation          $16,877       (3)%      $17,459     $33,091      (5)%     $34,718
  As a percentage of       5%         3 bp        5%           5%       13 bp       5%
  total revenue

Operating Income Before Amortization

     For the three months ended June 30, 2009 compared to the three months ended
     June 30, 2008

                                                 Three Months Ended June 30,
                                                 2009      % Change     2008
                                                   (Dollars in thousands)
        Operating Income Before Amortization   $25,745        12%      $22,927
        As a percentage of total revenue          8%        110 bp       6%

Operating Income Before Amortization in 2009 increased $2.8 million from 2008 primarily due to a decrease of $21.3 million in corporate expenses and strong profit growth from Match. Included in the prior year period is $12.6 million in expenses related to the Spin-Off. Partially offsetting these increases in Operating Income Before Amortization is a decrease of $19.9 million from Media & Advertising resulting primarily from lower overall revenue.

For the six months ended June 30, 2009 compared to the six months ended

     June 30, 2008

                                                  Six Months Ended June 30,
                                                  2009     % Change    2008
                                                   (Dollars in thousands)
         Operating Income Before Amortization   $22,577     (46)%     $41,563
         As a percentage of total revenue          3%      (238) bp     6%

Operating Income Before Amortization in 2009 decreased $19.0 million from 2008 primarily due to decreases of $47.3 million, $6.1 million and $4.7 million from Media & Advertising, ServiceMagic and Emerging Businesses, respectively. These decreases in Operating Income Before Amortization were partially offset by a decrease of $33.6 million in corporate expenses due in part to the inclusion in the prior year period of $21.1 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 marketing costs from ServiceMagic, and increased operating expenses from Emerging Businesses primarily related to The Daily Beast and InstantAction.com, as well as the absence of profits from ReserveAmerica in the current year following its sale on January 31, 2009.

Operating income (loss)

For the three months ended June 30, 2009 compared to the three months ended

     June 30, 2008

                                               Three Months Ended June 30,
                                              2009      % Change      2008
                                                 (Dollars in thousands)
          Operating income (loss)            $3,907        NM       $(6,434)
          As a percentage of total revenue     1%          NM         (2)%

Operating income in 2009 increased $10.3 million from 2008 primarily due to the $2.8 million increase in Operating Income Before Amortization described above and decreases of $5.0 million in non-cash compensation expense and $2.9 million in amortization of non-cash marketing, partially offset

by a slight increase in amortization of intangibles. The decrease in non-cash compensation is due in part to an increase in forfeited awards. 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.

For the six months ended June 30, 2009 compared to the six months ended

     June 30, 2008

                                               Six Months Ended June 30,
                                              2009      % Change     2008
                                                 (Dollars in thousands)
         Operating loss                     $(29,217)    (67)%     $(17,542)
         As a percentage of total revenue     (4)%      (193) bp     (2)%

Operating loss in 2009 increased $11.7 million from 2008 primarily due to the $19.0 million decrease in Operating Income Before Amortization described above, a goodwill impairment charge of $1.1 million related to our gift card business and a slight increase in amortization of intangibles. Partially offsetting these increases in operating loss are decreases of $5.3 million in non-cash compensation expense, as described above in the three month discussion, and $3.4 million in amortization of non-cash marketing.

At June 30, 2009, there was $113.8 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 2.4 years.

Other income (expense)

For the three months ended June 30, 2009 compared to the three months ended

     June 30, 2008

                                                   Three Months Ended June 30,
                                                 2009        % Change        2008
                                                      (Dollars in thousands)
    Other income (expense):
      Interest income                          $    2,444          (57 )% $    5,703
      Interest expense                             (1,261 )        (91 )%    (13,886 )
      Equity in (losses) income of                 (2,165 )         NM         6,448
      unconsolidated affiliates
      (Loss) gain on sale of long-term            (12,305 )         NM        29,131
      investments
      Other income (expense)                       74,116           NM      (127,872 )

Interest income in 2009 decreased $3.3 million from 2008 primarily due to the impact of lower average interest rates resulting, in part, from a reallocation of investments during the second half of 2008 into lower yielding treasury and government agency funds, partially offset by higher investment balances. Interest expense in 2009 decreased $12.6 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 June 30, 2009 is $15.8 million.

Equity in (losses) income of unconsolidated affiliates in 2009 decreased $8.6 million from 2008 primarily due to the inclusion in the prior year period of $8.4 million related to the equity in earnings of our former investment in Jupiter Shop Channel Co., Ltd., a Japanese TV shopping company.

Loss on sale of long-term investments in 2009 represents a loss of $12.3 million related to the Company's sale of Arcandor AG ("ARO") shares. As part of the consideration for the sale of Home Shopping Europe GmbH & Co. KG, and its affiliated station HSE24 ("HSE") in June 2007, the Company received approximately 5.5 million shares of ARO stock plus additional consideration in the

form of a contingent value right ("CVR"). During the second quarter of 2009, the Company sold 4.3 million shares of ARO stock.

Gain on sale of long-term investments in 2008 represents a gain of $29.1 million associated with the sale of the Company's preferred investment in Points International, Ltd. ("Points").

Other income in 2009 of $74.1 million is principally due to a $116.8 million gain related to the sale of Match Europe. On June 5, 2009, Match.com completed the sale of its European operations to Meetic. In exchange for its European operations, Match.com received a 27% stake in Meetic, plus a promissory note valued at $6.2 million. Partially offsetting the increase in other income in 2009 are the write-downs of $38.2 million and $3.9 million related to the CVR and the Company's remaining 1.1 million shares of ARO stock, respectively. ARO filed for insolvency on June 9, 2009. The impairment charge related to the CVR is based upon the Company's assessment of its fair value at June 30, 2009 of €13.4 million or $18.9 million. The Company will continue to monitor the progress of the insolvency proceedings of ARO in the coming months and will reassess the fair value of the CVR each reporting period. At June 30, 2009, the carrying value of the Company's 1.1 million shares of ARO stock was €0.7 million . . .