Dotdash Has the Answers for Media Investors

Dotdash specializes in the third. Its 14 brands include Investopedia, The Spruce, Brides and Simply Recipes. Ever wonder what exactly is “adjusted” about “adjusted Ebitda” or how not to shrink your laundry? Creative wedding venues? How to make lasagna for 10 people? If you have had a question online over the past several years, there is a good chance you found your answer through one of Dotdash’s brands.

Dotdash, formerly known as About.com, has a history that dates back to the 1990s. It was acquired by IAC almost 10 years ago. Few know the company by name, even if they recognize its individual brands. That could soon change. Dotdash is still small, comprising just 7% of IAC’s total revenue last year. But with the spinoff of Vimeo recently completed, Dotdash is now the fastest-growing and the most highly valued wholly owned asset remaining under the IAC umbrella. JPMorgan analyst Cory Carpenter estimated last month that, excluding IAC’s minority stake in MGM, its majority stake in Angi Inc. and cash, Dotdash now constitutes roughly 55% of its value.

Competitor BuzzFeed Inc.’s plans for a public listing have turned heads back to digital media after some tough years, putting Dotdash’s recent performance in a positive light. Last month BuzzFeed, whose portfolio includes such brands as HuffPost and Tasty in addition to its listicle-heavy namesake brand, said it would go public through a merger with a blank-check firm. The deal, which includes a $300 million acquisition of youth entertainment and media company Complex Networks, is being valued at $1.5 billion.

Dotdash generates less revenue than BuzzFeed, but it seems to be doing more with it. According to an investor deck, BuzzFeed and Complex managed a combined adjusted earnings before interest, taxes, depreciation and amortization margin of just 4% last year. That compares with Dotdash’s nearly 31% margin on the same basis. Solid margins, coupled with strong revenue growth in the first half of the year, have analysts across six different banks valuing Dotdash at an average of just over $1.9 billion—a premium to BuzzFeed despite its smaller size.

Moreover, it is possible that Apple’s recent privacy changes to iOS could increase Dotdash’s value proposition to advertisers should they choose to diversify away from major social-media platforms, which will see their ability to track users’ activities off their platforms diminished in the near term. Dotdash, which makes money from a combination of advertising and “performance marketing,” or commerce, says users come to its brand platforms with shopping intent, much as they do on Pinterest. That means the company doesn’t need much in the way of third-party data to show its worth to advertisers. When users search for something such as “best diet for early onset diabetes” or “resort wear for summer in Hawaii,” Dotdash is armed with a lot of information to help its advertisers understand how and when to best target those users next.

Dotdash’s overall business was relatively resilient throughout the pandemic as users leaned on the internet more than ever to get pressing questions answered with a lot of in-person businesses shut down. But it did see year-on- year declines in display advertising in spring and early summer 2020. That deceleration has made for particularly easy comparables thus far this year, with Dotdash increasing total revenue an average of over 56% for the first half of 2021. Even as revenue growth moderates, analysts are forecasting robust margins for the foreseeable future.

Dotdash might not generate the “buzz” of its flashy media competitors, but investors should start asking a lot more questions.

Write to Laura Forman at laura.forman@wsj.com