Vimeo raised $150m as its parent company consider a spin-off of the video platform

Amid record revenue growth, US holding company and parent of Vimeo, IAC raised $150m for the video hosting/sharing platform and detail plans to separate Vimeo as its own company.

During IAC’s Q3 earnings report, CEO Joey Levin told investors that, like many other (but not all) media companies, Vimeo saw dramatic growth this year due to COVID-19.

Vimeo was initially seen as a competitor to YouTube, but more recently realising YouTube’s total domination of the online video space, changed its business strategy, offering live streaming and screen recording, editing, distribution, storage and monetization. These tools have of course been in high demand since stay-at-home orders earlier this year.

Vimeo brought in $75.1m revenue in Q3 2020, a massive 44% year-over-year growth from Q3 2019 and it’s first positive EBITDA at $3.4m. Vimeo now has 1.5 million individual monthly subscribers, up from 1.4 million in the previous quarter. IAC also reported Vimeo have 3,500 brands paying for its tools and has seen growth in organic and self-service sales. At the end of 2019, organic bookings (booking without extra marketing effort) made up 27% of total sales. This rose to 41% of total sales by the end of Q1 2020, then 79% in Q2, now sitting at 56% in Q3.

In a letter to shareholders, Levin said:

On the Self-Serve segment of our revenue (meaning, a customer begins to pay Vimeo without having spoken to a salesperson), we’re seeing about $5 in profit for every $1 we spend in marketing. That ratio has continued to steadily improve and we haven’t yet found the limit on our ability to spend on marketing with those returns.

Joey Levin, CEO, IAC

As a result of the success, IAC has “begun contemplating spinning Vimeo off to our shareholders”. This won’t be IAC’s first spin-off company this year. In July, Match Group, who own Tinder, and other dating apps, separated from IAC, dividing stake in the company among shareholders.

“We expect Vimeo’s access to capital inside of IAC will be much more expensive than access to capital outside of IAC,” to evaluate this theory, IAC held funding for Vimeo to test how it would fare standalone “we had more interest in Vimeo than the number of shares we were willing to let Vimeo sell.”

Vimeo went on to raise $150m at an implied enterprise value of $2.75bn from investors Thrive Capital and GIC. IAC are yet to go through with the spin-off. “There’s a long way to go before we’re decided on that, and far too early to speculate on what the terms of that spin would look like”.

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