Yahoo just released earnings for the second quarter. Total revenues dropped 13 percent to $1.5 billion. Google, in contrast, saw total revenues rise 3 percent in same quarter. After paying partner sites traffic acquisition costs (TAC), Yahoo’s take-home revenue was $1.1 billion.
Yahoo’s net income rose 8 percent to $141 million. Operating income fell 17 percent to $101 million, and net income fell a whopping 78 percent to $118 million (but much of that difference was due to a $401 million non-cash gain Yahoo took in the first quarter related to its stake in Alibaba, which had an IPO).
Yahoo’s search advertising revenues on Yahoo-owned sites declined 15 percent to $359 million, while display advertising on owned and operated sites declined 14 percent to $393 million. Yahoo announced a deal with AT&T to sell local online ads.
Correction: This post briefly included information about layoffs which was incorrect. My apologies for alarming any Yahoo employees.
During the conference call, CEO Carol Bartz praised Bing (Microsoft’s search effort) and promised to get rid of annoying ads on Yahoo Mail. My live notes are below (bolded parts are for emphasis):
Carol Bartz:
Considering the economy I am pleased with our results, revenues above midpoint of our expectations, upside coming from currency fluctuations.
Less fear from advertisers.
But so much conflicting info form the market, too early to call.
1. great team (hired CFO)
2. great experience (mobile, social, advertising) have to make sure ads are more relevant, less irritating to users.
3. Better business processes. Want to be a better company to work for and with.
CFO Tim Morse:
Pageviews up 7%
Rev: $1.573 billion (down 13%)
Search revenues down 15%
display revenues down 14%
encouraging sign: guaranteed display inventory increased on a sequential basis
growth in health and travel
Affiliate business (primarily search) down
TAC was 28% of total revenue, rising slightly
listings revenue down 21%
OCF (operating cash flow) $385M
free cash flow $266M
savings at the low end of our expectations due to cost savings. Planning on hiring new sales people, invest in branding efforts to seize growth opps that will come as economy recovers.
$365M restructuring charge, real estate related and $25M related to headcount reduction
$67M pretax gain from sale in Gmarket.
Carol Bartz:
Biggest content site. Lead in news, sports, finance, and other categories. Yahoo homepages leads all others.
brags about a single link from Yahoo home page to NYT, creating 9M pageviews.
“We work with publishers, not against them” (subtle dig at Google)
Yahoo mail, open features, improvements in speed and performance and engagement.
Talks about annoying ads, calls them a “detriment,” “cheapening the Yahoo brand.” Will be trying to get rid of blaring ads.
Initiative around improving ad experience
Talks about mobile search deal with cell phone carrier in Taiwan to displace Google [she's digging deep there]
expanded relationship with AT&T to sell Yahoo local inventory by AT&T advertising salesforce. Yahoo’s salesforce with its advertising partners is now 13K strong.
Q&A:
Q: Carol, what is your first impression on Bing? Seeing any user behavior changes?
Carol: I think Bing is actually a good product. Experimentation around search instead of thinking just a standard blue link. only a month in, hard to understand if it is just curiosity or if they will gain share, but I think they have done a nice job.
Q: Search business seems to have deteriorated, display shows sequential improvement. Where is the bets ROI, display or search, since you will prob. have to choose one or the other?
Carol: Search did decline Q over Q, that is not a meaningful trend. Our volume was healthy, more that there was RPS pressure. The whole idea is to keep to optimize and drive relevancy for advertiser’s ROI. Advertisers being smarter, chose less keywords.
At the end of the day, our investment priority is in the user. If we can increase our audience, which we know we can, we can drive both search and display revenues. We can provide both, but what we really need to provide ad partners is an engaged audience.
Tim: CPCs not that different, more a mix in the queries.
Q: Do you get renumerated for links to Facebook or Gmail?
Carol: No, it is really about giving consumers an experience on Yahoo without having to leave Yahoo. To be the center of their online life. Not about money, about helping them organize their online life.
Q: Ebitda margins lowest guidance since 2003. You said you would be ramping spending in Q, how should we think about margins?
Carol: When we gave the guidance last Q we told you we were going to to layoffs to have room to put the same cost into the system to reinvest into the business. Pretty much on target with that. Marketing spend for 3Q is in the additional cost already ($75M?). Adding people into product, engineering, sales people.
Tim: Repositioning cost structure, drained some buckets, now filling up different buckets.
Q: What percentage of ad inventory is guaranteed? How should we think about yearly cost structure?
Tim: We don’t break out between guaranteed and non-guaranteed. We did see strength in guaranteed in high-single digits. Strength in 7 out of 10 categories we track like finance, health, consumer products. In non-guaranteed ads, more steady.
Carol Bartz: It’s like 30 to 40 steps to buy a display ad from us. Want to have a much. much easier way to do business with us. Looking forward to making this better.
Q: How is growth in Q2 breaking down?
Carol Bartz: We don’t actually break this out, but there are those people experimenting more with non-guaranteed and new customers coming in with guaranteed. By moving more into the mid-market that will be a lot more non-guaranteed because that is their first online ad experience.
Tim: We are doing very well with our top advertisers. On Display, revs are up with top ten advertisers. Also in Search, but not quite as good.
Q: O and O search vs. affiliate revs?
Bartz: I don’t see a trend.
Q: U.S. was down, looks like RPS (revenue per search) pressure, is that because of scale vs. Google?
Bartz: Of course scale matters in search. I’d switch positions, that’d be fun. When you have fewer click-throughs and you have a longer tail you get to monetize more. But our search volume is holding fine. We have to convince those buyers to get off the chair and push buy.
Q: Follow up on RPS, you talked about improving relevancy of ads. Can you talk about levers you can pull to improve RPS, how do you view new homepage impact on search
Bartz: Alot of what we are talking about in improving ads is display. You know what an irritating ad is. With RPS, working to drive teh right ad to the right query, better targeting. With how Metro will impact search, we are pleased with search placement on the homepage. improved quality in display, improved relevance in search and make search more prominent will help drive relevancy.
You have to get users to say, I like those. then they tell their friends. You take some of the bad ads off mail, guess what, they stay. All of that is a better experience. All of that will drive advertisers to us.
Kinda sucks for the 5%. I hope everything works out for them.
Somebody should innovate display ad. I feel goog text ads much worse while i like non-animated display ads. My take is mouseover play of a flash ad should be taken up by someone.
13% is quite alot when you are talking in the million figures. Oouch, the economy is putting all businesses back to the basics.
James F.
TwitterBackground.com – Free Twitter backgrounds
Hi, Erick, Yahoo did not announce a new round of layoff. Are you using the same script from Q1 2009?
yes, my mistake. Corrected.
Doubt this is a suprise to anyone, I bet they are hanging out for a positive deal with Microsoft.
Although there was a much better one they should have taken 18 months ago….
i agree with you. the last deal was for what I believe $37 per share. But Jerry Yang, yahoo!’s previous CEO killed the deal and didnt want Microsoft to acquire it.
but now it seems the Bing Yahoo Search deal is inevitable
COULDA HAD 34
that will be jerry’s legacy in its entirety
did they still turn a profit? Firing workers to make a few (wealthy) stockholders happy always seemed wrong to me, especially if the business is still profitable.
Did they mention what divisions/locations will be affected? I can certainly help anyone in the technical/engineering space make a smooth transition to a new career. Hopefully this will help
Haha, they only made $118 million. suckers.
In profit. How many internet companies out there beat that right now?
Bartz is queen of reigning in costs. No doubt this will help with marquis clients.
They should try diversifying like AOL has done. For the past year or so they have been trying to create other properties no way associated with the main brand. This has helped them tremendously in terms of revenue, although we’ll see about their business model. Yahoo should try the same.
This post is dead wrong.
The nytimes got it right:
http://www.nyti...es/22yahoo.html
Yahoo is always losing money
its over. oddly enough they are finding one last way to screw shareholders: msft will in essence slowly take over the company, but there won’t be a full buyout that would give shareholders an exit
of course my layoffs will come. yahoo burbank staffers (all of them) might as well wait around now for the severance. facebook serves an equal number of pageviews with one fifth the headcount. how long can yahoo stay so overstaffed????
Honestly, as a blogger or journalist you *should* check before telling the world and people that 5% of some company will lose their job. Sorry, this is just not professional.
Think you can correct the Twitter post? It still has the original headline, and we don’t want another Jeff Goldblum situation (may he rest in peace).
The headlines focusing on Rev is kind of ridiculous. Yes revenues are decreasing in a crisis context. Yahoo! rev is the pure indicator of Advertisers’ spending on display and Yahoo! is doing fairly well with that.
You compare revenues with Google’s ones, fair enough, why not comparing the net-profit trends as well?
You know Net profit is what matters most!
Profitabilty of Yahoo! rose over expectation in a crisis context, that’s the main story here and you didn’t get it.
Eventually Yahoo! will become relevant now. Microsoft have proven that it’s possible to steal market share off Google very easily, and with a little thinking and experimentation, Yahoo! could easily rise to the top again.
We should all get behind Yahoo! – they were around before Google came too town.
Guys…as somebody who counts many fellow ex yahoo’s as friends…well, 15% drop in search where 14% drop in display should read HOLY CRAP.
Why? less than 1/2 their resources (my guess) are aligned with search…but, its’ about half their money.
As a result…they will keep bleeding themselves dry, until they allocate resources where the dollars are.
And, if you keep pissing on advertisers (yahoo search marketing) it will bite you in the ass.
It would be a shame to see Yahoo slowly consumed by Microsoft. They *were* the internet in the beginning, everybody had their browser’s homepage set to Yahoo. I don’t know much about Bing, but I’d say keep away, maybe Yang had it right.
Wow! It is so non professional to say that 5% of a company will be layoff, without checking the source. And as Gregory has said, you should look to Net profit…
No more comments, I guess this enough from now
No one needs a link to Facebook or Gmail. They are bookmarked, auto-completed and hardwired into everyone’s brains.
Wasting your most precious real estate with that kind of pandering shows you really don’t know what you are doing.
well its not only a link, Gmail is the mail preview on the home page and facebook is reading and writing status updates and comment within the homepage.
Why you never check before writing craps.
TechCrunch is so dead wrong: Correct new is here: http://www.nyti...yahoo.html?_r=1
Techcrunch is big time sucker… or I wuld say pimps for Google and now a days Bing ….. lol
“Experimentation around search instead of thinking just a standard blue link.”
The improvement in search results that are driver. Everything else is just window dressing.
Bartz’s entire view of Yahoo and the web is always coming from the most simplistic vantage point. All she ever notices is the wallpaper (How things look). Never mind how well they work. Do you care that your SERPs are full of duplicate results? Do you care that Yahoo Mail has extremely poor spam filters and has not kept up with the times?
Why are properties like Shine still buried under the edifice of Yahoo’s domain, instead of living on their own .com? AOL took 10 years to learn this. How much longer will it take Yahoo?
Also why aren’t you getting Yahoo Search bars all over third party sites they way Google did years ago? That is THE best way to increase your share of the search market… duh!
Not to mention getting YPN out of 4 years of beta and going head to head with Adsense? Small publishers have been desperate for a viable alternative to Google for years. No one expects Yahoo to be as good out of the gate, but you have to get out of the gate!
that sir is a nice comment.. I believe it too
“When you have fewer click-throughs and you have a longer tail you get to monetize more.”
Up to a point.
“But our search volume is holding fine. We have to convince those buyers to get off the chair and push buy.”
You need to grow your search by leveraging third party sites. Convincing buyers to buy is a search marketers job. Not Yahoo’s. You need to provide search marketers with volume. That’s your job.
Erick, you know how to make headlines interesting making it full of crap.
“Conference call notes: Bartz like Bing”
Better make it “Yahoo! net profit rose 8% in Q2″
Why u always do negative marketting for Yahoo! I think u guys enjoy that because u see lots of comments on this kind of topic.
isn’t it
Well Shonu – it is because TechCrunch probabbly gets some money from Google or Bing to praise them… or techcrunch just like to suck their balls …. they are not HONEST at all as they should being in this business
dude tech crunch has been yahoo haters since the dawn of time
I agree. -My guess is that they havent got shares in Yahoo!
Because Yahoo isn’t sufficiently trendy for them. I guess Yahoo would need to publish some other company’s private memos to really get the love of the Techcruncherati.
Yahoo traffic would go up if they just stopped hosting those stupid animated insurance ads.
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