Yahoo Focused on User Engagement, Eyes 10% Sales Growth
Yahoo CEO Carol Bartz May 26 at the company's analyst day pledged allegiance to improving user engagement. Yahoo CFO Tim Morse said Yahoo expects annual sales to increase by an average of 7 percent to 10 percent. Yahoo also partnered with Zynga after buying Associated Content and Foursquare copycat Koprol. Some analysts see these moves as positive attempts to gain more users; others see them as an admittance that the company would rather integrate others' technology than build exciting new products.Yahoo CEO Carol Bartz pledged the company's allegiance to improving user engagement and expressed confidence in reaching as much as 10 percent revenue growth over the next few years. Yahoo CFO Tim Morse said at the company's analyst day May 26 that Yahoo expects annual sales to increase by an average of 7 percent to 10 percent and operating margins of 18 percent to 24 percent by 2013.
Some analysts see these moves as positive attempts to gain more users; others see them as an admittance that the company would rather integrate others' technology than build exciting new products. The greatest example of this is Yahoo's outsourcing of its search engine to Microsoft's Bing, which could make Yahoo a lot of money because Microsoft is paying its partner 88 percent of the traffic acquisition costs.
Count Susquehanna Financial Group analyst Marianne Wolk among the faithful. Wolk said Yahoo's analyst day was a positive surprise given the low expectations heading into the event. She said the 7 to 10 percent net revenue growth over the next four years was a nice boost, assuming the company can execute to hit those figures. She also said the deal with Zynga and the launch of log-in page takeovers in June should boost display revenue by the second half of 2010 and "support a long-term display forecast above 13 percent through 2013. "Yahoo expects to monetize its log-in page for the first time as of June," Wolk wrote in a research note May 27. "If it achieves Facebook's recent rates near $300,000 per day, this suggests at least $110 million in incremental revenue potential from the full page, graphical ads reaching one in ten U.S. internet users every day (one in three every month). If it matches the $1 million rates it achieves on the Yahoo home page, a more sizable $300 million $400 million opportunity is possible." Other analyst sounded more somber notes regarding Yahoo. "The sole investment issue, in our opinion, remains user engagement, where, outside of a few individual data points, the trends are increasingly negative," wrote FBR Capital Markets analysts May 27. "Until we see signs that the company's efforts are reversing this trend, we believe the stock will likely continue to underperform."