What Yahoo's Numbers Mean for Google

By Steve Bryant  |  Posted 2006-07-18 Print this article Print

Yahoo cooling down Update: Yahoo cool-down. Terry Semel says the commercial launch of Yahoo's new ad platform is being delayed from Q3 to Q4, and marketers should plan to start deploying on it in Q1 2007. Yahoo's stock is down to $28.62, two cents off its year low. (slides and data) This isn't good news for Yahoo, since improving its ad tech is key to improving how it places ads next to its search results. Yahoo profit per user search isn't as high as for Google. Google has also been making incremental improvements to AdWords. CFO Sue Decker: If we see a slowdown this year, we'll see it in search and e-commerce first.

Update #2: Decker: We think we've been consistent in search share. ComScore numbers don't reflect the reality of what our internal log files say. ComScore's year over year trends are very distorted.

Yahoo released their Q2 earnings today. Profits are down about 10 percent from a year ago (when it had a one-time investment gain) and it missed profits by a penny.

The good news for Yahoo is that sales are up due to a healthy online advertising market. Sales at Yahoo rose 26 percent to $1.58 billion from $1.25 billion. Yahoo credited interest in soccer's World Cup tournament.

Yahoo said adjusted net income rose to $237 million, or 16 cents a share, from $209 million, or 14 cents, a year ago, excluding stock option expenses and one-time gains and charges.

Revenues are up 26 percent year over year and 3 percent quarter over quarter.

So, overall, Yahoo is doing okay, but not great. According to Nielsen/NetRatings, Web traffic to Yahoo increased 9 percent in Q2 06 versus Q2 05, growing from a three-month average monthly unique audience of 97.4 million to 105.7 million. Yahoo's market share of estimated image-based advertising revenue was 30.4 percent this past quarter. The company's fastest-growing channel was Yahoo Health, which increased its unique audience from 2.36 million in 2005 to 3.16 million this quarter.

But Yahoo's share of search queries hasn't changed much, growing only .5 percent to 28.5 percent of all U.S. searches. Google, meanwhile, continues to dominate search, with almost 45 percent of the U.S. market, and Google is increasing its lead quickly.

All in all, it looks like either Google is taking share from Yahoo, or Yahoo is too bloated to keep up. As of right now, Yahoo's stock is near its year low of $28.60. If it goes below that, things start to get ugly.

Google will release its earnings this Thursday, July 20. Stay tuned.

Notes from Call:


-- Priorities this year include creating next-generation apps (whatever that means), extending Yahoo beyond the browser, and increasing focus on text-based and banner ads.

-- droning on about Yahoo home page and Yahoo Answers

-- 4.2 billion page views of Yahoo properties, 138 million (billion?) video streams

-- new Yahoo video product (nice, but it looks/works like everything else)

-- public beta of IM interoperablity is out (yep, that's cool)

-- 3.9 billion page views per day in June. Outpaced 25 percent in unique users. Four percent more revenue per page view in Q2.

-- 400 hires in the last quarter.

-- biz outlook for Q3: revenue up around 25 percent from a year ago. Q3 margins roughly inline with Q2.

Questions and Answers:

Revenue and search
We don't have info on competitors, but we've been clear for a year that we think that we're not performing as well. Lost market share on revenue basis. Put a lot of effort into our Panama efforts. We take comfort in [the fact that our] core search product to consumers is doing so well. Means when our product is ready, we'll have more to monetize.

Partner quality, how many? Be more in the future? What's changed with Panama since analyst day?
Dan: Traffic quality is an ongoing process. We're pleased with Panama progress, testers are pleased, we don't manage the company for a particular quarter. Wanted to make sure we did the right testing. Our top priority. Not finding a lot of bugs in the system. We'd rather do it right than hurrying it out.

Retail and economy
Too early to tell.

Why did registered users not grow and what's that mean?
No impact in FIFA on those registered users. Page views and figures in June exaggerate numbers because of seasonality. Very consistent with what we've seen in the past. Page view growth: the 33 percent growth is June over June and includes FIFA. Avg page view growth through the quarter is 27 percent. O&O growth rate is 4 percent. Average marketing growth up 30 percent. Volume vs. pricing, 27-28 percent page view growth compared to 24 percent last quarter. But monetization is down, attributed to RPS and search.

Advertisers starting to go to second-tier sites?
Dan: continue to see tremendous momentum with graphical advertisers coming onto the Internet. They're looking for first-tier sites. UK ad market not drying up.

Yahoo sees Yahoo Answers as helping a lot with search and advertising. Work with manufacturers, get users involved, consumer and business side win-win.

Decker: We think we've been consistent in search share. ComScore numbers don't reflect the reality of what our internal log files say. ComScore's year-over-year trends are very distorted.

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