Yahoo's Q3 Profit Falls; Cuts Outlook, Launches New Ad Platform

By Steve Bryant  |  Posted 2006-10-17 Print this article Print

Yahoo released its Q3 2006 results today, announcing that its profit dropped 37 percent for reasons including weak corporate advertising sales and competitive pressures, as well as costs to expense employee stock options, as the company cut its outlook for Q4 2006. Net income fell to $158.5 million, or 11 cents a share, from $253.8 million, or 17 cents.

"While we're very excited about a number of things happening at Yahoo," said CEO Terry Semel, "I am not satisfied with our current performance."

Semel announced that the company's news search advertising platform, Panama, is live as of today. Yahoo will transition customers on a market-by-market basis. Everything is on track for Q1 2007.

Earlier in the third quarter, Yahoo disappointed investors by trimming its forecast and delaying the introduction of Panama. Yahoo has also faced increased competition from Google, MySpace and YouTube for customers. Google last week bought YouTube for $1.65 billion, stepping up pressure on Yahoo.

Continue to expect any changes in revenue from Panama not to occur until Q2 2007.

Graphical Ad Business
Yahoo saw reduction in graphical ad business in Q3. The company continues to say that's due to advertiser industry problems. In the near term, Yahoo expects growth to be in line with the market, but Semel says he's not happy with that.

Yahoo announced today a 20 percent stake in Right Media, creators of the Right Media Exchange. Semel said he believes this investment will increase yields on non-premium inventory.

Yahoo also announced today it had purchased specialty video advertising firm AdInterax, which will provide Yahoo with creative assembly and campaign management tools.

Impact from YouTube, MySpace
COO Dan Rosensweig: "I'll talk about the inventory glut. It's definitely been a big change ... change [in] market dynamics." Hopefully that glut will bring in advertisers who have been interested in search, get them to do other types. We have to continue to adjust and evolve. Flickr not monetized right now. We plan to leverage our assets. Quality of audience debatable in competitor sites. We know our users, we have a great sales team. Glut for a while.

Plans for investment
Semel said Yahoo would continue to invest in social media, video and mobile applications.

Social Media
-- Flickr grown to 20M users
-- Yahoo Answers one of largest communities, 60M monthly unique users 10 months after launch
-- Yahoo Answers, Delicious, Flickr, Yahoo video have 100M users, including the largest community of 15-24 year olds (30M users)
-- Semel: "convinced SM space will continue to grow and evolve"

Semel: "Our goal is to make video as ubiquitous as text throughout the Yahoo network."
 -- continue to improve our video infrastructure
 -- invest in high-quality user-generated content, hence acquisition of Jumpcut
 -- continue to partner with video producers, more than a dozen including the local news partnership with CBS news plus partnership with Current TV
 -- producing unique, contextually relevant video

-- 35 percent of the emerging market is not coming from PCs, but from mobile devices to the Internet
 -- Yahoo Go -- Windows Mobile and Symbian versions, Java version coming soon
 -- extending social media comms to mobile devices. 50 parterships with access providers. Next 18 months Yahoo Go will be available to the majority of mobile phones in the world.

Traffic metrics
-- added 68M users, 20 percent year over year
-- page views: up 24 percent to 4B per day, plying better engagement
-- generally maintaining query share
-- e-mail leading globally
-- revenue per page view a little lower

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