MSN's Q2 Ad Revenue Horrendous, Woe Is Yahoo (YHOO)

The Internet ad wreckage keeps piling up, and it’s all bad news for Yahoo (YHOO):

  • Bankrate implosion
  • Valueclick implosion
  • Declining CPMs
  • Financials, autos, and real-estate advertisers pulling back
  • Google underwhelms, and
  • Big MSN miss

How bad were MSN’s numbers? Organic year-over-year ad revenue growth decelerated from 26% in Q1 to 8% in Q2, which is also known as hitting a wall. Surely Microsoft’s discombobulation has something to do with it, but we’d be shocked if there weren’t some market weakness in there as well.

The sense we get from inside Yahoo is that the quarter will be in the low-to-mid end of the guidance range. If so, we suspect this will be in part because Yahoo has a lot of acorns stored, not because they just blew away Microsoft, et al, in Q2. And we fear for the rest of the year.

That $33 is looking more dreamy all the time…

See Also:
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Microsoft Cuts Ad Outlook on Weakening Display Ads (Q1)

JP Morgan’s Imran Khan has the MSN details:

OSB reported 4Q segment revenue of $838M, up 24% Y/Y, but below the company’s guidance of $943M – $970M which we believe was due to softness in internet advertising. Online advertising sales increase of 18% included $33M in revenue contributed by aQuantive implying organic growth of 8%. Access revenue declined 23% driven by subscriber migration to other offerings. Total segment revenue in the quarter also included $94M in agency revenue generated by aQuantive while organic segment revenue growth was 5%.


Segment operating loss in the quarter widened to ($488M) from ($210M) in 4Q’07. Expenses increased across the board including cost of revenue growth of 76% due to data centre, equipment, online content and aQuantive- related costs. Additionally, headcount-related expenses were 39% higher than in 4Q’07.


MSFT expects OSB revenue to grow 7% – 11% in 1Q’09 and 18% – 20% in the full year ’09. We note that MSFT started consolidating aQuantive results on August 10, ’07 and as such the above growth rates reflect the benefit of half a quarter of aQuantive revenue in ’09 not included in ’08 results.


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