Yahoo just delivered earnings that beat the street sending the stock up around 3% in after hours trading.Yahoo’s numbers were solid, but not super exciting.
Revenue is flat on a year over year basis when you back out charges related to Zimbra and HotJobs, as well as the Microsoft revenue share.
If you don’t back out those things, it’s down 6%.
The display ad business ex-TAC was up 10% on a year over year basis to $471 million.
The search ad business ex-TAC was clobbered though, falling 19% year over year to $357 million. On the earnings call, CEO Carol Bartz blamed Microsoft’s poor ad centre technology for problems with revenue per search.
The bottom line on Yahoo: It’s just plodding along, slowly improving, but not delivering anything to get really excited about. Nothing in this earnings report will send the stock flying to the moon as far as we can tell.
Here are the key numbers reported versus expectations:
- EPS: $0.17 reported versus $0.16 expected
- Net revenue: $1.21 billion reported versus $1.06 billion expected
- Operating income: $190 million reported versus $147 million expected
- Revenue guidance: $1.1 billion reported versus $1.1 billion expected
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Time for the LIVE BLOG:
5:02: It’s about to start …
5:03: Here’s Carol Bartz, says she has a lot of “proof points” to show the company is turned around. “We’re not shipping the major tech platforms we’ve been working on.” Minutes on Yahoo were up 17%, pageviews were up 8%.
Search issues thanks to Microsoft’s ad centre technology.
5:04: We’re beating our guidance.
5:05: Let’s speak to three strategies: Modernize technology, increase engagement, innovate in advertising.
5:06: Modernize technology — We have 34 sites live on new global content platforms. This year in target of getting 130+ sites on new platforms. More users, more ad inventory.
5:07: Increasing engagement — tech advances, and editorial focus on big events like Super Bowl/Oscars. With content personalisation we were able to deliver personalised programing, driving 37 million clicks, more than double last year. That’s huge.
5:09: We generated 1.2 billion pageviews around the Oscars, a 23% jump from last year.
US News blogs delivered 400 million pageviews, up 53%.
5:10: Talk monetization. New features on our display ad platforms deliver results. We’re selling ad packages and solutions that make use of the whole Yahoo network.
5:12: To the numbers … “we delivered” Display bsuiness should grow in mid teens in Q2. New ad platforms letting us monetise better.
Search: Good news, many of our most important advertisers realising higher ROI. Spending multiples of what they spent previously. Some third party reports confirm what we
Downside – Ad centre not producing RPS. Advertisers see ROI, but the click volume isn’t there. We expect RPS to be neutral. MSFT will take longer than expectec. Now expect by year end. However our deal protects us with revenue share. Working close with Microsoft on this. They’re working on architecture. They have an aggressive roadmap to bring to the market place.
5:15: Yahoo is focusing on what we can do to produce better and better user experience.
5:16: Finally, also working with publisher partners to realise more of the volume they’re seeking. A lot going on in search.
On sales/profits: Seeing efficiencies gain, delivering on bottom line.
5:17: Hands it over to Tim Morse who is reading off the earnings numbers.
5:19: Into core operated search. O&O underperformed, but protected by RPS guarantee from Microsoft.
5:21: Value is 9.9 billion, or $7.50 per share for Yahoo’s Asian assets based on public companies.
5:23: Display should accelerate and search should be flat.
5:24: And now we’re back to Carol …
comScore counts 680 million users of Yahoo properties around the world. No one else has that scale or reach says Bartz.
5:28: Bartz like Finance app for iPad. In social, we’re integrating across many Yahoo sites. We got great results for sports. Finally, ramping in local. Our hyperlocal flip of Yahoo home page is live in hundreds of towns.
As you come away from today, hope you have a clear sense of our progress. Make headway to increase profitability and revenue. Continue to lead and differentiate in display. Confident we’ll increase EPS.
Onto the Q&A:
5:30: Youseff Squali asking about display business. What will drive acceleration? And Tim, what about monetizing Yahoo Japan …
Carol: Display is engagement being up. With new platforms better able to predict, and deliver a better CPM, better ROI. Also, the thing that’s interesting is that we’re bring up new sites these are sort of built in advertising magnet sites. Users coming to the new sites.
Tim: 2Q is a clean comparison, nothing unusual. Mid teens growth. As far as Y!J, we make progress and that’s all we have to say.
5:33: Mahaney from Citi — is there listings or fee elements you can talk about?
Carol: Real estate partnership. Shopping getting stronger, travel is strong, in fact some great ideas on how to enhance and small business is hanging in there and in fact doing a nice job. What’s left in there is going on a positive trajectory.
Tim: We’re figuring out how to leverage them, how they fit in out business.
Carol: Don’t forget, until we get to Q4, going against comps w. Hot Jobs, Zimbra.
5:35;: Ben Schacter, dig into search — Volume and RPS. Why you confident in a turnaround?
Tim: In the earnings release, or powerpoint, is us core search, that is all search including contextual initiatives. What we usually talk about for O&O is just our core search.
Carol: Relative to RPS, it was flat in Q1 but thats because of guarantee. RPS is below what either Yahoo or MSFT expected. The variability can’t be predicted. Some budget smoothing issues, some relevance issues. How they’re going to use hard science. How they’re going to get this back to where it needs to be.
5:38: Stock based comp question …
Tim: Stock based comp will pick up to timing, and this is the time when it’s issued. Underrun of cost guidance? Hiring efficiences, payroll tax down.
5:38: RPS not living up to expectation … spread or delta? What % of display is video ads?
Carol: Not providing specifics because its part of our agreements. Video is still small but fastest growing. This will be our fastest growing segment, we have some new ad formats. Very very excited.
5:40: Search RPS to improve gradually under original?
Carol: We knew we couldn’t know … expected a dip in Q1 as marketplaces normally have. Dip lower and longer. I personally sat down with people from MSFT last week. Feel good about their plan to get us back to where Panama was a baseline.
5:41: Spencer Wang from Credit Suisse … You talk about Yahoo digital media company, what is your strength v. Hulu, Netflix, etc.
Carol: A lot of areas of video, we all know user generated is biggest. We’re not interested in that. We like video snacks — 3-5 minutes. Area we could have longer format video. UGC unilaterally say — except to the point it becomes so interesting, then it will show up — but huge ad interest in being connected with video snacks that users come to see in and out every day. our biggest problem is that it’s hard to find. We’re making it more discoverable.
5:45: Can you tell us if there’s been any impact on licensing fees in Japan.
Tim: There’s a little impact, nothing material, they do pretty well (very well says Carol) and on second one, no talks on assets future.
5:46: Brian Pitz, UBS: Did 3rd party underperform O&O, what verticals will you attack?
Tim: Not sure on 3rd party what you’re looking at.
Carol: Verticals we’re looking at, we’re looking at 50 brand new vertical sites — entertainment, lifestyle, women, females, mothers, sports, movies, gossip. Things people want to do, they want to disappear.
5:49: Right media exchange question, how satisfied with it?
Carol: Impressions are up in Right Media, RPM is up. Adding more science. We’ve been cleaning it up as well. Better prediction, better analysis. A lot of the things that we are doing are now flowing to the exchange.
5:50: Heath of Cannacord … on communications, declines you’re seeing in email, any solution?
Carol: Interesting thing in mail, IMAP mail so it’s not being counted. We think we’d be flat. We have a new mail under beta, some 7-8 million people using it. Too early to tell, but engagement up 30%. 2X as fast, it has great features. “I’ve had too many diet cokes,” says Carol after flubbing her lines.
5:53: Ross of RBC Capital: On search, on RPS, when does guarantee expire? Search spend is up, but RPS underperforms? Last, are you planing any new search ad formats? Why will RPS turn around?
Carol: Search guarantee ends in March 2012. Turns out ad centre doesn’t have a good handle on predicition. Can take an advertiser in the system, but a new advertiser doesn’t do a good job. We’re not predicting for people, so they can’t run their campaigns.
5:55: Rory Mahr (an ex-BI writer!) asking about driving likes from Yahoo?
Carol: When you ask about Fbook, yeah, there’s a little confusion among analysts that companies want a social ad and they can only run a social ad at Facebook. Companies looking to do a great brand story, but with a social component. We pitch Chrysler on ‘road to awards,’ and they wanted a social aspect. You’re not going to run it only on a social company. People saw ads on Yahoo — they got 1.6 billion impressions. They get viral part taking it to their social graph.
5:58: How are daily deals doing?
Tim: The Daily Deals space, we’re seeing it growing – last year it was nothing. We think we cna do a lot more. Finally, I mentioned Jaime in Australia did a good job. There’s an awful lot we’re working on to take a chunk of it.
5:59: Last question, are you able to see how new content platform is working? How about mobile measuring?
Carol: We’re working with rating people to figure out how to get mobile measurement working. No good third party right now. As relative to these new sites. Interesting. Look at Canada. Uniques are up, pvs are up. Sites in Asia, 30-50% lift. All in the right direction. We’re literally on pins and needles. We think we can drive uniques.
Look at a Yahoo site 2 years ago, it was static.
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Here’s the Yahoo earnings release as a PDF.
Here’s Yahoo’s slides on earnings:
Mark Mahaney at Citi says he thinks the street’s expectations are reasonable, and Yahoo might even surprise people based on its cost cutting. Looking at Google’s solid quarter, there’s reason to believe Yahoo can also deliver a solid quarter.
Things to watch for:
- What’s going on with Yahoo’s Asian assets? The company is reportedly figuring out how to sell off its Asian assets which are worth billions.
- What is the plan for this company? More media and video investment? We’ve heard the plan in the past, but we’re still hard pressed to remember off the top of our heads what Yahoo’s big exciting products are.
- What’s happening with the Yahoo-Microsoft partnership? rumour has it, Yahoo’s search business is tanking, and the alliance is not paying off.
- Carol Bartz’s performance. She hasn’t done much with Yahoo since taking over. The company has essentially lost two years while all of its competitors, especially Google and Facebook, are racing ahead at light speed.
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