Yahoo just reported Q2 earnings. Here’s the release.
Our quick take: Revenue was disappointing, as ever. So was operating income. GAAP EPS did manage to beat consensus by a penny, but it’s hard to get stoked about that.
Yahoo’s core business, display revenue at owned-and-operated sites, did grow 19% year over year, as the company benefited from the rebound in display advertising. But even this was below expectations.
And, unfortunately, owned-and-operated display isn’t the only business Yahoo is in. There’s also search, which appears to have had another disastrous quarter.
Overall, revenue grew a pathetic 2% year over year, a year into a sharp recovery in the global economy. And although Yahoo’s profitability did increase modestly, you can’t save your way to prosperity–especially at a company that’s supposed to be in a growth business.
Bottom line, Yahoo appears to have stabilised. But growth is nowhere to be seen. And even the company’s core business, display advertising, continues to fall short of expectations.
Here’s the snap comparisons to the street’s expectations:
- Gross revenue slightly light: $1.6 billion versus $1.64 billion consensus.
- Operating income slightly light: $175 million versus $178 million expected
- GAAP EPS: $0.15 versus $0.14 expected
Nick Saint will be covering the conference call…
CONFERENCE CALL NOTES
Nick Saint here, welcome to the live blog. The conference call is still 20 minutes off.
Yahoo is down 4.4% in after hours trading.
4:55 Five minutes until show time, in theory.
5:01 OK, we should be starting any minute now. Meanwhile the stock is now down over 6% ($0.95) to $14.25
5:02 And we’re live. Disclaimers. By the way, note the embedded slides below.
5:03 CEO Carol Bartz is up. (everything is paraphrased unless in quotes)
5:04 CB: So we did great on operating costs, but why did we hit the low end of our revenue target? A few things but mostly failure to monetise searches as much as expected.
5:06 CB: The big content move we made in Q2 was Associated Content acquisition.
5:08 CB: We just launched a lifestyle site in the U.K. that racked up 7 million pageviews and 2 million uniques. “What website other than Yahoo” could have a launch like that?
5:10 Users who log in with Facebook Connect spend more time on Yahoo and rack up more pageviews.
5:12 Next month, Yahoo’s front page video will have “a new, interactive advertising format.”
5:13 CFO Tim Morse is up to deliver the detailed financials.
5:17 Search volume and share up, but revenue per search way down. Juking the stats can only get you so far.
5:20 Our repositioning efforts fit into three categories: divesting, partnership outsourcing, and “internal reinvestment”.
5:21 Happily off of revenue and on to cost figures, where Yahoo actually did very well. “$27 million favourable to the midpoint of our expectations.”
5:25 Stock now down 7.2% from close, and still falling.
5:27 Woah. “We’re in dialogue with the IRS” over an issue that could reduce Yahoo’s effective tax rate to roughly 20%. Details to come during the October call.
5:28 Back to Carol.
5:33 Carol is emphatically denying that Yahoo’s new search stats are gamed. Read about it here.
5:34 The transition to Bing is going well, but Yahoo won’t go ahead until it can guarantee a smooth transition.
5:37 Wrapping up, and headed for Q&A. Bottom line: revenue dips are fleeting, our margins are improving just as we said they would.
5:39 “Paid [search] is where we make our money.” Awesome. Again, the transition to Microsoft for paid search will only go ahead in Q4 if everything is perfectly set. Algo searches are already 20% Microsoft.
5:43 Tim: Ignore the pageview decline. It’s just one metric among many. Minutes spent on the home page were up 10%.
5:46 Q&A started with a request that everyone limit themselves to 1 question. So far 100% of questioners have asked 2 questions.
5:47 Question: can we get some details on where all these cost savings are coming from? Answer: Basically, no. (“Across the board”, “long-term view”, etc., etc.)
5:49 Carol: “Basically, Microsoft is a wash [for cost cutting].”
5:51 Tim: “We have a very unique value proposition.” Ugh.
5:53 Carol: “At the end of the day, targeting is really the issue.” If we can nail targeting, “we’ve got a hell of a business.”
5:54 Incidentally, that ‘hell’ is as close to swearing as Carol has come. Underwhelming.
5:55 Tim: “The question I’m going to get a lot is: is the guidance conservative. Our guidance always represents our best estimate of the range of outcomes.”
5:58 Back to targeting. “Buying an audience, not inventory” has become the buzz phrase of record in advertising.
6:02 Ah, Tim says 7% growth in search volume is based on real searches, not including the controversial “contextual searches”. That’s good news, although he says it’s much lower in the U.S. And it’s a little odd, since Carol just told us that those were very much real searches.
6:04 That’s a wrap!