Marissa Mayer does not yet appear to have Yahoo under control, even though she has now been its CEO since July 2012.
Revenues slipped 2% to $US1.2 billion in Q4 2013, but the stock tanked immediately after hours when investors realised that the underlying core business of Yahoo — display ads — declined 6% to $US520 million during the last quarter, and down 9% to $US1.9 billion for the full year.
And then Yahoo lowered its guidance for the current quarter.
And then it declined to give full-year guidance in favour of a vague promise that there will be growth in late 2014.
CFO Ken Goldman also admitted during the call that the company cut jobs in Q4 — even though that period is usually the biggest and busiest at companies dependent on ads.
In other words, this is one of very few major online advertising businesses that is somehow unable to increase its revenue during one of the greatest bull markets in ad sales the planet has ever seen. Internet ad revenue generally was trending up 18% last year.
A few days ago, Mayer fired the man she had hired only one year before to generate ad revenue. COO Henrique De Castro walked out the door with a $US109 million pay packet. The fact that he was Mayer’s choice, and that he delivered such rotten results, shows you how far from the mark she is right now. That, perhaps is why Mayer said on the call that she would not replace him and instead personally take a more active role in ad sales.
And where is the revenue from Tumblr, acquired in the middle of 2013 for $US1 billion?
Not mentioned, again, in the earnings release. Tumblr is one of Yahoo’s traffic bright spots, and its addicted users churn through hundreds of millions of pageviews a month. Yet it makes negligible revenues.
Here are the top and bottom lines:
- Revenues ex-traffic acquisition costs: declined 2% to $US1.2 billion.
- Earnings per share: 46 cents.
- Full year 2013 revenue: $US4.68 billion, down 6%.
That’s a huge beat on the bottom line. The stock rose 1.4% after hours but then immediately declined nearly 6% when it emerged that Yahoo’s display ad business had gotten smaller again — this time by 6%.
Yahoo also lowered its guidance to below analysts’ expectations, according to CNBC:
Meanwhile, Yahoo said it expects current-quarter non-GAAP net income of between $US130 million and $US170 million, well below forecasts. In addition, the company sees current-quarter sales of between $US1.06 billion $US1.1 billion ex-tac, versus expectations for $US1.08 billion.
The bottom line for the full year was hurt somewhat because it compared poorly with the year before, when Yahoo benefitted from a sale of Alibaba stock. Alibaba is the huge Chinese trading site that Yahoo owns a valuable stake in:
GAAP net earnings for the full year of 2013 was $US1,366 million, a 65 per cent decrease compared to $US3,945 million for the prior year (which included a net gain related to the sale of Alibaba Group shares of $US2,755 million).
But Yahoo is still contracting as a company. Here are the top line revenues over time:
The mix of ad prices to total ads sold is hurting Yahoo over time, with search performing better than display:
Once again, Yahoo’s display ad business withered while its search ad business picked up the slack:
- Display revenue ex-TAC [traffic acquisition costs] was $US491 million for the fourth quarter of 2013, a 6 per cent decrease compared to $US520 million for the fourth quarter of 2012. Display revenue ex-TAC was $US1,737 million for the full year of 2013, a 9 per cent decrease compared to $US1,899 million for the prior year.
- Search revenue ex-TAC was $US461 million for the fourth quarter of 2013, an 8 per cent increase compared to $US427 million for the fourth quarter of 2012. Search revenue ex-TAC was $US1,699 million for the full year of 2013, a 6 per cent increase compared to $US1,611 million for the prior year.
CEO Marissa Mayer glossed over her shrinking media sales business and asked investors to focus on the traffic increases:
“I’m encouraged by Yahoo’s performance in Q4 and 2013 overall. We saw continued stability in the business, and our investments allowed us to bring beautiful products to our users and establish a strong foundation for revenue growth … We are extremely heartened by the year-over-year traffic increase we experienced in 2013, an early sign of return on our investments and the acquisitions we’ve made.”
Here is the full earnings release.
Some notes from the call with analysts, as usual delivered on streaming video:
Mayer says “getting overall growth to a place we are happy with will take multiple years.” She says Yahoo will see growth in late 2014.
Side note: Mayer pronounces gif as “jiff,” which is technically correct!
Tumblr posts are up 40%, and mobile monthly users are up 30%.
Yahoo received 340,000 job applications in 2013!
CFO Ken Goldman says the 6% decline in display ads revenue masks underlying growth. Hmm.
Goldman says they are going to report GAAP revenues going forward, not ex-TAC revenues.
He declines to give full-year guidance.
Mayer says Yahoo is positioned to take advantage of mobile ad sales, and that mobile will eventually perform better than desktop.
Tumblr revenue … Mayer mentions it but … makes a sales pitch instead: average Tumblr post reblogged 14 times … average Tumblr ad post is reblogged more than 10,000 times. Again, no indication of meaningful revenue at Tumblr.
Mayer notes that Yahoo’s various digital magazines will be using Tumblr as their publishing platform. (Interesting that the platform is that flexible.)
A question on the De Castro exit. Mayer: “Ultimately Henrique was not a fit. That was a regrettable conclusion, and a conclusion we tried to avoid …. we are not planning to replace that position … we have a strong sales team ….. it gives me the opportunity to be much more involved with revenue as we drive toward revenue growth.”
Wow: Mayer seems to be saying she’s going to get more involved in sales!
Goldman: The focus is getting the ship back to where we can grow again. He admits Yahoo cut jobs in Q4. “We do need to catch up.”
Ouch! Another question on De Castro. Mayer: “Out of respect for Henrique I’d rather not comment on the past and his performance.” But the future will involve “me having much more direct involvement with our sales leadership.”
To Mayer’s credit, she’s really getting into the adtech weeds at the end of this call, talking about targeting and inventory like a pro. Which, of course, she is — it’s just that we’ve never heard her talk in this detail before.
Here’s what analysts were predicting prior to the release:
- Revenues: $US1.2 billion.
- Earnings per share: 38 cents.
The call at 5 p.m. EST came after these recent events at the company:
COO Henrique De Castro left after little more than a year on the job, and exited with a $US109 million pay package. He was CEO Marissa Mayer’s first major hire, and first major error in judgment. Yahoo currently does not have a chief revenue officer, as a result.
Mayer has been diligently acquiring and launching a suite of new apps to transform Yahoo into a mobile media company. David Pogue now runs Yahoo Tech, Nick D’Aloisio runs the Yahoo News Digest app, and the company acquired Aviate, a mobile app search and organisation division.
But analysts are focused on two things: Any signs of growth in the online advertising business, and the state of Yahoo’s investment stakes in the Chinese trading site Alibaba and Yahoo Japan. Those holdings are mostly responsible for the recent increase in Yahoo’s stock.
It would also be nice to eventually see some revenue attached to Tumblr, its most spectacular acquisition of the past couple of years.
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