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Yahoo Beats Expectations with Weak $1.5B Revenues, But Display Up 17 Percent
Yahoo reported Q4 2010 earnings this afternoon. Revenues were slightly up vs. the previous quarter but down compared to the same period a year ago. CEO Carol Bartz called them “encouraging.” Gross revenues were $1.53 billion, down 12 percent from 2009. Search revenues were down; though in a surprise bright spot for Yahoo display ad revenue was up 17 percent and so were operating margins and income.
CEO Carol Bartz is doing a good job of managing costs but there’s not really a growth story (save display). Outlook for 2011 is weaker than expected. Right now Yahoo shares are down in after-hours trading.
Overall revenue was negatively affected by the revenue sharing Yahoo now does with Microsoft vis-a-vis the search alliance. According to the earnings press release:
Revenue excluding traffic acquisition costs (“revenue ex-TAC”) was $1,205 million for the fourth quarter of 2010, a 4 percent decrease from the fourth quarter of 2009, primarily due to the revenue share with Microsoft. GAAP revenue was $1,525 million for the fourth quarter of 2010, a 12 percent decrease from the fourth quarter of 2009, primarily due to the required change in revenue presentation and the revenue share with Microsoft associated with the Search Agreement. For transitioned markets (U.S. and Canada in the fourth quarter), Yahoo! now reports revenue associated with the Search Agreement on a net (after TAC) basis rather than a gross basis. Excluding the impact of these two items as well as the divestitures of Zimbra and HotJobs and the exit of the paid inclusion business, revenue for the fourth quarter of 2010 increased 3 percent compared to the fourth quarter of 2009.
It may turn out that the search alliance in the end is a net negative for Yahoo (in several ways), though an overall positive for dominant partner Microsoft because of the additional reach it provides to advertisers.
Consistent with managing costs as a way to increase margins, Yahoo announced today that it was laying off 1 percent of its workforce.
I’m going to listen to the earnings call and report anything interesting.
Earnings call notes:
CEO Carol Bartz:
We’re a “premier digital media company.”
Bartz denies that Yahoo is “cutting its way to revenue growth; we’re investing for revenue growth.”
We don’t have SEO optimization for any of our sites, which is ridiculous. Content platform now makes sites more SEO friendly.
Engagement of early adopters with new mail beta is 50 percent higher than the “old” Yahoo Mail.
Yahoo is now about “content aggregation, curation and creation.” The company said it divested businesses not consistent with that mission.
Search transition proceeding abroad: algo will be transitioned by mid-year and paid by end of year outside US.
Bartz touts brand relationships with Yahoo in display: Wal-Mart, Toyota, Macys . . .
Bartz also points out that its stake in China’s Alibaba continues to gain in value. She points to other Asian successes: Yahoo Hong Kong, Yahoo Japan. She says that EMEA is doing much better than in the past.
She also talks about the new division heads (e.g., Ross Levinsohn) and her high expectations accordingly. They’re building out their teams. She then addresses layoffs as part of streamlining to support individual divisions and Yahoo’s overall mission.
Finance, sports and news remain leading properties.
Our focus in search is giving users “answers not links.” She reviews some of the product innovations (e.g., Yahoo Quick Apps) in search.
Mobile: we’ll release more of our popular products for mobile (emphasizes iOS and Android apps and HTML5 sites).
Original video content driving lots of minutes/views.
CFO Tim Morse:
He hits hard on good metrics: return on invested capital (doubled), EPS (doubled) and several others. “We’re proud of these exceptional 2010 results.”
Premium display grew, driven by impression growth.
Though he says Yahoo is going to experience “revenue headwinds” through 2011. Not going to see benefit of combined search market until later this year.
“We’re encouraged by search volume trends . . . ”
Our product team has done a great job toward our goal of “personalized content for every user.”
Our competitive advantage: “increasingly personalized world-class content.”
Whenever Morse and Bartz said the phrase “search alliance,” which they did many times, I couldn’t stop thinking about Star Wars and the “rebel alliance.”