Yahoo (YHOO)
– Avg. estimate, Thomson Financial: $.11 per share profit on $1.24 billion revenue
The most important thing to know about Yahoo (YHOO) these days is that it’s living in the shadow of another Internet giant. It’s gotten so bad that Yahoo’s developing into a complex. Wall Street keeps saying to Yahoo, “Why can’t you be more like your younger brother, Google (GOOG)?”
In fact, Yahoo and Google don’t have that much in common. Sure, both were founded by Silicon Valley whiz kids looking for a way to organize heaps of information on the Web – Yahoo co-founder Jerry Yang just took the reins as CEO. But while Google seems to be driven by math-genius uber-geeks, Yahoo has traditionally seemed more inclined to craft elegant, simple user experiences. Google News, run almost entirely by an algorithm, is slick technology; but Yahoo News, with its staff of human editors, gets three times the traffic.
Here’s some recent data on Yahoo’s growth, from Neilsen//Netratings:
– Web traffic to the Yahoo! parent company increased two percent year over year, from a three-month average monthly unique audience of 105.6 million unique visitors in Q2 2006 to 108.3 million unique visitors in Q2 2007.
– In online advertising, estimated revenue from image-based ads on Yahoo! grew 36 percent from Q2 2006 to Q2 2007, according to AdRelevance. The number of sponsored links on the Yahoo! property grew 33 percent in the same time period.
– The sponsored search click-through rate for Yahoo! Search was 6.7 percent in April 2007, according to MegaView Custom Analysis. Yahoo! Search had 21.5 percent of all U.S. search queries in May 2007, according to MegaView Search.
Yahoo Brand’s Top 5 Fastest Growing Channels (U.S., Home and Work)
Please view in a fixed-width font such as Courier.
+——————–+———-+———-+———————-+
| Channel | Q2 2006 | Q2 2007 | Q2 2006 – Q2 2007 |
| | Average | Average | Percent Growth |
| | UA (000) | UA (000) | |
+——————–+———-+———-+———————-+
| Yahoo! Video | 2,861 | 14,211 | 397% |
| Yahoo! Downloads | 238* | 712 | 199% |
| Yahoo! Real Estate | 1,083 | 3,190 | 195% |
| Yahoo! Answers | 6,761 | 17,456 | 158% |
| Yahoo! Health | 3,160 | 6,173 | 95% |
+——————–+———-+———-+———————-+
Source: Nielsen//NetRatings, July 2007
Note: *Web site does not meet minimum sample size standards. Projected and average measures for this site may exhibit large changes month-to-month as a result.
Small victories aside, everything Yahoo has done lately has been eclipsed by Google’s search engine profit machine. (Yahoo stock has been eclipsed, too; see Yahoo’s one-year chart at left.) While Yahoo tends to pull in just over $1.5 billion per quarter in revenue and a net income usually north of $150 million, Google’s revenues are climbing toward $4 billion with a profit better than $1 billion. More and more, it looks like Yahoo just isn’t playing in the same league as Google.
So how is Yahoo going to turn things around?
Well, that’s what investors are going to want to hear during Yahoo’s earnings call today. Wall Street already expects Yahoo to report mediocre revenues and earnings, so I’d be surprised if Yahoo’s actual numbers do much to move the stock. Instead, Wall Street will want to hear Jerry Yang being to outline a plan to get Yahoo’s revenue and earnings growing again, and begin to make some promises that they can hold him to in the future. (Executive credibility is very important to Wall Street; Yahoo Chairman Terry Semel definitely hurt the company’s rep last quarter when he said he was all smiles about Yahoo’s new Project Panama search advertising system, then missed earnings numbers a few weeks later.
The top few things I’ll be listening for in the earnings call:
1. Jerry Yang’s persona. Ex-CEO Terry Semel was a Hollywood guy, and some were beginning to feel that Yahoo needed an old-fashioned Silicon Valley geek in charge. I’ll be interested in hearing how much Yang channels his inner nerd as he talks about the direction that Yahoo needs to take. How much will he personally oversee Yahoo’s engineering efforts, and where does he think the company should focus?
2. Project Panama. Yahoo would need some amazing technology – or blockbuster partnerships – to begin truly narrowing Google’s lead in search advertising. How will Yahoo do it? Is there solid evidence yet that Panama is good enough to make a dent?
3. Display advertising. Yahoo agreed to buy Right Media, which operates an auction-based platform for online ads, for $680 million almost three months ago – soon after Google announced plans to buy DoubleClick for $3.1 billion. How quickly will Yahoo integrate Right Media and use the company to offer innovative products? Yahoo probably has a better chance of making headway against Google in the display advertising arena.
