Yahoo! Tops Street Estimates
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Following DoubleClick's lead Tuesday evening, Internet bellwether Yahoo! beat Wall Street's second-quarter estimates by a penny, while predicting several more quarters of serious trouble in the ad market.
Sunnyvale, Calif.-based Yahoo! said its quarterly revenues reflected this trouble, coming in at about $182.2 million -- roughly flat with the previous quarter, but $91 million shy of its take a year earlier.
But the report looks less damaging on a before-charges basis, with the company posting $8.7 million in profit, or $0.01 per share -- topping Wall Street's estimates of a breakeven performance.
That's good news, even though it's down sharply from the $69.1 million it took in during second quarter 2000. (Last quarter, Yahoo! posted a $7.6 million profit.)
The strong performance comes amid an important quarter for Yahoo!, which in recent months has seen its first round of layoffs, a new executive and a renewed purpose -- staying independent amid falling advertising revenues and media consolidation.
During the call, new CEO and Chairman Terry Semel said that the independent, online-only company didn't feel overly threatened by cross-media titans like AOL Time Warner, which has made a brisk business of bundling Web inventory into its traditional ad deals.
"I think for companies [like that] ... the real question to me is, at the end of the day, did they get more money selling them together, than when they sold each individually?" Semel said. "We are the largest delivery system in the world, we have approximately 200 million users in the world ... we're very open to going things on our own, selling advertising individually."
Indeed, Semel called the quarter's results a sign of "financial stability" in Yahoo!'s current business model, which affords the company an opportunity to concentrate on extending and strengthening its business.
One such opportunity is through for-pay, highly personalized services, which Semel said would become a greater component of Yahoo!'s consumer offerings. One example he gave is the company's music channel -- citing the company's relationship with pressplay, and its recent acquisition of Launch Media, a purchase that Semel said "will allow us to prove customers with compelling, personalized music services."
Additionally, Yahoo! reported growth in its intranet development practice, Yahoo! Corporate, and its Yahoo! Broadcast service, which hosts streaming video for clients' investor relations and sales programs. According to Decker, the non-advertising portion brought in $33 million, or 18 percent of company's revenues -- about double its contribution to revenues in first quarter.
But while previous executives had outlined a goal of developing new businesses to avoid reliance on ad revenues, Semel said that advertising and marketing services would remain "a key component" of Yahoo!'s business.
"I believe online advertising will increase in importance, and overall get a larger share of companies' marketing budgets," he added. "While economic conditions are still affecting spending now, we see this opportunity to regroup, rebuild and be stronger than ever for when ad spending rebounds ... So when the marketplace gets stronger ... Yahoo! shall reap the largest share."
What is different from previous corporate foci, Semel said, "is that we will take better advantage of Yahoo!'s [traffic] assets to create deeper services in key verticals."
Semel also described Yahoo!'s efforts to foster better relationships with advertisers and agencies -- a nod to industry scuttlebutt that painted the Web portal as arrogant and dictatorial to advertisers during the Web boom of 1999 and 2000.
"We have been spending more time than ever to develop solid relationships with ad agencies and key clients," Semel said.
Among those initiatives were a restructuring of the sales force to be more agency-friendly, and an agreement with media buying giant, Aegis Group-owned Carat, said president and chief operating officer Jeff Mallet.
With those relationships, and Yahoo!'s increased willingness to launch rich-media "takeover" ads, "we are now able to deliver the type of campaigns that now match the branding efforts of print, magazines and broadcast," he said.
Those efforts will largely take shape against a backdrop of continued weakness in the online ad sector. Echoing DoubleClick executives Tuesday evening, Semel predicted that the ad market wouldn't pick up until mid-2002.
For Yahoo!'s part, executives said they were assuming largely flat changes in revenue and earnings during third quarter. Chief financial officer Susan Decker said the company anticipates revenues coming in between $160 million and $180 million, with earnings ranging from a loss of $5 million to a profit $10 million -- breakeven on a per-share basis.
For the full year, Yahoo! gave guidance for revenue of $700 to $775, and pro-forma earnings of breakeven to $50 million, or $0.02 to $0.06 per share.
In a separate announcement Wednesday, Yahoo! said it appointed three new senior executives to its worldwide management team -- an effort designed to bolster an international business that many see as having been weakened by the departure of top regional executives in recent months.
One of those, Mark Opzoomer, will become managing director and regional vice president of Yahoo! Europe. Allan Kwan has joined Yahoo! as the new regional vice president and managing director of Yahoo!'s North Asia operations, while S.I. Lee will head Yahoo! Korea's business operations.
Yahoo! also appointed John Glascott as regional vice president of sales for the eastern U.S., it said.