Yahoo! Tops Estimates

Web portal and online advertising bellwether Yahoo! topped Wall Street estimates in its second quarter, as executives touted the company’s success in cushioning falling advertising revenues with paid services.

After posting six straight quarters of losses prior to Wednesday’s announcement, Sunnyvale, Calif.-based Yahoo! reported earnings of $21.4 million, or $0.03 per share — a penny above analysts’ estimates, according to Thomson Financial/First Call.

Last quarter, the company posted a net loss of $53.6 million, or $0.09 per share. For the same quarter in 2001, Yahoo! posted a net loss of $48.5 million, or $0.09 per share. Top-line income, too, increased, with second quarter 2002 revenue totaling $225.8 million, up 17 percent from the previous quarter and 24 percent from a year earlier.

On the surface, Yahoo!’s performance would appear to suggest that conditions might be turning around for one of the Web’s largest media players.

Actually, the company saw sluggish growth in its Marketing Services division, which includes sales of site advertising inventory and paid search. Revenue for that unit came in at $135.7 million, up slightly from last quarter’s $121 million, but still 4 percent below a year earlier.

However, much of the company’s revenue gains came from growth in non-traditional advertising areas for the firm, such as Yahoo!’s personal, recruitment and classified ads listings businesses. Specifically, the firm continues to see expanding revenue from its HotJobs unit, which Yahoo! acquired at the beginning of the year, as it does from newly introduced paid enhancements to its personal and automotive listings.

Additionally, Yahoo! said continued declines in advertising spending by online companies was partially offset by an increase in spending from small- and medium-sized businesses, particularly in paid search.

Yahoo! said its fee-based products, too, played a major role in boosting revenue, although the company did not separate income from fee-based consumer services from income for listings. Combined, the two units brought in $74.1 million, a 109 percent increase from last year and 35 percent from last quarter.

That’s in keeping with Yahoo!’s publicized plan to reduce its exposure to the tight ad market by working in new paid services and non-traditional ad products, like search. Earlier this year, the company awarded a long-term sponsored search contract to Overture .

“As we complete the first half of 2002, we are pleased with our report card,” said Yahoo! Chief Financial Officer Susan Decker. “Yahoo!’s continued evolution to a more robust and sustainable business model is supported by strategic focus and financial discipline. We continue to seek new ways to provide deeper value to our vast consumer base, and we are also attempting to build greater revenue, margins and returns.”

The company also said revenues from transactions topped $16 million, a 179 percent increase versus last year and 24 percent above last quarter. While the trend points to greater e-commerce activity — of which Yahoo! gets a cut — it also represents a move by Yahoo! from some previously cost-per-impression-based advertising services to performance-based agreements.

Yahoo! said it expects revenue for third quarter to be between $225 million to $250 million, and between $900 million and $940 million for the full year.

Before one-time charges, Yahoo! said it expects earnings to be between $38 million and $48 million for the third quarter — up from the $36.1 million reported for second quarter — and to be between $140 and $165 million for the full year 2002.

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