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Where now for Yahoo?

Many people expected Yahoo’s results to be low. However I would suggest the figures announced beat even the some pessimists forecasts and expectations: A couple of the ‘highlights’ from their financial results included:

Full Year 2008 Financial Results

• Revenues for 2008 were $7,209m ( a 3 percent increase up from $6,969m in 2007)
• Marketing services revenues were $6,316m for 2008, a 4 percent increase compared to $6,088m for 2007.
  • Marketing services revenues from Owned and Operated sites came in at $4,046m for 2008, a 10% increase from $3,670m in 2007.
  • Marketing services revenues from Affiliate sites were $2,270m for 2008, down 6% compared from 2007.
• Fees revenues were $892 million for 2008, up 1% compared to 2007′s figure of $881m.
• Revenues excluding TAC were $5,399m for 2008, a 6 percent increase compared to $5,113m for 2007.
• However the biggest stand out figure was…operating income for 2008 was $13m compared to $695m for 2007.

Q4 Specific reading

• Operating loss for Q4 2008 was $278m in comparison to operating income of $191m for Q4 2007.
• Revenues were $1,806m for Q4 2008. In real terms this was a 1 percent decrease compared to $1,832m for the same period of 2007.
• United States segment revenues for the fourth quarter of 2008 were $1,338 million, a 2 percent increase compared to $1,313 million for the same period of 2007.

Source: SearchEngineLand 2009

In terms of outlook for 2009, CFO Blake Jorgensen suggested this remained uncertain as ‘Yahoo has “less visibility” than it did a year ago on the “advertiser pipeline”‘. Certainly MSN appears to have gained some traction in certain markets – primarily at the expense of Yahoo, however I would suggest much of this is down to the reduction in ‘Premium Display Advertising’ as advertisers reduce branded advertising in the current economic climate

I would suggest though it is new CEO Carol Bartz’s feedback that is particulary interesting, in particular in the fact she does not seem to be definitively saying that the search side of Yahoo will stay Yahoo. The following comments in particular may shed some light

• Am I immediately planning to sell the Search business? I didn’t come here with any preconceived ideas about what to do.
• Re integration of search and display: Search is like a house with different rooms; all of it is part of a complex that allows users to search and us to get money. Some parts of it are easy to break apart and others are not. This is an important asset for the company. It’s important for us to invest in it if we’re going to keep and get the most value for it if we’re going to sell it.
• On the Yahoo brand: Should stand for the best information site on the internet. The problem with some of the many [Yahoo] properties is that they can distract from the core products

I would suggest no body is in any doubt as to the huge job head of Carol Bartz at Yahoo. It is obvious that the continuing evolution and popularity of Google is hurting revenues (searchwise), and with potential rollouts from MSN in the pipeline there is still the considerable threat from MSN, and other potential competitors from overseas (Naver etc) . I would add this is unlikely to reduce the amount of rumour regarding Yahoo search over the coming weeks and months. Now is the time when many of the engines are innovating and rolling out new services and solutions. Whilst Yahoo have rolled out some innovative solutions, they are playing catchup to Googles considerable inventory – and I do have my doubts as to whether Yahoo’s existing inventory is in the right places to best exploit the current climate.

So where now for Yahoo? I think there is a common thought that 2009 is going to be make or break for Yahoo not just in terms of search but I would suggest Yahoo as a whole. I personally believe Yahoo have too much to make up in terms of becoming a serious competitor to Google, particularly as it currently stands, and I do believe the search product is going to have to evolve or merge in order to pose any serious short to medium term competition.

More information

• Yahoo Earnings Release
• Yahoo Q4 Shows Operating Loss; CEO Bartz: ‘This Is Not A Company That Needs To Be Pulled Apart And Left For The Chickens’

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