Yahoo's Revenues Drop 13 Percent In Second Quarter (Conference Call Notes: Bartz Likes Bing!)

Comment

Yahoo just released earnings for the second quarter. Total revenues dropped 13 percent to $1.5 billion. Google, in contrast, saw total revenues rise 3 percent in same quarter. After paying partner sites traffic acquisition costs (TAC), Yahoo’s take-home revenue was $1.1 billion.

Yahoo’s net income rose 8 percent to $141 million. Operating income fell 17 percent to $101 million, and net income fell a whopping 78 percent to $118 million (but much of that difference was due to a $401 million non-cash gain Yahoo took in the first quarter related to its stake in Alibaba, which had an IPO).

Yahoo’s search advertising revenues on Yahoo-owned sites declined 15 percent to $359 million, while display advertising on owned and operated sites declined 14 percent to $393 million. Yahoo announced a deal with AT&T to sell local online ads.

Correction: This post briefly included information about layoffs which was incorrect. My apologies for alarming any Yahoo employees.

During the conference call, CEO Carol Bartz praised Bing (Microsoft’s search effort) and promised to get rid of annoying ads on Yahoo Mail. My live notes are below (bolded parts are for emphasis):

Carol Bartz:

Considering the economy I am pleased with our results, revenues above midpoint of our expectations, upside coming from currency fluctuations.

Less fear from advertisers.

But so much conflicting info form the market, too early to call.

1. great team (hired CFO)
2. great experience (mobile, social, advertising) have to make sure ads are more relevant, less irritating to users.
3. Better business processes. Want to be a better company to work for and with.

CFO Tim Morse:

Pageviews up 7%
Rev: $1.573 billion (down 13%)
Search revenues down 15%
display revenues down 14%
encouraging sign: guaranteed display inventory increased on a sequential basis
growth in health and travel

Affiliate business (primarily search) down
TAC was 28% of total revenue, rising slightly

listings revenue down 21%

OCF (operating cash flow) $385M
free cash flow $266M

savings at the low end of our expectations due to cost savings. Planning on hiring new sales people, invest in branding efforts to seize growth opps that will come as economy recovers.

$365M restructuring charge, real estate related and $25M related to headcount reduction
$67M pretax gain from sale in Gmarket.

Carol Bartz:

Biggest content site. Lead in news, sports, finance, and other categories. Yahoo homepages leads all others.
brags about a single link from Yahoo home page to NYT, creating 9M pageviews.
“We work with publishers, not against them” (subtle dig at Google)

Yahoo mail, open features, improvements in speed and performance and engagement.
Talks about annoying ads, calls them a “detriment,” “cheapening the Yahoo brand.” Will be trying to get rid of blaring ads.

Initiative around improving ad experience

Talks about mobile search deal with cell phone carrier in Taiwan to displace Google [she’s digging deep there]

expanded relationship with AT&T to sell Yahoo local inventory by AT&T advertising salesforce. Yahoo’s salesforce with its advertising partners is now 13K strong.

Q&A:

Q: Carol, what is your first impression on Bing? Seeing any user behavior changes?

Carol: I think Bing is actually a good product. Experimentation around search instead of thinking just a standard blue link. only a month in, hard to understand if it is just curiosity or if they will gain share, but I think they have done a nice job.

Q: Search business seems to have deteriorated, display shows sequential improvement. Where is the bets ROI, display or search, since you will prob. have to choose one or the other?

Carol: Search did decline Q over Q, that is not a meaningful trend. Our volume was healthy, more that there was RPS pressure. The whole idea is to keep to optimize and drive relevancy for advertiser’s ROI. Advertisers being smarter, chose less keywords.

At the end of the day, our investment priority is in the user. If we can increase our audience, which we know we can, we can drive both search and display revenues. We can provide both, but what we really need to provide ad partners is an engaged audience.

Tim: CPCs not that different, more a mix in the queries.

Q: Do you get renumerated for links to Facebook or Gmail?

Carol: No, it is really about giving consumers an experience on Yahoo without having to leave Yahoo. To be the center of their online life. Not about money, about helping them organize their online life.

Q: Ebitda margins lowest guidance since 2003. You said you would be ramping spending in Q, how should we think about margins?

Carol: When we gave the guidance last Q we told you we were going to to layoffs to have room to put the same cost into the system to reinvest into the business. Pretty much on target with that. Marketing spend for 3Q is in the additional cost already ($75M?). Adding people into product, engineering, sales people.

Tim: Repositioning cost structure, drained some buckets, now filling up different buckets.

Q: What percentage of ad inventory is guaranteed? How should we think about yearly cost structure?

Tim: We don’t break out between guaranteed and non-guaranteed. We did see strength in guaranteed in high-single digits. Strength in 7 out of 10 categories we track like finance, health, consumer products. In non-guaranteed ads, more steady.

Carol Bartz: It’s like 30 to 40 steps to buy a display ad from us. Want to have a much. much easier way to do business with us. Looking forward to making this better.

Q: How is growth in Q2 breaking down?

Carol Bartz: We don’t actually break this out, but there are those people experimenting more with non-guaranteed and new customers coming in with guaranteed. By moving more into the mid-market that will be a lot more non-guaranteed because that is their first online ad experience.

Tim: We are doing very well with our top advertisers. On Display, revs are up with top ten advertisers. Also in Search, but not quite as good.

Q: O and O search vs. affiliate revs?

Bartz: I don’t see a trend.

Q: U.S. was down, looks like RPS (revenue per search) pressure, is that because of scale vs. Google?

Bartz: Of course scale matters in search. I’d switch positions, that’d be fun. When you have fewer click-throughs and you have a longer tail you get to monetize more. But our search volume is holding fine. We have to convince those buyers to get off the chair and push buy.

Q: Follow up on RPS, you talked about improving relevancy of ads. Can you talk about levers you can pull to improve RPS, how do you view new homepage impact on search

Bartz: Alot of what we are talking about in improving ads is display. You know what an irritating ad is. With RPS, working to drive teh right ad to the right query, better targeting. With how Metro will impact search, we are pleased with search placement on the homepage. improved quality in display, improved relevance in search and make search more prominent will help drive relevancy.

You have to get users to say, I like those. then they tell their friends. You take some of the bad ads off mail, guess what, they stay. All of that is a better experience. All of that will drive advertisers to us.

More TechCrunch

Dating app maker Bumble has acquired Geneva, an online platform built around forming real-world groups and clubs. The company said that the deal is designed to help it expand its…

Bumble buys community building app Geneva to expand further into friendships

CyberArk — one of the army of larger security companies founded out of Israel — is acquiring Venafi, a specialist in machine identity, for $1.54 billion. 

CyberArk snaps up Venafi for $1.54B to ramp up in machine-to-machine security

Founder-market fit is one of the most crucial factors in a startup’s success, and operators (someone involved in the day-to-day operations of a startup) turned founders have an almost unfair advantage…

OpenseedVC, which backs operators in Africa and Europe starting their companies, reaches first close of $10M fund

A Singapore High Court has effectively approved Pine Labs’ request to shift its operations to India.

Pine Labs gets Singapore court approval to shift base to India

The AI Safety Institute, a U.K. body that aims to assess and address risks in AI platforms, has said it will open a second location in San Francisco. 

UK opens office in San Francisco to tackle AI risk

Companies are always looking for an edge, and searching for ways to encourage their employees to innovate. One way to do that is by running an internal hackathon around a…

Why companies are turning to internal hackathons

Featured Article

I’m rooting for Melinda French Gates to fix tech’s broken ‘brilliant jerk’ culture

Women in tech still face a shocking level of mistreatment at work. Melinda French Gates is one of the few working to change that.

22 hours ago
I’m rooting for Melinda French Gates to fix tech’s  broken ‘brilliant jerk’ culture

Blue Origin has successfully completed its NS-25 mission, resuming crewed flights for the first time in nearly two years. The mission brought six tourist crew members to the edge of…

Blue Origin successfully launches its first crewed mission since 2022

Creative Artists Agency (CAA), one of the top entertainment and sports talent agencies, is hoping to be at the forefront of AI protection services for celebrities in Hollywood. With many…

Hollywood agency CAA aims to help stars manage their own AI likenesses

Expedia says Rathi Murthy and Sreenivas Rachamadugu, respectively its CTO and senior vice president of core services product & engineering, are no longer employed at the travel booking company. In…

Expedia says two execs dismissed after ‘violation of company policy’

Welcome back to TechCrunch’s Week in Review. This week had two major events from OpenAI and Google. OpenAI’s spring update event saw the reveal of its new model, GPT-4o, which…

OpenAI and Google lay out their competing AI visions

When Jeffrey Wang posted to X asking if anyone wanted to go in on an order of fancy-but-affordable office nap pods, he didn’t expect the post to go viral.

With AI startups booming, nap pods and Silicon Valley hustle culture are back

OpenAI’s Superalignment team, responsible for developing ways to govern and steer “superintelligent” AI systems, was promised 20% of the company’s compute resources, according to a person from that team. But…

OpenAI created a team to control ‘superintelligent’ AI — then let it wither, source says

A new crop of early-stage startups — along with some recent VC investments — illustrates a niche emerging in the autonomous vehicle technology sector. Unlike the companies bringing robotaxis to…

VCs and the military are fueling self-driving startups that don’t need roads

When the founders of Sagetap, Sahil Khanna and Kevin Hughes, started working at early-stage enterprise software startups, they were surprised to find that the companies they worked at were trying…

Deal Dive: Sagetap looks to bring enterprise software sales into the 21st century

Keeping up with an industry as fast-moving as AI is a tall order. So until an AI can do it for you, here’s a handy roundup of recent stories in the world…

This Week in AI: OpenAI moves away from safety

After Apple loosened its App Store guidelines to permit game emulators, the retro game emulator Delta — an app 10 years in the making — hit the top of the…

Adobe comes after indie game emulator Delta for copying its logo

Meta is once again taking on its competitors by developing a feature that borrows concepts from others — in this case, BeReal and Snapchat. The company is developing a feature…

Meta’s latest experiment borrows from BeReal’s and Snapchat’s core ideas

Welcome to Startups Weekly! We’ve been drowning in AI news this week, with Google’s I/O setting the pace. And Elon Musk rages against the machine.

Startups Weekly: It’s the dawning of the age of AI — plus,  Musk is raging against the machine

IndieBio’s Bay Area incubator is about to debut its 15th cohort of biotech startups. We took special note of a few, which were making some major, bordering on ludicrous, claims…

IndieBio’s SF incubator lineup is making some wild biotech promises

YouTube TV has announced that its multiview feature for watching four streams at once is now available on Android phones and tablets. The Android launch comes two months after YouTube…

YouTube TV’s ‘multiview’ feature is now available on Android phones and tablets

Featured Article

Two Santa Cruz students uncover security bug that could let millions do their laundry for free

CSC ServiceWorks provides laundry machines to thousands of residential homes and universities, but the company ignored requests to fix a security bug.

3 days ago
Two Santa Cruz students uncover security bug that could let millions do their laundry for free

TechCrunch Disrupt 2024 is just around the corner, and the buzz is palpable. But what if we told you there’s a chance for you to not just attend, but also…

Harness the TechCrunch Effect: Host a Side Event at Disrupt 2024

Decks are all about telling a compelling story and Goodcarbon does a good job on that front. But there’s important information missing too.

Pitch Deck Teardown: Goodcarbon’s $5.5M seed deck

Slack is making it difficult for its customers if they want the company to stop using its data for model training.

Slack under attack over sneaky AI training policy

A Texas-based company that provides health insurance and benefit plans disclosed a data breach affecting almost 2.5 million people, some of whom had their Social Security number stolen. WebTPA said…

Healthcare company WebTPA discloses breach affecting 2.5 million people

Featured Article

Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Microsoft won’t be facing antitrust scrutiny in the U.K. over its recent investment into French AI startup Mistral AI.

3 days ago
Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Ember has partnered with HSBC in the U.K. so that the bank’s business customers can access Ember’s services from their online accounts.

Embedded finance is still trendy as accounting automation startup Ember partners with HSBC UK

Kudos uses AI to figure out consumer spending habits so it can then provide more personalized financial advice, like maximizing rewards and utilizing credit effectively.

Kudos lands $10M for an AI smart wallet that picks the best credit card for purchases

The EU’s warning comes after Microsoft failed to respond to a legally binding request for information that focused on its generative AI tools.

EU warns Microsoft it could be fined billions over missing GenAI risk info