At the tail-end of Yahoo’s fourth quarter earnings conference call today, CEO Carol Bartz was asked about competition with Facebook in display advertising. Facebook has come out of nowhere to account for nearly a quarter of all display ads on the Internet.
“There is some confusion about whether Facebook leads in display advertising,” Bartz responded. “It is because they have a lot of little impressions. We actually lead in display revenue.” But in fact, the two may be neck and neck. In 2010, Yahoo’s reported display ad revenues (after taking out traffic acquisition costs, the part they give to partner sites which run its ads) were $1.89 billion. Meanwhile, Facebook’s estimated global ad revenues for 2010 were $1.86 billion, with ad revenues expected to more than double to $4 billion this year.
Take this comparison with a grain of salt because one is real audited numbers versus an estimate of a private company’s business, but if that estimate is anywhere near correct, Facebook will soon surpass Yahoo in display ad revenues as well as impressions, if it hasn’t already.
Yahoo showed significant improvement to its bottom line in the fourth quarter, with profits doubling to $312 million. However, its revenues of $1.2 billion (again, minus TAC) were down 4 percent. To fend of Facebook, Yahoo has to get overall revenues growing again, and fast.
Yahoo is growing profits by cutting costs (as it did today with more layoffs) more than by growing its business. Although if you break down Yahoo’s revenues, display ads is the one bright spot. It was up 16 percent to $567 million in the quarter, whereas search revenues were down 18 percent to $388 million. (See earnings slides below).
Bartz also seems to have a better answer to the question, What is Yahoo? She seems to have settled on Yahoo becoming a “great content” company. In other words, a media company. “We just want to create content that is interesting to people,” she said. Don’t we all.