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Yahoo 1Q06 Earnings Call Highlights April 21, 2006

Posted by David Card in Media.
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Just got around to listening to Yahoo’s earnings call — apologies for the tardy posting. As usual, I’ll stick to industry rather than financial stuff.

Marketing Services (display ads and search) revenues less fees paid to partners (“ex-TAC”) grew 2% sequentially and 34% year over year to $902 million. For comparison, the similar figure for Google was up 19% sequentially and 93% year over year to $1.5 billion. Fees (services for consumers and small business) were flat compared with Q4, and up 25% year over year, to $186 million. Yahoo said it should hit 28% ex-TAC total revenue growth in Q2, and 28% for the year. Last time I said Yahoo execs sounded way defensive, but they seem to have some mojo back now. Still firing on all cylinders, as far as I can see.

Advertising and Search

– Spending from big advertisers (Top 200 US) is still outgrowing the average.
– Big categories: Pharma, Telecom, CPG, Auto, Financial. Somebody asked about Will CPG pick up the slack as 15% of auto and FS ad budgets go to online? Yahoo said: Uh, nobody’s anywhere near 15% yet.
– Yahoo said it’s now going to talk about ad sales on “owned & operated” sites and on its partner network, instead of branding versus search. Since it gives precious little info about either, this is no big deal. It didn’t break out O&O vs. Network (Google does). All Yahoo said was that growth was comparable for both. Non-MSN TAC rate was flat.
– Yahoo likes to talk about dollars per page. It said growth in this figure was 10-20% for content and communications pages, and 5-10% in revenue per search query, for a net of 10% growth.
– Yahoo execs claimed third party data that implied bad search query numbers for Yahoo were misleading. Instead, Yahoo said it saw 15-20% growth globally. It also said it wouldn’t give this number out regularly, but felt it had to counter any potential bad news.
– Video ad revenue isn’t worth talking about yet.
– The new search platform will roll out in stages: 1) the foundation, core data platform; 2) the front-end mgmt app; 3) results ranked by price plus other variables in the magic formula. More details to come on Analyst Day in four weeks. No $$ impact till 07.

Paid Content and Services

– 13.3 million paid relationships is up 6% sequentially and 49% year over year. 700K net adds isn’t bad since Fantasy Football is done.
– Yahoo thinks it will beat its target for the year of 16 million subscribers. ARPU $3-$4/month.
– Yahoo denied that flat fee growth was due to declining ARPU. Sequential growth was tough because of the seasonal effect of Fantasy, and because of one-time events in Asia.
– No other “color” on categories. I think broadband access bundles must be driving things; Personals has been very quiet.
– No mention of Music at all, outside of music videos. Hmmmmm……I’d say Yahoo Music Unlimited is still only poking along. In January, Real/Rhapsody had nearly 1.5 million subscribers, Napster 525K, AOL about half a million (15-20% on a trial period). I’m thinking Yahoo has 300-400K paying subs across Musicmatch and Unlimited.

Other

– CEO Terry Semel went all Hollywood on us and offered effusive praise for those brave networks and studios offering video and filmed entertainment content online — instead of “locking them away” — even on their own sites. But they’ve got “awfully small audiences” and are already beating a path to Yahoo’s door. I suspect he’s right.
– In response to a MySpace question, Yahoo noted that it added 50 million users in the quarter across all demographic categories. It said it doesn’t worry about missing the youth audience, and wants to build services that will age with its audience from Yahooligans up. While this makes sense, I have to say none of the Big Four have anything that looks like it could steal MySpace users.
– And in case you were worrying, Semel claimed that even without a deal or a broadcast network, Yahoo’s Olympics site rocked. Sadly, the FIFA contract is coming to an end (Yahoo produces the World Cup site). World Cup is mostly a chance for Yahoo to act like a sponsor, and try to tease up its own mobile and Flikr activities.

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