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Highlights from Yahoo’s 2Q06 Earnings Call July 19, 2006

Posted by David Card in Media.

Industry rather than financial highlights from Yahoo’s Q2. Details are here.

Marketing Services (display ads and paid search) revenues less fees paid to partners (“ex-TAC”, ie revenue sharing with ad network partners) grew 3% sequentially and 30% year over year to $933million. Fees (services for consumers and small business) were up 2% compared with Q1, and up 19% year over year, to $190 million. Yahoo reaffirmed guidance, and said it should hit 26% total revenue growth ex-TAC in Q3, and approach 30% for the year. Yahoo said it will outgrow the industry in online display ads, but it delayed the roll-out of its paid search infrastructure re-vamp (Project Panama) by a quarter, to Q4, and didn’t give any real detail on why. Wall Street was not pleased.

Advertising and Search

– CEO Terry Semel said Yahoo would outgrow 2006 industry projections for online display ads by growing well above a rate in the mid-20 percent range. Jupiter agrees.
– Top 200 advertiser spending grew 35-40% in Q2, at a pace similar to recent quarters.
– Display ad growth was strong across all categories, but especially Financial Services, CPG, Pharma, and Entertainment.
– But then came search, and all the bad news. (Google gets much higher revenue per search than Yahoo does. Panama’s supposed to fix that.) Proactive steps Yahoo is taking to ensure it makes more money on paid search: 1) 3rd party audit for click-fraud, 2) dumped loads of ineffective partners from the network (no details), 3) signed new, high-quality partners (like eBay. Later said eBay’s inventory was as good as Yahoo’s own.)
– Announced Panama delay. Code complete in May, with 100 agencies and tool providers doing sandbox testing. Management app being tested by 175 advertisers. But new marketplace roll-out delayed. Yahoo will “try” to get the marketplace up and running before year end, but cautioned analysts not to build that into their models. No real excuse other than QA. Essentially, Yahoo is saying “we don’t know how to manage huge software projects any better than anyone else does.”
– During Q&A, Google love-slave Piper Jaffray analyst Safa Rashtchy said his model showed paid search revenues actually declined sequentially, and Yahoo management didn’t deny it.
– Yahoo’s no longer getting $10 to $20M per quarter it used to get from MSN.
– Somebody else suggested that UK advertising was “drying up.” Not so, said Yahoo.
– Yahoo said comScore’s search traffic data still doesn’t look right, though they’re working together to fix that.

Paid Content and Services

– Registered user count was flat quarter to quarter, at 208 million, but that’s up 20% year to year. Yahoo said that was seasonal.
– Total paid relationships totalled 14.3 million, up 42% yearly and 8% (or 1M) sequentially. That’s pretty good, without fantasy sports. Oddly, Yahoo gave no color at all regarding which services were hot. It’s been the fees Yahoo collects from broadband partners lately, but I don’t know what happened in Q2.


– Claimed the Yahoo home page redesign has resulted in increased engagement. No numbers.
– Yahoo Answers $$ opportunity = text ads, display ads, sponsorships, and something where “manufacturers” can talk directly to the users. Celebrity questions (Bono, Stephen Hawking) generated 50,000 responses and were “media events” in and of themselves.
– World Cup partnership generated 4.2B page views, 73 million page views at the mobile site, and 138 million video streams.

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