Yahoo 2Q05 Highlights

David Card | July 20, 2005, 07:01 PM

The stock market continues to baffle me. Yahoo had another great quarter. Ad revenues (less fees paid to network partners) were up 7% sequentially and 43% year over year to $716M. Fees and Listings (consumer and small business, Hotjobs and directories) were up 7% sequentially and 45% year to year to $159M. The sequential growth in fees appears low, as Q1 was boosted by a Japanese royalties settlement. Yahoo slightly raised its overall guidance for 2006. Tidbits from the earnings call:

Advertising

- Gross revenues were $1.094B for the quarter, up 51% year to year
- Big advertiser display ad spending grew faster than that 43% figure cited earlier
- Yahoo more or less confirmed a questioner’s estimate that display advertising grew 10% sequentially – i.e., at a greater rate than paid search
- Yahoo said it would outgrow someone’s (not ours: we don’t do global, and we’re not quite finished with our 2005 forecast)34% forecast growth for WW online advertising. Jupiter agrees that Yahoo is indeed outgrowing the market, and that it is already the Number One company in online advertising. I guess that’s a good reason to hammer the stock.
- Auto, CPG and Financial Services were very strong
- Yahoo continued to refuse to comment on dollars per search or click through rates or any of the traditional paid search metrics. It says the averages are too dependent on changes in mix: new advertisers coming onboard with a different collection of keywords, seasonality, etc.
- Yahoo said new products in self-service platforms for advertisers and publishers, and contextual targeting within the Yahoo network were high priorities

Paid Content & Services (Fees & Listings)

- 181M active registered users, up 23% year to year
- 10.1M paid relationships, up 1.2M from the previous quarter and up 3.7M year to year. That’s big growth sequentially (it was only 200K net adds last Q), and I believe it’s more from broadband bundles and fantasy baseball than from music
- Biggest category in paid relationships remains access bundles, accounting for over half of business, with small business, personals, fantasy sports, and music doing well
- Yahoo launched its new Music subscription service, but only as a beta, and is delaying the big launch along with big marketing spending, till Q3. Last quarter, if my math was correct, Yahoo expected up to $15M of incremental Music revenues in Q2. It appears, again only if I’m interpreting correctly, to have hit $12 to $13M. Yahoo also said paid downloads were above expectations
- Yahoo didn’t give any hard numbers guidance on paid subscriber growth for the year – although it said it was ahead of plan, and implied its high-end target of 12M was probably in order
- Yahoo also didn’t make its usual comments on ARPU, other than to say they were flat to down slightly, but not dramatically (the broadband bundles produce less $/user for Yahoo than other services). It also said that even in the face of broadband price competition, its contracts with BSPs were “broadly protected”

Yahoo CEO Terry Semel described the company several times as a “social media company” or “social media environment.” A new tagline? Its pillars are search, community, personalization, and content (“whether licensed, original, or user generated”). Semel also made a comment about recruiting superior talent, including “visionaries” and “scientists.” I won’t speculate whether this was in response to the Wall Street Journal story on executive defections, or just a “we’re keeping up with Google” quip.