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by Stephen Logan on 21st April 2010
Whilst Yahoo revenue has grown by 1 percent and advertising income improved by 3 percent, the latest figures have done little to comfort investors.
Usually an increase in revenue is greeted with optimism and excitement. However, Yahoo’s announcement of a 1 percent rise in fortunes saw share prices fall and market confidence take a dip. So why all the ambivalence?
Well, first of all, Yahoo had predicted a 3 percent increase for this quarter; so the $160 million revenue increase was a long way shy of their target. Confidence slipped as a consequence, leading to a 65 Cent slip in share price.
Secondly, Yahoo has been very public in how frugal they have been. Carol Bartz has made it her mission to get the Yahoo ship sailing again; in doing so, she has stripped it back, got rid of much of the excess ballast and cut advertising costs [see: Yahoo Continue Cull with Yahoo Publishing Network Closure]. She also signed that search agreement with Microsoft, taking away search engine responsibility from the company [see: Yahoo & Microsoft Close to Striking Search Deal]. But for all that downsizing, asset stripping and fresh investment (Microsoft paid Yahoo $78 million in the first quarter), they still only grew 1 percent.
It is also unfortunate that these otherwise positive figures came out following Google’s. The 3 percent rise in advertising income is, by normal standards, pretty decent. Sadly, when compared to Google’s 21 percent leap in the same period, a little of the gloss is lost.
No one will argue that Yahoo is a company in transition. Their YaBing partnership will begin to take effect in the not too distant future and their focus will shift from search to search advertising and other avenues of income. Carol Bartz herself has barely got her feet under the table, so any kind of upturn in fortunes should be seen as positive.
The slump in online advertising revenue hit everybody hard. The recession saw budgets getting squeezed and paid search getting the brush off from many companies. Now though, we are in recovery [see: The Internet is Now Advertising Medium of Choice in the UK].
People have more money to invest. They see opportunities online and are willing to splash the cash again. The challenge for Yahoo, as it is for all advertising hosts, is to make that newly found confidence pay. The 3 percent rise in ad revenue is a start, but they will need to do more if they are to appease shareholders and industry analysts.
Their future might still be in limbo [see: Has Yahoo Jumped the Shark (Following AOL and Netscape)], but there appears to be plenty of fight left in Yahoo yet. Whilst they are profitable, they are functional. If the YaBing agreement takes away some of Google’s global superiority, surely advertising revenue will follow. With this comes the opportunity to invest and with investments comes future hope for bigger revenue windfalls.