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Yahoo have fallen short of their second-quarter sales target, triggering further drops in share price and questions about their changing strategy.
The once imperious search engine has fallen on tough times recently. Whilst the $1.13 billion in sales would be excellent news for many, the fact that this slipped below the $1.16 billion estimate has caused consternation amongst market analysts.
The good news in all of this is that banner ads have risen 19 percent, although (some might say unsurprisingly given the circumstances) Pay per Click advertising has dipped by 8 percent. Unfortunately this news is further tempered by the fact that users are spending less time on the site; dropping from 2hrs 56mins in December to just 2hrs 11mins last month. This may well be the statistic that concerns the powers that be most.
A 10 percent increase in U.S. users is a positive sign that Yahoo remains within the public consciousness and are proving popular. But again, this good news isn’t without its downside. In the same period, Google grew its (already far larger) user base by 14 percent, whilst Facebook took a massive step forward with an 84 percent increase.
Crisis, what crisis?
Yahoo, let’s not forget, are in a major period of transition. As we covered last week [see: Yahoo Increasingly Looking to Content to Fill Search Void] the focus of their future business model will largely be based around the content they provide. It’s a drastic shift from the search product that made their name; but is clearly one that is necessary to halt slumping fortunes in the face of Google’s growing market dominance.
This is a company that still has impressive earning potential let’s not forget, as evidenced by the growth in net income to $213.3 million – a 50% rise from this time last year. As with the quarter one statistics [see: Yahoo Record First Quarter Revenue Increase], these results are a mixed bag.
Optimists will see the rise in revenue and reasonably strong sales as building blocks for future success. Pessimists on the other hand, might view the dramatic drop-off in share price (down 9.4 percent this year), the amount of time people are spending on the site and missing of sales targets as signs of impending doom. In truth, both views aren’t without their merits.
With the content they are looking to invest in (Premier League football highlights and an exclusive Ben Stiller show being two reasonable examples), future growth – both in terms of brand visibility and user levels – is a distinct possibility. Yahoo already has popular multi-channel news services and is the largest email provider around, so if they could build on this then the future could be a little rosier.
Bing is a far better search engine (setting aside objectivity, it just is), so with this being integrated into the mix there’s no reason this transitional period can’t bear fruit. Whether people will still want to use a single source for all this content, the Yahoo homepage, remains to be seen. It certainly wouldn’t harm their chances if they could bring a bit of order and simplicity to this key page.
Unfortunately though, as these latest figures suggest, there are still more questions than there are answers about the future of Yahoo.
Statistics courtesy of BusinessWeek – Yahoo Shares Decline After Second-Quarter Sales Miss Estimates.