Yahoo's financial results came in lower than analyst expectations for revenue and net income, but the stock is trading higher after hours. Here are highlights from what Chief Executive Jerry Yang, President Sue Decker, and Chief Financial Officer Blake Jorgensen have to say about the second quarter during the company's conference call.
To recap, here are Yahoo's numbers: Revenue excluding commissions increased 8 percent to $1.346 billion, shy of the $1.37 billion analysts had expected. Net income was 10 cents per share, excluding items, compared to 11 cents expected by analysts surveyed by Thomson Reuters.
Yang optimism: "The indicators of Yahoo's progress are promising."
But advertising has a tough environment. "We were affected by weakness in the overall economy," he said. With consumer packaged goods and finance, branded advertising revenue "softened."
Yang is relieved Carl Icahn is now an ally (we'll see if he's more genial on the board than he has been off it): "Our board and management are pleased to have reached this agreement to settle the proxy contest...We look forward to working with the new board members who will be joining us."
Yang made the case, essentially, that the executive exodus was all part of Yahoo's plan. "We are actively promoting talented executives...The senior managers we placed in the last 12 months are nearly equally divided between external and (internal). We continue to recruit exceptional leaders."
Decker said page views are up in India because of Glue Pages, which present search results in number of related modules, some potentially sponsored, rather than in a straight textual list of Web sites.
"Already, Glue Pages have produced a meaningful lift in page views and search sessions for Yahoo India," Decker said. "While Glue was only out for half the quarter and on 4 percent of the Yahoo India search queries, user volumes are up more than 20 percent and we experienced a 1 percent search share improvement in May according to ComScore, indicating that Glue is delivering on our commitment to provide a compelling and locally relevant online search experience."
Decker said revenue per search is doing well. "We expect RPS growth to accelerate in back half of the year," she said. "Our search assets are only growing in value. We believe we can sustain a three-year average growth of 15 percent in RPS, or more."
Decker didn't sound complacent, but she was bullish on gains made compared to Google, which today gets the most revenue per search ad. "We had another quarter of narrowing the RPS gap," she said.
Decker said that greater user engagement in revamped, more customizable My Yahoo could increase ad inventory. "The initial results are promising...As we scale this to other parts of the network, this could have an impact on page views and monetization of inventory," she said.
Decker said there is no change to the 100-day schedule to implement the Google search-ad deal, and said Yahoo isn't changing its forecast of revenue from the deal, at least for now. Previously the company said that for the first 12 months of the deal, Yahoo expects up to $800 million in new revenue and $250 million to $450 million in operating cash flow.
Yahoo is working hard on delivering a unified tool geared to make it as easy for advertisers to run display-ad campaigns as it is to run search-ad campaigns. But it's not easy: "Buying search is straightforward, but buying display is hard," Decker said. There's only one interface for search, but display ads vary greatly in targeting techniques, the properties on which they're being shown, pricing models, and formats that range from text to banners to video.
Once Yahoo gets the tools right, though, Decker has high hopes to trigger a lot more advertising. "By removing friction, we believe our platform will greatly accelerate...the transition from offline to online."
One of Yahoo's changes to its search-ad platform was the incorporation of technology to set minimum bids for search terms, a method called marketplace reserve pricing that can increase revenue per search. So far, that had "a very modest effect" on revenue, but Decker has higher hopes as it's deployed more widely: "We announced it in late April, but did not have very significant percentage of our queries impacted. Where we did have queries impacted by it, it was very positive," she said.
That's it for today's call. Thanks for tuning in.