Semel Disgusted With Yahoo!'s Q3 Results

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Terry Semel, Yahoo's CEO stated " ...we are not satisfied with our third quarter financial performance."

Net income for the third-quarter dropped to $159 million, or 11 cents per share, weighed down by $80 million worth of stock-compensation expenses, compared with the year-earlier quarter's profit of $254 million, or 17 cents per share.

Total revenue rose 19 percent to $1.58 billion.

Excluding traffic acquisition costs -- the financial cut affiliated Web sites receive for featuring Yahoo advertising -- revenue rose 20 percent to $1.12 billion. - Reuters

Yahoo! also approved buying back up to $3 billion in stock over the next 5 years. The stock market does not know how to respond to the news. In after hours trading the stock was down roughly 3% and is currently up about 3%. Part of the price shake up is because Yahoo! launched Panama early.

Seems to me the five biggest things killing Yahoo! are stock based compensation, a lack of ad relevancy based on CTR, arbitrage lowering the quality of their traffic, poor international ad targeting, and the next version of IE due out this month.

eMarketer recently noted that Google is expected to pocket $4 Billion from the US ad market, a quarter of US internet ad spend this year. Is the slowing ad spend a Yahoo! only problem? Or is it industry wide?

Comments

Slowing Ad Spends

I have noticed a little tightening of spend across a bunch of areas - based on fewer advertisers and lower max bids.

Add to that the cartoon that mentioned today that an internet company with no income sold for $1.65 billion... is the bubble getting ready to burst again???

I seriously doubt it but Google and crew need to maybe focus a little on their core features for a little while before the whole thing goes to crap.

One important point on this

Quote:
After subtracting commissions Yahoo paid its advertising partners, the third-quarter revenue fell to $1.12 billion.

That's $460,000,000 being paid out or 29% of their revenues...

I am not good a math whiz so please feel free to correct

you also have to consider

you also have to consider that they have tons of display ad revenues and user based revenues from things like music and dating, etc.

Partners might be responsible for roughly half of Yahoo!'s search and contextual ad revenues

We killed our

YSM PPC Campaign because the traffic became abolute "caca" over the past 18 months. Like us, I have a feeling many other companies have slowed their YSM spend and/or canceled it altogether.

Re: Panama launched...

Just saw that and its actually what is keeping the stock from tumbling right now:

Quote:
Shares of Yahoo seesawed in after-hours trading Tuesday. The stock initially traded higher after the earnings were released but quickly lost ground and at one point were down as much as 4 percent. The stock recovered from these losses though and moved as much as 4 percent higher after Yahoo CEO Terry Semel made the comments about its new search platform for advertisers.

CNN story

We killed our... Part 2)

Today, we also got a call from YSM informing us that we're being migrated to the new ad platform tomorrow.

Coincidental timing????

....a lack of ad relevancy

....a lack of ad relevancy based on CTR...

Who needs ad relevancy based on CTR when their editors know your business (or your customers) better than anyone.

"My Yahoo!"

For several years I've used Yahoo!'s bill paying service and over the past several months it's gotten harder and harder to get a payment to go through. (BTW-this is a PAID service)

I also use their TV guide module and over the past few weeks it's gone haywire.

That leaves my Yahoo! email account as the only reason to keep "My Yahoo!" as my home page.

(And I'm already switching over my Yahoo! email subs to gmail.)

From what I hear they've

From what I hear they've been bringing in more and more corporate management from other companies who simply don't get what Yahoo! is, and simply push on employees doing twice as much for half the pay.

My brother-in-law ran the server farm for Yahoo! Europe until about 18 months ago, but now he's running Amazon's US servers because of this.

It's not too hard to perceive a gradual rot in direction across the departments of Yahoo! - but whatever their issues at present, they have superb assets. They could benefit significantly if they put the creatives back in control instead of the bean-counters.

2c.

Bust is coming

Hopefully people will read this. I mean, when it comes to stock bursts you'd think people would need to hear it.

The bust is coming. It will happen with GOOG when it hits $450 again and a single piece of bad news occurs. In the case of similiarly over-valued Novell in 2000, this could be as little as a snide remark by a company insider at an exclusive dinner party (sent Novell down 65% in 3 months).

Look, it's simple. Forget P/E ratios for a moment and focus on market caps and stock prices. GOOG is increasingly becoming what's called a 'thin stock' because its stock is exorbiantly high for the amount of risk one must currently take.

Let's say I want to make $100 on an investment. I buy $2350 worth of YHOO (100 shares atm). It only needs to get to 24.50 to make money. At worst case, i can pull out if i am absolutely sure YHOO is going to stay under at $22.00 and i will have lost $150. For me to make $100, YHOO would need to rise some 4.2%, which it is perfectally capable of doing.

Now, consider GOOG. I spend $2105 on 5 shares of $421 GOOG. It has not strayed much higher than $421 in the last months, while YHOO is at 2 year lows. To make $100 GOOG would have to rise to $441. Only twice, EVER, has GOOG ever done this: 18 Jan and 21 Apr 2006.

Thus, a GOOG bet is exponentially more risky than a YHOO bet. It is *purely* for insanity and outright manipulation (timed entry into the S&P 500) that GOOG has not collapsed since it hit $331 in March 2006.

Sooner or later, people are going to realize that GOOG just spent more money than YHOO makes in a quarter on a vaporware product that greatly increases their chances for getting sued for copyright violations and costs some 1.5 million a month *net* to operate (according to Forbes, April 2006). And it was in *stock* options. That is not cash. As GOOG starts tanking, those YouTube holders will be selling.

Really, why aren't the companies suing GOOG now? Well, probably because they have invested in GOOG; esp. at high prices they would be intimately aware of how detrimental a fervent lawsuit would be to their own holdings. It's the only thing I can think of. I seroiusly doubt they care much for the mid-term financial security of the U.S. and global economies.

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