Earnings Call: Yahoo's Display Ad Revs Fall 13 Percent; 'There Is No APT Rollout'

This story was written by David Kaplan.
After introductory remarks by CEO Carol Bartz, outgoing Yahoo (NSDQ: YHOO) CFO Blake Jorgensen began his last earnings call with an overview on ad revenues and, as expected, search looked a whole lot better than display. Display fell 13 percent to $371 million in the U.S. The international display side declined roughly the same amount, though on a constant currency basis, that segment grew about 6 percent. "We're seeing continued pressure on guaranteed pricing," Jorgensen said.

Update: At the very end of the call, Bartz was asked about the delays related to the rollout of APT, the company's ad targeting and delivery system for the Yahoo Newspaper Consortium. During the previous hour, the subject of APT and the Newspaper Consortium didn't come up at allwhich is kind of surprising, since the company introduced APT to much hype back in September. Even more surprising, no one mentioned the status of HotJobs, which is a key component of the Newspaper Consortium and may be sold off. Still, given the relatively small amount newspapers contribute to Yahoo's overall revenues, it's at least understandable.

There is no APT 'rollout': During the last two calls, Bartz has come across as a breath of fresh air, offering a lot of candor and little doubletalk. Still, she must be getting tired of being asked "When will the APT rollout be complete?" So, to put a cap on thatand gloss over criticisms of still yet another delayBartz simply declared an end to thinking of APT as being rolled out. Bartz: "There is no such thing as a 'rollout of APT.' This is a platform that will be ongoing for some time. We will have releases periodically, more sooner rather than later. It's a very important platform for us. It has to solve two things: it has to replace an internal ad platform and Right Media, our next platform. Looking at it from my software background, it was a bigger task than what the company initially understood. There are architecture and functionality issues; it's not that easy to use right now. There also needs to be more features added. This is one of the things that we can talk more about in October. It is central to our roadmap and there is no one-time fix and we won't say, 'APT is perfect and now let's go on to something else.'" More after the jump

In defense of brand ads: Much of the call centered around the decline of display. In general, display was hit by the pullback in brand budgets. In particular, financial services and auto display ads plunged, as search ad spending rose among car companies. Bartz said the trend is typical of a recession. She gave a forceful, if predictable, defense of brand advertising and display. "I get asked all the time if display will be permanently eclipsed by performance-based search ads," Bartz said. "But ask any CMO and they'll tell you they can't create a campaign just using 20 keywords." Bartz alluded to companies whose images have suffered during the downturnthink banks and car companiesand said that they will have to reintroduce themselves to consumers and will need to rebrand once the recession ebbs. "Brand advertising is not going away."

Don't put Chanel next to Harley: Yahoo doesn't break out the differences between class one inventory and class two display ads. However Bartz said that the "vast majority" of its display ads are class one, while class two is growing a lot fasteralmost double the rate of class one. "People are doing what they usuall do in a recession. Again, you don't build a brand by letting it float down the long tail. People are very concerned about where their media shows upthey're concerned about time and placement. Chanel doesn't want to wind up next to Harley Davidson, and vice versa."


By David Kaplan
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