Earnings Call: Yahoo's Q3 Had 'Mixed Trends'; Held Down By Weakness In Display

This story was written by David Kaplan.
[In progress] Following the announcement of 10 percent cut in its roughly 1,500-member workforce and its anemic 1 percent revenue growth. CEO Jerry Yang introduced the call by saying Yahoo (NSDQ: YHOO) saw "mixed trends" in Q3: while there was strong growth in search and display, though U.S. saw display weakness in ad categories like finance. Europe and Asia.

-- The coming layoffs: The workforce reduction will be at least 10 percent by the end of this year and will continue through '09. Certain offices will also be relocated and other areas may see consolidation. We've been through a downturn before and we were able to grow our model. Yahoo is now responsible for 14 percent of all the time spent online. We also have attracted more visitors through news events like the Olympics and the current movements in the financial markets.

--Google (NSDQ: GOOG) pact not dead yet: Yang: Yahoo and Google are continuing to work with the Department of Justice, which is examining the pact for antitrust issues. We look forward to bringing this pro-competitive agreement to the market. While the ad market goes through this downcycle, online advertising will benefit.

-- Pain and gain from financial markets: Sue Decker, Yahoo's president, then came on to address the impact of the global financial crisis. She reiterated the higher usage brought by the twists in the financial markets, but noted the weaker performance in premium display. In addition APT, Decker focused on audience trends and monetization products. Growth in display and search queries in general were up in the double digits.

-- Another redesign?: While it was barely a year ago that Yahoo redesigned its homepage, Decker insisted that the company is going much deeper this time and that this shouldn't be considered yet another redesign. Decker: "We are embracing more open and social features, that will make the site more relevant. we will continue organize spending around new tools like APT, the company's ad targeting and display delivery system. The Social Profile will be leveraged across several forthcoming products. We're also testing ways to serve more targeted content. We're changing from a one-stop portal model, but to a starting point for the rest of the web." More after the jump

Release (PDF) | Webcast (5:00 PM EDT) | Slides

-- Display woes: Guaranteed volume and pricingi.e., premium displaywere noticibly weaker, resulting in a deceleration in display. O&O display was up 3 percent in Q3. In Q307, the same category had year-over-year gains of 21 percent, a considerable difference. Search, which is a smaller part of Yahoo's business, was up 17 percent. Decker: Slower growth is expected in Q4, but we're hearing from media buyers who consolidating their ad budgets around larger brands like Yahoo. We've also seen more demand for performance display.

-- On APT: Good order flow operation in just the first month, and orders are strong for the rest of the year. APT can take advantage of the growth in performance display. 

By David Kaplan