Who’s to Blame for Yahoo’s Q2 Revenue Rout? The Line Forms Around Back…
Yahoo turned in another weak performance in the second quarter, with yet another decline in revenue.
This time it was five percent, compared to last quarter’s six percent. In other words, at least things are looking up as they go down!
While earnings per share rose smartly, Wall Street is still looking for strong sales growth from the Silicon Valley Internet giant, which seems unable to provide it.
Blamed most this time for the revenue fall: Yahoo’s changes in its display sales operations in the key Americas region, reasons for which were largely unspecified in the initial company press release. (You can see the damage in this slide deck from the company here.)
Maybe Yahoo CEO Carol Bartz will explain it all in its upcoming conference call with analysts (or she could try the I-don’t-know approach taken by News Corp. CEO Rupert Murdoch in PhoneGate hearings in Britain earlier today!).
2 pm PT: It starts with the usual regulatory blah-blah, which I always enjoy.
Bartz gets right into it, opening with the key problems with China’s Alibaba Group, as well as its display and search revenue weaknesses.
The fight with Alibaba is over its Alipay payments unit, which was spun out of the Chinese company without Yahoo’s say-so. Yahoo is a big shareholder.
Bartz says that the company was working on a settlement night and day.
But she quickly gets onto how display did not perform as expected in its key Americas arena. “Obviously, I am not happy,” she said.
Obvi! Neither are shareholders, Carol.
She says it was not about new competitive development. It was not about the economy. It was not about engagement.
So what was it? Changes in its sales leadership and organization, says Bartz, which has included talent walking out the door in droves.
A lot more than Yahoo expected, but no surprise to anyone who has been paying any attention to the brain drain at the company.
Bartz promises a new approach to sales, part of its endless turnaround, which is beginning to feel like a digital version of “Waiting for Godot.”
Search revenue, though, says Bartz, was better than expected.
2:11 pm: CFO Tim Morse is on now, running through the numbers and the display shortfall in the Americas region.
“We simply did not have appropriate coverage,” says Morse, noting consumer products, tech and autos as weak spots in the advertising market.
Thank goodness, then, for the guarantees from search revenue in the Microsoft partnership deal.
More numbers and then it is back to Bartz to talk about search, which is going better than the last quarter, when it was the culprit for the revenue decline.
She says that Microsoft and Yahoo were working together to improve the issues.
“We’d like to be further down the road,” says Bartz about the goal of search revenue per search growth, as well as settling all the other problems, such as the Asian issues.
And, by further, I am presuming she means actual forward movement, which is what roads are actually for.
2:27 pm: Q&A time, the part of our program where Wall Street analysts do not ask the questions that need asking (and where I win fancy journalism awards for pointing this delta out!).
Therefore, Bartz is first thanked for providing “color” about the display disaster and is not asked about more specifics of the disaster itself.
The second question still does not get to it either, but she does note Yahoo’s sales force has to sell beyond “Gee, we’re big” and come up with better ad solutions.
“The issue is we did not have enough sales people in front of the big clients,” says Bartz.
That’s because all those former Yahoos are now working at Groupon, LivingSocial, Facebook and on down the line and now in front of big clients for those hotter companies.
2:34 pm: Question about its Asian assets. Yahoo’s talks with Yahoo! Japan and Alibaba are separate, says Bartz, although I would add that they have non-movement in common.
And also a question about Yahoo’s interest in the acquisition of the Hulu premium online video service.
Bartz winks verbally and says nothing, which translates into: Of course, it is interested.
More on the reasons for the display fall-off, which Bartz makes clear is not due to big competitive threats, but internal issues.
Maybe she’s saving big competitive threats as the reason for a revenue decline in the third quarter!
I look forward to the quarter I get the finger pointed at me for causing revenue to fall, due to my snarky posts.
Now, we are into softball questions about improvements in engagement. It’s up, but no one asks why Yahoo is still not doing anything very cutting edge in product innovation compared to competitors.
I believe Google has launched at least 14 new social networks since this Sunday, along with its strong quarterly performance last week. And Apple, well, blew away its quarter today as it is about to release more cool new stuff later this week.
And that might be the crux of the issue for Yahoo, which might not solve its woes by throwing a more focused sales army at the issue.
That’s because Yahoo’s products are simply not nearly has social as Facebook or even Google right now, which might be the true problem as old customers move on to new advertising solutions.
Whatever the reason, Yahoo clearly needs a refresh of its ad products and how it sells them, especially in its fast-growing mobile, video and communications products.
Bartz talks about getting better expertise, a tighter regional focus and other issues of going to market, which is perhaps something she might have realized many, many quarters ago.
After all, she’s been in charge for a while, and these issues are not new.
In fact, in an earlier quarter, Bartz was stressing “tentpole” events and anchor media properties and the power of the size of Yahoo as a selling point.
As I wrote then:
“CEO Carol Bartz excited was the Silicon Valley Internet giant’s traffic gusher for big tentpole events such as the Super Bowl and the Oscars. In fact, Bartz practically sounded like a gushy “Entertainment Tonight” flunky when talking to Wall Street analysts about Yahoo’s Oscar news, games and other offerings. She proudly noted the site’s efforts generated more than a billion pages views.”
Now big is out! Moving on!
The last question is another about Yahoo’s talks with its Asian partners.
“It’s complex,” says Bartz.
You can say that again.