Peter Kafka

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New Yahoo CEO Scott Thompson Has Big Plans, but Can’t Tell You About Them

You want news out of Scott Thompson? Then you’d be very disappointed with the Yahoo CEO today. Not surprisingly, the new boss — who wants us to remember that he’s really only officially been at work for two weeks — says it’s too early to talk about his plans.

But he does have some, he insists. For instance:

  • He has a plan to fix Yahoo’s big mess in Asia.
  • And he has a plan to help fix ad sales, which have been in turnaround for nine months and are still declining.
  • And he has a plan to buy some stuff to “fill in technology gaps” that will help with all of that.

But no details on any of that during the Q4 earnings call. Instead, Thompson repeated what he told Yahoo employees during his first address to them — Yahoo is both a media and technology company, and people should get their heads around that — and he laid out some big, pretty obvious ideas:

  • It’s important to pay attention to users and advertisers.
  • Yahoo should move fast, etc.
  • He’s going to double down on some existing Yahoo projects, and cut others.

Got it? Good. More details to come, Thompson says. And yes, for the record: That is a serious Massachusetts accent on the new guy.

—————–

EARLIER

Earlier this month, Yahoo CEO Scott Thompson got on the phone with Wall Street analysts, and refused to discuss the company or his plans for it in much detail.

Fair enough: He had just been hired that morning, and had barely met anyone in the company.

So now it’s been nearly three weeks. Think he’ll offer much more in the way specifics, in the wake of the company’s Q4 earnings report?

Me, neither. But Wall Street will still be hungry for any scraps it can get, whether it’s an update on the company’s Asia mess, a hint about future cost-cutting moves, or a general “here’s what I think we should be doing” state-of-the-state.

We will definitely get a chance to hear the Boston accent that seemed to charm everyone so much in early January. Time to see if it’s still as effective.

4:58 pm: Greetings! Just doing some finger exercises in advance of the call. Also looking for some Kara Swisher aviator glasses, since La Swish is in transit and cannot cover the call herself. I’d say I’ll do my best to channel her as I type, but I don’t think I could handle that.

5:00 pm: There’s time for a quick ticker check: Investors still yawning, and YHOO shares are nearly flat, after-hours. But Apple!

5:01 pm: And we’re off. On the call: Thompson and CFO Tim Morse.

5:03 pm: Thompson: Even though I’ve been here for three weeks, my official start date was only two weeks ago. Still! I had strong opinions before I arrived, and since then, I’ve been looking around: Big opportunity here.

Powerful brand, lots of visitors: 702 million globally! Advertisers like us, etc. “We’re going to work not just at scale, but with speed.” “I feel great about that, but I’m still very clear that we have a lot of work to do.”

You want details? Won’t give ’em. But I’ll talk about guiding principles:

For me, I insist “that we be balanced.” Have to think about customers, who we are, [something I missed] and how we allocate capital. I’ll come back to this in a bit.

And before we get to any of that, let’s talk about Q4 numbers and 2012 projections.

[At this point you can consult the numbers they've already put out]

Let me praise some people. And, “there’s no question” that we can do better. “And we will.” Need to get to market faster, monetize better.

5:07 pm: Here’s Tim Morse, with some numbers. [Again, you can read most of this, so I'll skip most until he gets to the "color" part.]

Challenging quarter, but I’m proud of the team. Etc.

And now, some 2011 numbers. [Again, I'll also skip this stuff.]

[Meanwhile, here's Citigroup analyst Mark Mahaney's take, fresh off the grill: "Fundamental trends remain nothing to email home about. The Display Advertising results were a clear negative, and the Search Advertising results continue to remain murky. Stock buybacks are (almost) always good … Scott Thompson has his work cut out for him …"]

Some details on our display missed. We missed by $15m; $10m of that is from Europe and macroeconomic stuff.

We’re nine months into salesforce revamp. We’re doing pretty good with that. “Several major advertisers” that had bailed or cut back on Yahoo spend have made “meaningful commitments for 2012.”

Some search notes. A reminder that we extended Microsoft search deal through 2013.

We’ll get to 2012 guidance in a minute. But first, a reminder that we’re still growing visitors and page views. More of that to come. U.S. elections and Olympics will be big for us.

“In short, we’ve made progress on many fronts, but that’s not the whole story.” Revenue isn’t growing, and “we expected better.”

5:18 pm: Guidance numbers, which you can also get from the release. But they are “not reflective” of our long-term goals. Because we want to grow.

And margins will get better, too.

And yes, we’re talking about fixing our Asia mess. But we won’t be able to go into details about that on this call.

5:21 pm: Back to Thompson. Okay. So here’s more on that “balance” stuff.

First: Customers. Both our users and our advertisers — we want them both to get real value from us, “and we will focus equally on both.”

We have to get people to use us more frequently. And we need advertisers to know we like them, we really like them.

5:22 pm: Two: “Balance in who we are.” We’re a media company and a tech company. We need to be great about both. “So we end the debate about which is more important … we must do both. End of discussion.”

Three: We gotta grow fast. “When it comes to making decisions, I make them quickly, and then push to move fast, fast, fast.”

Four: We gotta balance investment resources for today, tomorrow and long-term. Right allocation of capital is very important. Most resources have to go to “current core business.” But a lot also has to go to the products of tomorrow and the next 12 months. And also a “small but meaningful” amount into products that won’t show up for a year or more. We need a vibrant long-term product pipeline, and we have to consider businesses that don’t look anything like what we’re doing today.

But need to be very clear — not about restarting investment cycle. Refocusing, which means there are some things that we’re going to stop doing [that is, we'll have shutdowns and cuts].

I have some very clear ideas about the specifics of what we’ll do. But I won’t tell you about them.

Still, some big ideas: Customer experiences, and data.

5:26 pm: On customer experience: 702 million users a month. Did I mention that? Yes, I did. I’ll say it again. “But the sheer numbers of users will not get us to where we need to be.” We have to improve their experience while they’re here: Better interfaces, faster speed, deeper and “much more relevant content.”

And we need advertisers to get better results, and spend more money with Yahoo. [Don't do the opposite!]

On to data: We can use data to make the experience better for users — tweak layout, content, flow of the page and advertisers. “Nobody has done that yet on the Web.” “I know lots of companies talk about using data.” But we mean it. Crucial for you to understand that data is core to our plans. It “will be the key component for driving innovation at Yahoo.”

5:30 pm: So there’s some insight for you. Now on to strategic-review update. Roy said on last call that BOD considered a lot of alternatives. “It’s important for you to know that the company remains open to anything that’s good for our shareholders.” but we’re “focusing on what appears most promising.” “The work is ongoing, and I won’t say more about that today,” but it’s going to be good for shareholders.

Here’s the takeaway: There’s plenty of opportunity here. “Much bigger than the outside world imagines for us today.”

I’m here because we can do more.

5:32 pm: Alrighty. Q&A time.

Q: Please talk about that Interclick deal. What will they contribute in revenue and earnings? Also, update on revenue per search, please.

Morse: $25M of cost in Q1 from ICLK. $10M in revenue. We expect revenue to ramp throughout the year. As far as RPS increase, Microsoft is doing a nice job, and so are our sales guys.

“We’re definitely closing the gap” when it comes to search. But a reminder that we have a guarantee though March 2013.

Q: On that balance thing: How important will Q&A be here? Big deals in the works? Also, what do you see in macro environment?

Thompson: I think there’s going to be some stuff that we need that we don’t have, and so we’ll probably have to be “aggressive” in the market. “I’m relatively certain that there will be things that interest us” to help us “fill in technology gaps.”

Morse: Europe wasn’t great last quarter, and early indications are the same now. Not expecting much change this quarter, anywhere.

Q: How about a dividend? Also, how do your big principles play into display ad turnaround?

Thompson: “Too early” to imagine dividends. On turning around display: I’ve tried to spend a lot of time trying to figure out our problems there. “We are after that with a very high sense of urgency.” Number-one priority for now.

Q: Also on display. Any sacred cows going forward? Also, on premium video — how are your original series performing?

Thompson: Not sure how to interpret that cow question. “We are understanding and evaluating all options … personally, I’m being very aggressive.”

Morse: Last month, we had nine out of the top 10 original shows in U.S. We don’t give out revenue and pageview and streaming numbers, but “assume healthy growth there.” But more work to be done.

Q: Tim: Please give us more detail on premium display pricing. Scott: You guys made a lot of buzz with that Tom Hanks show announcement. Please discuss economics. Also: Experiment, or prelude to more?

Morse: Like I said, premium display below where we wanted, but it was in the range. And Interclick will make that better.

Thompson: Yeah, that was great buzz at CES. “It was more than the event itself,” everyone had nice things to say. “I was pleasantly surprised.” Not going to share details on dollars. So far, “we’ve had reasonably good success” with the originals we’ve done past.

Q: You talked about doing things Yahoo hasn’t done before. Like what? Also, for Morse: Shouldn’t he be worried about Yahoo’s share on mobile devices?

Thompson: Too early for me talk about strategically what we’re doing.

Morse: On search — yeah, we want to grow our O&O. In terms of mobile share, it’s so early right now. “It’s very intriguing in terms of how we’re going to play.”

But new revenue streams from mobile are even more important than existing ones.

Thompson: Important to point out that “no winner” has shown up yet when it comes to mobility. [Really?]

Thompson: Did I mention data? Let me mention it again. We have tons of it. It’s going to be huge for us. Data and technology can help us predict what users want to do next; it’s a huge advantage for us.

Q: Carol called this a communications company. Terry Semel called it a media company. And you?

Thompson: I had this all-hands meeting, and I said it again today. There’s this long-standing debate here. But “we better be darn good at both. In fact, I think we ought to great.”

Morse: Discussion of financials. Gap between reporter and subject.

Q: You said you’d realign around key areas of focus. But what’s new about that? Are there new verticals? Also, since you’re talking about investing, how does that jibe with operating margin goals?

Thompson: We’re working really hard to evaluate options. “Providing more detail for you today … is just a little bit premature.” “I actually feel a little bit bad” that I can’t tell you more.

“Just a little bit longer, if you will, before we get really specific” on that.

Morse: Yes, we’re going to spend money. But we’re also going to stop those projects, so we can move money around.

Q: On display: Seems like big opportunity to monetize your leftover inventory. Talk about that, please.

Morse: Yep. That’s one reason why we bought Interclick. (Also, theoretically, the reason for this.)

Q: Talk more about Interclick. $10m revenue, $25M costs. But that doesn’t look like what they were doing before you bought them — they had $2M EBITDA per quarter. What’s going on?

Morse: A lot of what they were doing before was related to Yahoo, so we have to eliminate some of that for reporting. Also, we’re building out so we can do more with that. Also, we have to start amortizing intangibles. Also! “This is the first quarter, right out the gate.”

Q: For Scott: You talked about growth before. Can you talk about growth via acquisition, and new business versus growth of existing business? Also, please talk about mobile traffic.

Thompson: I’ve talked to customers. “The conversations were fascinating.” People want us to grow. They also told us “exactly what we have to do to get more of their spend, today.” We can do that. We don’t have to grow solely via M&A. “The really good news is, the customers are there, they’re cheering for us.”

As far as mobile, I haven’t really seen the data. But I’m sure it’s growing really fast. It did at the last business I was at.

Morse: Right.

That’s it, everyone. All done for today.


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