Yahoo's Q1 Earnings: The Revenue Growth Drought Continues Due to MicroHoo Search Fall-Off

Published on April 19, 2011
by Kara Swisher

Yahoo announced its first-quarter earnings today, showing a continued worrisome revenue growth stall, due in large part to declines in search revenue from its partnership with Microsoft.

The Silicon Valley search giant reported revenue of $1.06 billion, down six percent from a year ago, on net earnings of 17 cents a share, down 28 percent.

The performance was essentially in line with Wall Street expectations, which had been estimating that Yahoo would report $1.05 billion in net revenue and earnings of 16 cents a share, after traffic acquisition costs (TAC) was taken out of its results.

That compared to revenue of $1.13 billion and 22 cents in earnings in the same period a year ago, results that were goosed by the sale of its Zimbra email asset to VMware.

Yahoo’s revenue growth drought was due largely to declines in its search advertising business, which fell 19 percent in the quarter from $440 million to $357 million.

Contractual guarantees paid by Microsoft, its search partner, masked even larger declines.

On a GAAP basis, search revenue was $455 million, a 46 percent decrease compared to $841 million for the first quarter of 2010.

Yahoo said display revenue ex-TAC increased 10 percent to $471 million, compared to $427 million for the first quarter of 2010.

It was a good performance, but by no means a barn burner, especially compared to Google’s 27 percent revenue growth year-over-year in its earnings last week.

Thus, it seems the turnaround efforts at Yahoo, much touted by CEO Carol Bartz, are still turning.

In a statement, she said:

“We are solidly executing toward our plan for returning Yahoo! to sustainable revenue and profit growth. During the quarter, we beat the midpoint of revenue guidance while continuing to deliver on the bottom line.”

As BoomTown had previously written, in the last quarterly call, Bartz had warned that MicroHoo had not grown yet into the beautiful swan expected in this ugly-searchling tale, noting that it might take until the second half of 2011 to see some prettier results.

Thus, Yahoo is right to focus on display advertising, an arena it dominates still, despite increasingly successful incursions from Google and Facebook.

Yahoo’s stock is certainly reflecting the worry, holding fast to its share price in between $16 and $17 for a while now. It closed today at $16.12, down 23 cents a share.

A year ago it was above $18.

The shares rose almost three percent in after-hours trading, though, to $16.57.

I will be liveblogging the conference call Yahoo’s top execs have with analysts, starting at 2 pm.

Until then, here’s the official Q1 earnings press release to peruse:


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