Yahoo will report its fourth quarter earnings tomorrow, after the markets close, which most expect to be lackluster compared to a year ago.

To call this report a surprise would be, well, wrong.

In fact, it will be the 13th quarter in which the Silicon Valley Internet giant has done worse that the previous year. (This has happened as Internet advertising has boomed for sites like Google and Facebook, as a point of reference.)

Welcome aboard, new CEO Scott Thompson! Now, what are you going to do about it?

Probably cut costs first, including staff, and try to quickly figure out an all-new, this-time-it’ll-take strategery about what to do to turnaround the much beleaguered Yahoo.

But, first, the depressing quarter to deliver again.

The estimates for that weak performance have a range, but the consensus of analysts is expecting revenue to be $1.19 billion on profits of 23 to 24 cents. If Yahoo has managed to rein in costs more than expected, some analysts are hoping for a slightly better report.

Still, all the indications are for more negative signs in user engagement, search share, display advertising stats and more.

Thus, we await the light at the end of the tunnel.

As Citigroup’s Mark Mahaney noted in his cheat-sheet analysis:

“Valuation remains intriguing, but we’re still waiting for convincing Top-Line Turnaround Story Proof. With new CEO Scott Thompson, we believe YHOO will be another wait-and-see turn-around story.”

Of course, much of the action is taking place elsewhere, with the company ferreting away at the deal to sell off a big stake in Yahoo’s Asian assets and also subtracting and adding new board members.

But tomorrow, it’s once more unto the Wall Street breach, dear friends, or close the wall up with our purple dread.

Until the results are in, here’s a recent video I did for WSJ.com’s online Digits show on the possible layoffs at Yahoo:

Earlier this month, investors pushed Google shares up past $670 — the highest they’ve ever been. They’ve since pulled back a bit, but not for performance reasons: The Street still expects Google to post net revenue of around $8.4 billion — that’s up about 30 percent over the previous year — and earnings of around $10.46 a share — up about 20 percent.

If there are questions out there about Google, the Street seems to think they’re about what could happen — government regulation, a misstep with the $12.5 billion Motorola Mobility deal, etc. — than what just happened over the last three months.

Analysts who have been listening to search marketers say they don’t see any real signs of slowdown over the last quarter, even as other ad businesses have been roughed up. (We’ll ignore, for now, an outlier report from Kantar Media which reports a huge and puzzling decrease in paid search.)

As always, there is lots of interesting stuff going on at Google. And, as usual, you can expect Larry Page and company to say very little about it, other than making vague comments about the strength of their core search business, and some acknowledgement that their video, mobile and display ads are starting to become very significant businesses of their own.

In a fantasy world, we’d like to hear Page, et al, talk about what they really think about Facebook, and whether that move to shove Google+ pages into Google search results is as telling as it seems to be. We’d also like to hear more detail about their plans for Motorola, assuming the deal goes through early this year. Don’t hold your breath.

For more grounded speculation, we can consult this cheat sheet from Citi’s Mark Mahaney, which lets you see how different results might move GOOG shares. We continue to find these summaries as useful as ever (click image to enlarge):

A main attraction: the bank’s top-ranked Internet analyst, Mark Mahaney.

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In an interview this afternoon, eBay CEO John Donahoe confirmed that it was indeed a “shock” — as he wrote to staff in a memo — after returning from a long New Year’s weekend, to learn that the head of one of the online commerce giant’s key divisions, PayPal President Scott Thompson, was leaving to be CEO of Yahoo.

With only 15 hours’ notice before the planned announcement this morning by Yahoo — and even earlier, given that AllThingsD.com scooped the news last night — Donahoe had no time to inform the company, especially those working at PayPal.

Still, he was as cordial as he could be, given the circumstances.

“Scott is a great guy, and he did a great job at PayPal, and I am one of his biggest supporters,” said Donahoe — known at the company for his even-handed demeanor — despite being blindsided by the longtime eBay exec and also Yahoo. “I told him, ‘I hope you are very successful at Yahoo.’”

But the eBay leader, who noted that he prefers to avoid corporate drama, shrugged off the suggestion that there would be any animosity going forward with Yahoo.

“It’s not the timing that I would have liked. It would have been nice for him to be able to tell the team, but that’s neither here nor there,” Donahoe said. “It’s no big deal.”

He also said he’s not holding a grudge against Thompson.

“Scott wanted to be a CEO, and that’s great. He felt the opportunity wasn’t going to come along again. He had the best non-CEO job in the world, but he wanted to be a CEO, and wanted to go for it,” said Donahoe. “I get that, and there’s not that many CEO jobs coming up.”

Still, after the news broke, one senior Yahoo leader joked to AllThingsD that he was afraid to call Donahoe.

Indeed, now that Yahoo has nabbed Thompson from its crosstown Internet peer, Donahoe will have to move fast to fill the exec shoes now abruptly left empty.

That’s especially true since Thompson’s departure is occurring at a most inopportune time.

First the good news: The digital payments division, which has been the bright spot at eBay, is on target to have a record 2011 performance, and is set to roll out several significant initiatives this year.

But the big item on PayPal’s agenda is daunting, too: To challenge both incumbent payment providers, along with new entrants, such as Google, by creating a digital wallet that can be used for physical payments at retail.

Nonetheless, the most pressing order of business, obviously, is that Thompson will have to be replaced.

And that’s no small task. The seven-year PayPal veteran has a deep knowledge of the digital payments market, and has a track record of success. PayPal has continued on a breakneck pace over the last couple of years, with the division’s revenue now on track to surpass that of eBay.

In addition, Thompson — often described as likable with an easy-going personality — was the company’s most visible cheerleader on payments, eagerly talking to major retailers and convincing them to get on board with its next generation of services.

Now, while PayPal has a plan and a budget for 2012, there is currently no sole person to implement the vision.

Donahoe, who will head up PayPal in the interim, said he addressed the PayPal executive team in a meeting this morning, in an effort to keep the momentum going.

“I got together with the team this morning and we spent a couple of hours together. Rest assured that they are driving ahead collectively to implement the plan that they helped put together over the last year,” Donahoe said. “They have a clear set of 2012 priorities, and they are excited.”

He added: “There was a shock in the morning, but by noontime, it was full speed ahead.”

As an example, Donahoe said eBay had already reassigned five of the company’s top 15 strategic accounts that Thompson was responsible for. Donahoe will take a couple of those, as will eBay CFO Bob Swan, and Devin Wenig, president of eBay’s Marketplaces unit.

But make no mistake, there needs to be a Thompson replacement, and quickly.

PayPal does have a deep bench of executive talent, and any number of senior executives could step up to take the role, although it’s also likely that eBay will conduct an external search before coming to that conclusion.

“I won’t worry about what’s next until we’ve made it a couple weeks into the year and are hitting our milestones,” said Donahoe, who noted that the company’s vision was shared by the management team, and even though Thompson was the one communicating externally, “It was not a one-person plan whatsoever.”

Donahoe declined to elaborate any further on how eBay would conduct a search.

Thompson’s direct reports and key leaders include:

Ed Eger, SVP and GM of North America, core payments and emerging markets; John McCabe, SVP of worldwide operations and customer service; Patrick Dupuis, CFO; Gary Marino, SVP of credit products and risk, who joined through the acquisition of Bill Me Later; Mark Lavelle, VP of strategy and business development, also from Bill Me Later; Rupert Keeley, SVP of Asia Pacific; Sam Shrauger, VP of global product and experience; James Barrese, VP of product development; David Marcus, VP of mobile, who joined through the acquisition of Zong; and Ranjana Clark, SVP and chief customer and marketing officer.

And there is a fairly long list of companies for eBay to attempt to cherry-pick from.

One obvious company is Amazon, which has a competing payments division. If PayPal could legally pull it off, Matt Swann, VP and general manager of payments of Amazon, would be a prime candidate to run the company.

There are also other companies with payment talent — many of which are also situated near eBay in Silicon Valley — including Apple, Google, Facebook, VeriFone, Intuit and the traditional payments providers, such as Visa, MasterCard or American Express.

While analysts viewed Thompson’s departure as a negative, they were still largely optimistic about PayPal’s future.

Colin Sebastian of Baird Equity wrote in a note to investors that “the core PayPal consumer value proposition remains strong, in our view, and remains well positioned for long-term growth.”

Citi Analyst Mark Mahaney pointed out that Thompson’s departure comes on the heels of a number of PayPal executive departures, including Stephanie Tilenius and Osama Bedier, both of whom left for Google; and Lorrie Norrington, who left eBay for personal reasons.

Still, eBay’s stock dropped $1.18 a share, or nearly 4 percent, on the Thompson news, to close at $30.16.

It is interesting to note that eBay’s market cap hovers close to $40 billion, which is still twice Yahoo’s market valuation.

They’re less happy than they used to be. But they don’t seem to be going anywhere.

That’s the cautiously optimistic conclusion of a new survey Citigroup commissioned over the past few months. It finds existing subscribers still fairly pleased with the service Reed Hastings is offering: 57 percent say they’re either “extremely satisfied” or “very satisfied.” But Hastings’ good will has certainly eroded a bit: In May, a similar survey found 50 percent of his customers in the “extremely satisfied” category. That number is now down to 18 percent.

As Citi analyst Mark Mahaney points out, the survey is a bit skewed, since Netflix subscribers who were most disappointed with the service’s changes — a price hike, an ill-fated attempt to spin off its DVD business into a separate unit, and the loss of programming deal that gives the company access to Sony and Disney movies — have already bailed.

But a different survey question suggests one reason customers are sticking around with Netflix: They don’t see many other options.

While Amazon has been building up its catalog of streaming video, only 9 percent of Netflix customers said they’ve watched movies or TV shows there. And while 15 percent said they’ve used Hulu, that number is down from 19 percent in May. Apple’s iTunes comes in at 8 percent. (Perhaps the reason only 27 percent of Netflix subscribers say they use Netflix is because they’re distinguishing between apps and the site. But that seems like a fairly precise distinction for a large number of people to make, so who knows.)

The very big picture is that Mahaney still assumes Netflix will keep growing. He figures its DVD-only subscribers will drop by 800,000, to 9.9 million, over the next year. But he thinks streaming subscribers will increase 9.9 million, to 30.9 million, and that the company will add a few million more as it expands in Latin America and the U.K. He also thinks Netflix will become profitable again by the end of 2012.

But none of that is going to help anyone who bought Netflix stock earlier this year, when shares had climbed as high as $300. Mahaney has lowered his price target for NFLX, and is now hoping it climbs back to $80.

In midday trading, the company’s shares fell 5 percent to $22.09 a share. Even so, that’s up from late last month, when the Chicago company traded as low as $15.24 a share, or roughly half of what some investors paid on day one.

The company is like a student in high school who still needs to push in order to get accepted into an Ivy League school. Even though it’s likely a shoo-in — and it’s already gone public — there’s no leeway for senioritis.

Most of the analysts’ evaluations were concerned about risks, such as the company’s short operating history, the prospects for growth now that it has gotten so large and intense competition coming from peers like LivingSocial, Amazon and Google among many others.

“While much execution lies ahead in order to meet expectations, the opportunity is large and Groupon has competitive advantages,” according to Barclays Capital, which had a neutral rating and a price target of $27.

J.P. Morgan also gave Groupon a neutral rating, but set a lower price target of $24 a share because there was still a lot to do despite its first-mover advantage.

“As subscriber growth slows, we project a major profitability ramp for Groupon over the next two years. However, we believe this ramp is largely anticipated and its magnitude leaves little room for error in execution and operations at current levels,” the analyst wrote.

Citigroup’s Mark Mahaney had the harshest words, saying he was “waiting for a better deal.”

He attributed his neutral stance and $24 price target to the lack of success in the company’s new segments, such as real-time offers, vacation packages and physical goods. “That, we believe, could take significant time to prove out,” Mahaney explained.

Nearly all the analysts were also concerned about the upcoming expiration date for a lock-up period. Expected in May 2012, it would allow some early investors and employees to dump the stock.

In other words, we could see a lot of people cashing in their vouchers right as the offer expires.

But here’s the counterpoint: Search — which means Google — appears to be doing just fine.

Citigroup’s Mark Mahaney has been checking with search marketers, who tell him that Q4 looks a whole lot like the rest of 2011, except maybe a bit better: “Our panel is tracking U.S. Search spend to be up between 15% and 27% Y/Y, rates that are largely in-line with or faster than Q1-Q3 trends.”

Mahaney notes that Efficient Frontier, the search marketer Adobe plans on buying, says its Q4 numbers show a “slight deceleration” from the rest of the year. But compared to the sour faces I’ve seen from some ad guys in recent weeks, that’s fine.

Also of note: Mahaney says that mobile advertising, which has generated lots of hype but not that many dollars, may finally be here, at least when it comes to search. There’s a “a clear consensus that Mobile Search spend is becoming material,” he writes, and will account for 10 percent or more of many search buyers’ spend.

In April, Expedia proposed a plan that would break the business into two public companies.

One would be a travel agency, focused on selling air, hotel and car rentals, and the other would be TripAdvisor, the travel reviews site that operates in 27 countries and 19 languages.

The deal is expected to close on or about Dec. 20, including a one-for-two reverse stock split immediately prior to the spin-off. Expedia will trade under the symbol EXPE and TripAdvisor will trade under TRIP.

Today, the company filed a presentation with the Securities & Exchange Commission detailing Expedia’s standalone growth prospects. The case will be an important one to make given that TripAdvisor is often seen as the more attractive of the two companies.

The Bellevue, Wash.-based company plans to present the slides to various investors and analysts over the next two-and-a-half months.

In the presentation, Expedia lists three major growth opportunities: International expansion, especially in Asia; a greater concentration on hotel bookings, which have higher margins than airplane tickets; and new distribution platforms, such as cellphones and tablets.

Expedia is a traditional travel agency that collects fees when an airfare or hotel room is booked. Meanwhile, TripAdvisor, which aggregates user-generated reviews, produces revenue from advertising, as well as fees when users book through other sites, such as Priceline or Orbitz.

In the quarter ended in September, TripAdvisor’s revenue jumped by 30 percent compared to the same period a year earlier. Meanwhile, Expedia’s revenues rose only 14 percent.

Additionally, the company is breaking up as it faces increasing competition from Google, which has started integrating the technology of ITA, a travel software company it acquired, into its search results.

Expedia’s stock today is trading at $28.65, up 61 cents.

We still view GOOG’s acquisition of the football coaching headphone equipment company as highly risky, but given signs that Amazon & Facebook may also enter the Smartphone market, GOOG’s move isn’t unprecedented.

– Citigroup analyst Mark Mahaney, who is upgrading his Google rating to “buy” from “neutral,” despite his lack of enthusiasm for the $12.5 billion Motorola deal. On the bright side, he adds, if regulators approve the purchase next year, it will “still provide GOOG with patent support, & it’s an accretive deal.”

“Based on our supply chain channel checks in Asia led by Kevin Chang, Citi’s Taipei-based hardware research analyst, we believe an Amazon Smartphone will be launched in 4Q12. Based on our supply chain check, we believe FIH is now jointly developing the phone with Amazon. However, we believe that Amazon will pay NRE (non-recurring engineering fees) to FIH but the device and multiple components will actually be manufactured by Hon Hai’s TMS business group (the same business group that makes Amazon’s E-reader and the 8.9” Amazon tablet). We believe the smartphone will adopt Texas Instrument’s OMAP 4 processor and is very likely to adopt QCOM’s dual mode 6-series standalone baseband given QCOM has been a long-time baseband supplier for Amazon’s E-reader.”

Mahaney and his team guess that Amazon’s phone may cost it $150 to $170 to build, and it’s conceivable that the company will sell it for something close to that price: “For a normal brand like HTC, they need to price the product at US$243 to make 30% gross margin. If Amazon is actually willing to lose some money on the device, the price gap could be even bigger.”

Mahaney’s note doesn’t spell out that the phone will use Google’s Android operating system, but it suggests that will be the case by positing that Amazon will need to pay Microsoft an “OS royalty” — Microsoft has recently been able to extract royalty payments from other Android hardware partners.

But don’t expect Amazon to crack open the books to provide anything more concrete than that, even during the company’s third-quarter earnings report, being released tomorrow.

The Seattle-based e-commerce giant has yet to provide numbers on how well its lineup of Kindles is selling, and that’s not likely to change.

For the most part, Amazon doesn’t share these figures because it doesn’t have to. Piper Jaffray Analyst Gene Munster points out that the Kindle is a fairly small part of Amazon’s business and, according to his best guess, makes up only about 4 percent of revenues.

And if Amazon doesn’t have to disclose sales, why would it want to? The numbers would only tip off Apple and Barnes & Noble on how well its tablet business is doing.

But expect Amazon to be under increasing pressure to start divulging more information as the Kindle makes a greater impact on its bottom line.

Analyst Mark Mahaney of Citi largely expects the third and fourth quarters to be strong; however, his guidance is lower compared to the Street consensus because of the financial hit the Kindle Fire launch could have on earnings.

“There is the distinct possibility that an aggressive/successful Fire launch could materially negatively impact AMZN’s margins and EPS near-term,” he wrote in a note to investors.

He expects a profit of 19 cents a share on revenues of $10.8 billion. The Street’s consensus is a profit of 24 cents a share on revenues of $10.9 billion.

As an indication of how well the full lineup of Kindle devices is selling, the top seven bestsellers in Amazon’s electronics store are Kindles of different shapes and sizes.

The Kindle Fire, which ships Nov. 15, is the most expensive and has been in the top slot for the past 27 days. The next best-selling Kindle is the cheapest model, at $79.

J.P. Morgan is estimating that in the fourth quarter, Amazon could sell five million Fires.

But all those sales may not be the best of news.

The Kindle Fire could result in lower earnings because of its aggressive price point. At just $199, it costs less than half of Apple’s entry-level iPad, which makes it appealing to the mass audience. But Amazon could be losing about $50 per Fire, according to some estimates.

However, the lower margin could be offset by the company’s new “offers” business, which basically places advertising on the devices to subsidize the cost of the hardware.

For example, the Kindle Touch with Special Offers costs only $99, but if you want one without ads, it costs $40 more. The new Kindle, without a touchscreen, costs $109 — or $79 for the ad-subsidized model. It’s not clear at this time if the Fire will ship with offers or not.

The offers appear on the device’s screensaver and do not appear while reading the text of a book or at any other time. They are sold by both Amazon and LivingSocial, which is second to Groupon in the deals niche and backed by Amazon.

But now we’ll get Reed Hastings’s own report card, when Netflix announces its quarterly earnings this afternoon.

As Citigroup’s Mark Mahaney notes, the key numbers to look for aren’t the Q3 metrics — the company has already preannounced that its subscriber numbers are going to be lower than it initially thought — but its guidance for the rest of the year.

That’s where we’ll be able to see the impact of its many stumbles — the price hike, the broken Starz deal, Qwikster’s New Coke moment — or at least what Netflix thinks the impact will be. If Netflix subscribers are really bailing out — and not just threatening to do so on Hastings’s Facebook page — you should be able to see that reflected in its expectations for the next three months.

Remember that shortly after Netflix dropped its first bomb this summer — a 60 percent price hike for many of its customers — management predicted that it would suffer a subscriber blip in Q3, but would recover by Q4. Let’s see if they’ve hung on to that confidence.

Here are Mahaney’s best guesses for Netflix’s Q3 results and Q4 guidance, along with Wall Street’s estimates (click image to enlarge). I’ll be covering the results live at 4 pm ET.

Check out this engagement chart, courtesy of Citigroup’s Mark Mahaney. It’s a neat illustration of the Web 2.0 era, and does a nice job of explaining why Google is so freaked out about Facebook, and why AOL and Yahoo seem to be in eternal turnaround mode. (Note that just a couple of years ago, someone might have thought to include Myspace in here. Remember?)

By the end of the day’s trading, the restaurant booking site had regained some ground, closing down only eight percent, or $5.23 to $57.50 a share.

But at least one analyst called the market’s bluff, concluding that the purchase did not mean Google was interested in competing with OpenTable.

OpenTable currently accounts for 10 percent of all diners who end up being seated in a restaurant, while Google mostly gains customer reviews and surveys from Zagat.

“The risk here … is that this marks Google’s attempt to compete directly with OpenTable in the Restaurant Reservation segment. For now, we don’t believe it,” wrote Citigroup’s Mark Mahaney in a note to clients. “Although Google has thrown a few surprises by us recently, we see it as highly unlikely that Google would want to enter the salesforce-intensive/truck-roll/hardware & software-install Restaurant Reservation business.”

Mahaney also noted that there’s little risk that traffic to OpenTable will fall because of the deal.

Today, only five to 10 percent of all reservations come from third-party networks like Yelp, Google, Yahoo, Zagat, etc. OpenTable, for example, is the exclusive restaurant reservation service on Zagat. Another review site, UrbanSpoon, was purchased by IAC two years ago. IAC, which owns a very diverse portfolio of businesses, saw its stock sink 15 cents today to close at $39.53.

Citigroup reiterated its buy and said its current price target is $82 a share.

The purchase of Zagat is likely a bigger blow to Yelp, which is still seeking an exit of its own after turning down a half-billion-dollar offer from Google two years ago. The companies are not completely alike. Yelp has been fairly successful in gaining a very broad audience, especially since Zagat charges for many of its publications and mobile applications — a very un-Google approach.

Google said this morning that Zagat will work closely with its search and maps divisions, but it also would make sense for it to work closely with Google Offers, which is trying to be the local deals equivalent to Groupon.

The online restaurant reservations company said today it has appointed Duncan Robertson to the position of CFO. Robertson previously co-founded and served as CFO of SnapStick, a mobile app company. Prior to that, he was CFO of Aricent, a technology services company.

Three months ago, the company surprised Wall Street when its CFO Matthew Roberts was promoted to president and CEO and said Jeff Jordan, the president and CEO, would transition to executive chairman.

Jordan has since taken a job at Andreessen Horowitz, the large Silicon Valley VC firm.

When Jordan’s departure was announced, OpenTable’s stock fell $17 to $96. Today, the company’s stock continued spiraling downward, slipping another 9.5 percent, or $6.51 a share, to stop at $68.90 a share in after-hours trading.

OpenTable reported second-quarter revenues of $34.3 million, a 53 percent increase over the same period a year earlier. It was that figure that narrowly missed analyst expectations of $35.3 million, according to Thomson Reuters.

The company’s quarterly profits totaled $6.3 million, or 26 cents a share, up from $2.6 million or 11 cents a share in the second quarter 2010.

Despite executives playing musical chairs, Citi’s Internet Research Managing Director Mark Mahaney wrote in a note to investors that the company reported an “intrinsically robust” second quarter, and that revenues were only modestly below his estimates, whereas adjusted earnings per share of 33 cents beat expectations.

Other positive results:

• Its base of restaurants increased 27 percent to 15,560 year over year and diners seated totaled 22.2 million, a 47 percent increase in North America.
• Internationally, it saw even stronger growth, with its installed base of restaurants growing by 276 percent and seated diners up 249 percent year over year.

That disclosure sent the company’s stock tumbling nearly 10 percent after the market closed. But Reed Hastings and company don’t seem to be sweating.

The real surprise, they say, is that Netflix customers aren’t more upset.

“Believe it or not, the noise level was actually less than we expected, given a 60 percent price increase for some subscribers,” Hastings said on yesterday’s earnings call, answering a question about the outpouring of outrage on the Web. “We knew what we were getting into, we tried to be as straightforward as we could, and that has worked out very well for us.”

What Hastings isn’t saying out loud, but is saying via the financial guidance the company is offering: Chill out. Relax. We know what we’re doing.

Netflix told Wall Street that it expects to see as much as $829 million in revenue next quarter. But as Citigroup’s Mark Mahaney notes, the relatively modest subscriber projections Netflix is offering for the end of Q3 — 25 million in the U.S., 15 million of them still using DVDs — puts the company on track to do a $1 billion quarter. Which is what it suggests it will do in Q4, for the first time in its history.

Essentially, Hastings is betting that subscriber growth returns to normal levels in Q4 — whoever is really dissatisfied with the pricing will have already bailed, while new customers won’t notice the change. And then he’ll see a real benefit from the price hike, which will affect the majority of his customers — DVD use has peaked, the company says, but it’s not going away overnight.

It seems to me that the real risk for Hastings isn’t consumer reaction to his price increase, which he can probably forecast fairly effectively. Netflix prides itself on the deep data insights it can mine from its customers.

What he can’t predict is the way the Hollywood studios will behave as he attempts to license new content for his streaming service and renegotiate his Starz deal, which expires early next year. If those deals aren’t successful and Hastings can’t grow his catalog of movies and TV shows, then the price he’s offering won’t matter that much.

Some important metrics to pay attention to:
24.59 million U.S. subscribers, plus another 1 million in Canada. That’s in line with exepectations.
Projected subscribers in Q3: Up to 27 million, which is a little lighter than analysts were looking for.

Q3 revenue guidance: Up to $828 million, which will again disappoint Wall Street.
Q3 EPS guidance: From $0.72 to $1.07 per share, also lower than expectations.

Not surprisingly, shares are down initially, dropping more than 7 percent after hours.

Reed Hastings seems to indicate that some of the shortfall is because of its recent price hike, which is meant to push subscribers away from DVD rentals and toward streaming: “Because of the timing of the price change, revenues will only grow slightly on a sequential basis”.

Hastings does say that he won’t completely abandon DVDs, though, noting that he’ll start marketing the DVD-only service in the last three months of the year, “something we haven’t done for many quarters.” By the end of Q3, he says, Netflix will have 10 million streaming-only customers in the U.S., 3 million DVD-only customers, and another 12 million who will get both formats.

Netflix has pushed up the operating losses it expects to incur from international expansion this year from $70 million to $80 million; that’s the second time the company has bumped that number up.

Netflix also says it is not bidding on Hulu, but that’s no surprise.

As always, here’s Citigroup analyst Mark Mahaney’s “cheat sheet” so you can play along at home. Pay particular attention to subscription growth projections (click chart to enlarge).

The Netflix earnings call starts at 6pm eastern; I’ll be back then to listen in and will update if needed.

Tomorrow, Yahoo will announce its second-quarter earnings and, once again, Wall Street is expecting yet another meh performance from the Internet giant.

In his “cheat sheet” report, Citi analyst Mark Mahaney’s take is pretty typical of the sentiment of investors weary of waiting for a rebound in Yahoo’s growth.

“From $15, we believe YHOO shares have upwards bias,” wrote Mahaney, “but we don’t have real conviction.”

That’s become the unfortunate norm for Yahoo, whose management has continued to struggle with a variety of issues, from its ongoing talent drain to an unexpected and still unresolved fight with its main partner in China to the troubles in its search partnership with Microsoft to the overall lack of ability to turbocharge its advertising and other businesses as has been long promised.

While it is certainly not for lack of trying, the prospect of Yahoo CEO Carol Bartz wheeling out another series of excuses for the lack of turnaround and — something many have been looking for most of all — a clearer strategic vision for the company on the earnings call on Tuesday, will surely not produce a dulcet impact on its depressed shares.

The stock has continued to dip well below $15 a share, down almost six percent last week and 13 percent for the last six months.

That’s why some think that Yahoo’s interest in bidding for the Hulu premium video service, which is being sold by its media giant owners, might be just the bold and risky move to get the company centered around.

With the online video ad business growing and the need for Yahoo to focus its many ambitions, some think Hulu could be a key piece in becoming the “premier digital media company” that the Internet giant has recently taken to calling itself.

By doubling down on what Hulu represents — that would be the premium online video business — it’s a fast-growing category Yahoo’s large sales force would be well-suited for.

In addition, a purchase of Hulu could give Yahoo some much-needed talent in the arena, including its CEO Jason Kilar and others.

“Of all the buyers, Yahoo is the most in need of a purchase to change its paradigm,” said one observer. “If it could not pay too much, Hulu would give Yahoo some differentiating that it really needs.”

Of course, paying too much for Hulu is a key consideration mentioned by all who are looking at it, including Google, AT&T, Amazon and others.

How to determine the value of Hulu’s content licenses, both now and later — given that once those rights expire whoever owns Hulu will eventually have to compete in acquiring the often high-priced material from Hollywood — is the biggest question they are asking.

Is that worth $1 billion or $2 billion? Can a new owner keep up the momentum needed to successfully maintain the Hulu business well after those content rights expire? And, of course, which company would be best suited to accomplish this task?

Yahoo certainly has all the potential to be at the front of that line, despite being managed erratically for far too long. But — also as usual — there is the endless debate internally over whether buying it will fix problems.

Whatever happens, most agree that something dramatic needs to happen at Yahoo, rather than the continual story of flatness that has been coming out of the company for far too long.

And we’ll all see if that’s improved after the close of the market tomorrow, when Wall Street is expecting Yahoo to report revenue of $1.11 billion on earnings of 18 cents.

That’s a revenue decline of two percent, which is not great, especially considering Google’s strong performance last week. Then again, it’s better than the first quarter’s six percent drop in revenue for Yahoo.

Like I said: Meh.

Hey Larry! How are you?

Come on in! Take a seat! Tell us how things are going!

No? Gotta run?

OK, then. See you in three months …

That’s a replay, more or less, of Google’s earnings call last quarter, the first one under the Larry Page regime.

Lots of folks thought it might be nice to hear what the new boss had to say about his company, but Page didn’t play along. He showed up for the first few minutes, muttered 370 nondescriptive words, and took off.

You can argue, convincingly, that Larry Page is the co-founder of a really, really successful company, and that if he doesn’t want to follow Wall Street tradition — like sticking around for the duration of his earnings call — he shouldn’t have to.

Still, Google’s stock did plummet after that call, and has yet to recover, even after a post-Google+ runup.

It’s much more likely that Google shares dropped because Wall Street is more worried about the company’s spending, and competition from Facebook, than about Page’s presentational skills. But wouldn’t it be nice to remove that bit of uncertainty from the equation?

As usual, here’s Citigroup analyst Mark Mahaney’s “cheat sheet” for today’s proceedings, so you can play along at home. The market is looking for revenues of $6.54 billion and earnings of $7.87; given last quarter’s performance, it’s reasonable to assume investors will also be looking closely at capital expenditures and margins. (Click image to enlarge).

Also as usual, many of us will hope to hear more about Google’s efforts beyond its core search business — YouTube, mobile and now social. That information doesn’t have to come from Page, of course. But if he wants to speak up, we won’t complain.

But if you’re paying to watch video on the Web, then the odds change: You’re very, very likely to be watching Netflix.

This news comes to us from Citigroup analyst Mark Mahaney, who polled Web users last week and came up with this breakdown of Web video usage. It’s not a shocking result, but it is instructive to see it spelled out. It’s also useful to see just how far Apple and Amazon lag behind in this race (Hulu is close to Netflix here, but most of its visits come from free users, not paid Hulu Plus subscribers):

As Mahaney notes, these numbers also point out just how much potential YouTube has if it ever gets serious about pay-to-play video. But he doesn’t think Google has the skills or will to do that.

Mahaney is also a bit puzzled to see how prominently Facebook figures in his survey — “What is also interesting/surprising is the significant presence of Facebook as a video watching site” — but he shouldn’t be. Third-party surveys have already pegged
Facebook as one of the top video sites on the Web, and plenty of media companies are getting their heads around the idea, too.

Talking to AOL CEO Tim Armstrong earlier this week about its investors day tomorrow, he used the word “execution” a lot.

No, not the kind evoking a firing squad if he did not succeed at turning around the New York-based Internet giant soon as he has long promised.

Instead, Armstrong was referring to reassuring big shareholders and Wall Street analysts that AOL was now in a mode of making sure all its many moves to turn around the company will finally begin to pay off.

“Basically, our point is going to be about fully operating around the strategy we’ve built,” said Armstrong in a wide-ranging interview. “It seems right for investors to ask about executing on what we have been doing for the last year and a half.”

It’s certainly the right message for the charismatic executive to be delivering, as he and other top AOL execs present their plans moving forward, especially after what has turned out to be a very hyperactive year.

After deep layoffs, a massive rejiggering of its management ranks and a number of shifts of its business focus, without much advertising increase to show for it yet, Armstrong has also pushed through a series of acquisitions.

It culminated in the high-profile and decidedly dramatic purchase of the Huffington Post in January for $350 million in cash.

Now, said Armstrong, deals will be taking a back seat to products.

“We are diligently staying on strategy and really focusing on products and services,” said Armstrong. “We have laid out the path we are on and now investors want proof of the concept.”

To Armstrong, that means the push of “branded content” and a continued focus on significant properties in key topic areas.

Tomorrow, in news that could worry investors, AOL will be noting that traffic is flat year over year, but explaining that it is due to the outsourcing of its sports and health sites.

“If you added that back in, we would have had a phenomenal year of growth,” said Armstrong. “Our main point will be that this is the right path for AOL.”

In fact, in an unusual wording, he said AOL was betting on the “urbanization” of the Web around big branded sites, which is, in many ways, exactly where the Web was a decade ago with Yahoo, Excite and others.

But Armstrong will be making the point that this retro idea is perfect for today, as marketers look for quality content that attracts big audiences, which has seen its most energetic application in the Huffington Post.

Thus, his linchpin remains the flashy news site’s even flashier co-founder Arianna Huffington, who has cut a very wide swath through AOL’s content efforts since Amstrong made her media czar of the company.

As Armstrong did, she also stressed the focus on unique visitors and ad growth, more video and a laser focus on local.

This includes shoving editorial into every AOL property, including unlikely ones such as Moviefone and MapQuest, and integrating it all to point back to the Huffington Post mothership.

“Much better editorial integration is a centerpiece of what we are doing, surfacing content in new places it was not before,” said Huffington, who used examples of local stories via its Patch unit that have gone global with a special push.

And by global, that also means the creation of new content sites in Europe and elsewhere, in order to build this unusual dream of a fully aggregating world.

“It is a big test of the HuffPo platform aggregation to do this,” said Huffington, who has clearly longed for the kind of money and staff to do this for a very long time. “It has moved a lot faster than I thought it would … but it feels good to be moving on so many fronts at once.”

Many fronts indeed, which might make investors pause. So far, those shareholders have had a continued wait-and-see attitude toward AOL, which has seen its stock decline almost 13 percent from its late 2009 IPO debut.

That’s mostly due to worries about whether the continued and expected fall-off of its lucrative access business can be met by similar increases in its ad business.

That share drop has been especially steep since the beginning of the year, but it has also not been drastic, indicating an interest in continuing to believe Armstrong’s confident — well, confidently delivered, at least — narrative.

As Citi’s Mark Mahaney wrote in a one-hand-other-hand note yesterday about the investor day:

Positives: 1) AOL still remains a top 5 U.S. Internet property; 2) In the latest quarter, AOL’s Display segment grew Y/Y for the first time in ~3 years, and this improvement seems sustainable; 3) At 4x ’11 EV/EBITDA, AOL’s valuation is among the lowest of any ’Net Stock. Negatives: 1) Deteriorating fundamentals; 2) Significant market share losses — ’Net usage, Display Advertising revenue & Search queries; 3) A significant profit hole from the structural decline of its Subs biz; 4) Substantial competitive risk; and 5) An unproven (@ AOL) management team.

“We all like Tim and what he says makes a lot of sense,” added one big investor, who is also attending and has many questions about the efficacy of what AOL is doing, in a common sentiment among its large shareholders. “But we also need to see real results soon.”

Jeff Bezos and company continue not to release sales numbers for the devices, but everyone else keeps guessing. Citigroup’s Mark Mahaney, an Amazon bull, has bumped up his sales estimates, and now thinks the company will sell 17.5 million devices this year, and another 26 million in 2012.

The big picture is that Mahaney thinks Kindle readers and books will generate $6.1 billion for Amazon next year–nearly 10 percent of its overall sales. Again, remember: This business didn’t exist until Thanksgiving 2007.

Also remember that all of this has been as the Kindle has faced competition from Apple’s iPad on the high end, Barnes & Noble’s Nook line in the middle, and a bevy of very cheap e-readers on the bottom.

One obvious reason for the Kindle’s success: It’s a popular product that keeps getting cheaper and cheaper. The first Kindles went for $399, and now the lowest priced ones, which come with a smattering of ads, go for $114. Mahaney thinks they’ll be below $100 by Christmas, and that seems like a very conservative guess.

Will Yahoo’s revenue growth drought finally end this quarter?

We’ll see tomorrow when Yahoo reports its first-quarter earnings, after the markets close.

As usual, investors will be looking for some sign that the Silicon Valley Internet giant’s lackluster revenue results have improved in CEO Carol Bartz’s over-promised but still under-delivered turnaround effort.

And despite Wall Street worries that sales will remain flat, sources insist that display revenue will be slightly better than expected, although those from its declining search business will remain weak.

A poll of analysts is expecting Yahoo to report $1.05 billion in net revenue and earnings of 16 cents a share.

That compared to revenue of $1.13 billion and 22 cents in earnings in the same period a year ago, which was goosed by the sale of its Zimbra email asset to VMware, as well as some benefits from its search and online advertising partnership with Microsoft.

There’s no extra cherries on top this quarter, especially in the search arena, which BoomTown previously reported was troubled.

As I wrote last week:

In fact, although its display business will show a definite strong recovery in Yahoo’s quarterly results next week, its search business–both in market share and revenue per search (RPS)–has, as one person close to the situation put it succintly, “fallen off the cliff.”

That’s due, in part, to getting the new system with Microsoft delivering better results, which is not happening yet (if ever!).

In this quarter, Microsoft has honored its contractual guarantees and will make up the difference–which will result in masking the magnitude of the RPS loss. It’s a worrisome trend to watch.

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 will turn Wall Street’s greedy eyes to display, an arena it dominates still, despite increasingly successful incursions from Google and Facebook.

A win here is key, of course, with investors hoping for a strong performance.

Yahoo’s stock certainly is not doing that, holding fast to its share price in between $16 and $17 for a while now. A year ago, the stock was above $18 a share.

As Citi Investment Research’s Mark Mahaney noted in an earnings preview today:

Valuation remains interesting, with a highly attractive Asian Internet investment portfolio. In terms of risks, we focus on: 1) Competition in the Display Ad segment from Google, Facebook, etc; 2) YHOO’s overall Internet Usage Share Loss–now less than 10% of U.S. ’Net usage minutes; 3) YHOO doesn’t have assets in place to take advantage of trends in Social, Mobile & Local Internet, and Video Advertising; & 4) We are challenged to identify a near-term positive catalyst.

“Challenged” translates to Mahaney saying politely that Yahoo has zip coming down the pike to change its situation.

That means Wall Street is not yet in the mood to give Yahoo shares a break. Here is one of BoomTown’s fave videos–the great Diana Ross, with the infectious song hit, “I’m Coming Out”–to get the right vibe going:

Larry Page kicked off his reign as Google CEO last week by reshuffling his management ranks.

This week’s news event: His first formal solo sit-down with Wall Street, during Google’s Q1 earnings call this afternoon.

Page won’t be expected to carry the full weight of the call: His predecessor Eric Schmidt usually handed over much of the event to his lieutenants, and there’s no reason to think Page will handle things differently. (Though one of the calls’ primary participants, product boss Jonathan Rosenberg, announced his retirement on Page’s first day.)

In fact, Schmidt was AWOL entirely for Google’s last few earnings calls, a move that Google said was supposed to allow analysts to focus their full attention on the company’s performance. (And in retrospect, that decision seems a little more freighted. But whatever.)

In any case, analysts and the Twittering classes will still be very interested to see how Page handles himself during the call. They’ll also be interested in any directional hints Page makes about Google’s plans. Like, for instance: What’s up with social, which Page doesn’t seem to enjoy himself but insists is crucial for the company’s future?

And, of course, Wall Street will want to hear about numbers, which in the end will matter much more than Page’s personal style. Analysts are expecting revenues of $6.32 billion and earnings of $8.13 per share, which really means they’ll be disappointed if Google doesn’t turn in results that are better than that.

It’s telling that Citigroup analyst Mark Mahaney’s note previewing today’s call has zero mention of Page or his management changes. Here’s Mahaney’s ever-helpful “cheat sheet” so you can get a detailed sense of what Wall Street wants; I’ll be back this afternoon to cover all of this live.

Answer: Yes.

Confused? Sure you are. But this is one of those brain-teasers that’s easier to understand once you step back a bit: Google is just as important as it ever has ever been–and in some cases more so–in driving traffic to many Web sites.

But for certain kinds of sites, its influence, while still enormous, has diminished a bit.

To put a fine point on it: The reason that Web sites that write stories about other Web sites are writing about Google’s stall and Facebook’s rise is because it seems to be true–for some media sites. But not for most of the Web.

Citigroup’s Mark Mahaney breaks it down in his newest report, which relies on comScore’s data that shows referring traffic for big Web sites. Conclusion: Google ranks as the top traffic source for 74 percent of the top properties he surveyed. And between January 2010 and January 2011, Google’s referral share increased for 69 percent of the sites Mahaney looked at.

But the two categories where Google’s influence seems to be flagging are health and media sites–particularly media sites. Note the summary chart below, which shows that for 80 percent of the top media sites, Google’s influence has diminished in the last year.

But even that drop, which seems clear-cut, is a bit fuzzy if you dig into the numbers. While Mahaney finds examples of many media properties that have seen referrals from Google decline while Facebook’s increased, the only one where he’s confident drawing a connection between the two is the Glam Media network. Glam saw Google’s share of referrals drop from 17 percent to 13 percent, and Facebook’s jumped from 5 percent to 9 percent.

But Facebook isn’t the only one gaining share in Mahaney’s analysis. Sometimes his data shows Microsoft and Yahoo inching up as well. That’s certainly counterintuitive, but then again these are usually small moves–a percentage point here and there–which makes it hard to string together a cohesive narrative.

Which won’t stop Web sites that write about other Web sites–just like this one!–from trying.