
Yahoo’s first-quarter earnings are out. The conference call is about to start.
5:03 ET: Boiler plate risks, blah, blah, blah
5:05 ET: Jerry Yang. We are very proud fop our Q1 results. Q1 revenue and cash flow in the upper half of our guidance, and raising guidance for the rest of the year. Results underscore the fact that our strategy is beginning t pay off: attract the most users, serve the most advertisers, and develop the best platform. Investments in innovation beginning to bring results. Will address MSFT bid, Q1 performance, and strategy
After a careful evaluation our board determined that MSFT’s offer undervalued Yahoo. Worldwide audience, strategic position in Asia, mobile, scale, tools, and technology. Our board has continued to be open to offers, exploring a number of strategic alternatives. If you take one thing away from thsi Discussion is that our board and management are committed to maximizing shareholder value and will not enter into any transaction that undervalues the company.
results. acquired Maven networks, previewed Amp advertising program, closed the gap on search relevance. Strategy: increasing volume and yield across both search and display. Focusing on starting points. Yield objective is rooted on serving advertisers so well they will insist on working with us. Working on video and mobile, and ads that span both search and display. We closed the revenue search ad gap between ourselves and the leader. Our largest opportunity is in display. With our leadership in display, starting points, and AMPs program, we have [a lot of opportunity here]
5:14 ET: Sue Decker. longterm objectives, becoming starting point for consumers and must0buy for advertisers. Approach to starting points is 3 changes in startegy, instead of hundreds of propertes, narrowing focus to make these starting points teh best on teh Web. Opening up to third parties. Giving peopel what they want instead of solely directingthem to Yahoo properties. Great contenet good for our users and financed by others. 3rd. linking Yahoo users to friends, family, and community. We are not trying to become another social network.
In March, we made it clear that driving 10% volume growth in search is long-term value driver. We exceeded that in the first quarter. Focused on game-changing features that will differentiate Yahoo from the leader. SearchAssist, which allows searchers to complete searches faster, also integrated with video and other search types. Our next advance is OpenSearch, Later in Q2 we will open the Search interface to developers. Call this Search Monkey. We are also innovating in mobile search. OneSearch is geared towards the mobile user. This quarter released OneSearch 2.0 with voice activated features.
Comscore relevancy score was 72.9 percent versus 69 percent for the next competitor. Mentions Buzz. Use votes to develop popularity indices. Over 120 publishers are in the beta. Yahoo.com has sent tens of millions of referrals in the beta to partners. comscore says 4 million unique visitors in the first month. With our enormous scale this should make us the partner of choice for publishers and bring users back for more as a key starting point.
video on Flickr launched a few weeks ago. Has quadrupled video uploads to Yahoo.
Panama. owned and operated site revenue per search was up 10 percent in the US. Have improved click yield. price per click upside. Can make the marketplace more efficient. Just launched minimum bid changes. eliminating 10 cent minimum bid, rewards advertisers for quality. the site is the most significant since the launch of Panama, in terms of engineering and potential. important in reaching our three-year gal of 15% growth in revenue per search.
test with Google. Premature to speculate what kind of arrangement that may result in. But goal is to improve search monetization. Overall display pricing in 1Q was up slightly as inventory shifted from guaranteed to non-guaranteed inventory.
Compared to search we are buying reach through two large players in display (Blue Lithium and). Simplifying the market can increase display yield. We are redesigning ad managenet. Announced AMP, previewed it with newspaper partners, will roll it out in Q3. should result in increase in display yield. Adding insights into display inventory, and already seeing yield benefits. the upside can be even greater.
5:31 ET: We feel we are on the verge of fundamentally changing the game in the most important advertising category: display.
reaffirming 2008 revenue outlook and increasing cash flow outllook. During Q1 recorded $29M related to workforce realignment. Also recorded $14M in cost for outside advisers related to MSFT’s unsolicited proposal. We will discuss resulst normalized for these items.
increasingly managing our business around GAAP revenue.
free cash flow: $647M
in Q1 $351M payment from AT&T. excluding this one-tiem payment, it was $297M
reinvested $79M in Yahoo stock.
$166M in two acquisitions: Maven Networks and FoxyTunes
Investments in Asian companies such as Alibaba was $13.8B or $10 per share, does not include investments Alibaba holds in Taoboa or other properties. Non-cash gain of $141M related to the Alibaba IPO.
GAAP Rev: $1.18B, up 9 percent
GAAP rev ex-TAC, up 14 percent.
O-and-O search up 15 percent
O-and-O display up 16 percent
Advertisers budgets may fall, but we believe the compelling ROI of online ads will cushion the impact.
Strategic relationships with AT&T and Rogers now reflect ad revenue shares, declining portal revenues fees will impact us. Expect fee line to be flat in 2008., woith y-o-y declines in teh back half. But we believe thee part
US revenues ex tac, up 17 peercent
Inter
14,800 employees
Business outlook for FY08. changing to GAAP (excludes workforce, AT&T payment, MSFT related expenses):
GAAP revenue of $7.2B to $8B
Operating cash flow: $1.1775B to $2.025B
free cash flow $900M to $1.050B
CapEx: $675M to $775M
Q: You are guiding 20 percent revenue growth, outstrips estimates for online ad growth.
A: We believe
Sanford Bernstein: We noticed TAC is coming down as percentage of gross reveneus. Are you doing better deals, or is there a slowdown in network business?
A: Overall TAC rates decreased around 4%. Average TAC still 78% globally. We believe still upward pressure on TAC rates. As we build out our network display business, competitors are also building out a network display business, we will have to compete for that business.
Q: Right Media and weakness in travel and other segments?
Sue: We refer tpo remnant inventory as non0gauranteed. Last fall we talked about moving that in Right Media (remnant ads). We are seeing significant growth in class 2 (remnant), very strong growth in revenues and CPMs, with revenues close to doubling in that category.
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