Yahoo Falls Flat on its Face
I’m beginning to take the view that Panama wont mean anything. I know, that’s in direct contrast to what I said last July. But stay with me.
My fundamental driver for the company, greater search yield will happen in the future, will still happen although I think it will be a weaker force than the competitive pressure on display advertising.
Display advertising is a lot more important to Yahoo than search advertising. I don’t believe the comscore/netratings numbers for a moment that show that Yahoo has roughly half of Google’s queries (or 50 Google/30 Yahoo/20% rest. I have never seen this split in any advertiser or publisher who receives organic or paid search traffic. I believe the number is closer to 70% Google/15% Yahoo/15% the rest.
Yahoo has premium advertising opportunities, for sure. But they also have a shitload of remnant inventory from Yahoo Mail that competes with the huge explosion of inventory on social network sites like MySpace and online video sites like Youtube. The later gets about 5 cent CPMs at the moment.
Which lead to this statement: “Revenue per Unique User was 97 cents. Down 2% from Q4 2005.”
Considering that the figure has international properties baked in which are growing monetization rates faster than the US and you have a pretty bleak picture. Not so long ago this metric was doubling year over year.
Revenue in the US grew 8% year over year. 8%! A number only MSN execs could love.
Yahoo may be the leader in display advertising but it, along with MSN and AOL, is being attacked by low priced sites with huge traffic and an inability to monetize it. That creates a strange market situation. Soon, when Google links search behavior to the inventory agreements they have guaranteed, the heat will be turned up. The problem is not search monetization, it is the competitive pressures of display advertising competitors, both on the monetization levels of display advertising and on the growth rates of Yahoo’s traffic.
p.s Go read John K’s recap of the Yahoo quarter too. An excellent run down of the call/results.
