Ads keep Yahoo! in the black

Making Overtures

ComputerWire: IT Industry Intelligence

Yahoo! Inc yesterday showed that the second quarter was not just a blip on the radar, as a 50% increase in revenue, aided by a resurgence of advertising dollars, gave the web portal firm its second consecutive profitable quarter since the bubble burst.

The company predicted an ad revenue rebound in July, and seems to have delivered. Of the $248.8m total revenue Yahoo reported for the three months to September 30, $147.4m came from the businesses the company categorizes as "marketing services", up 22% on last year and the first increase in revenue from that segment in some time.

But Yahoo's relationship with paid-search firm Overture Services Inc seems to be mostly responsible for the new advertising money. The boost came mostly from search engine paid-performance listings, generally bought by small and medium sized enterprises, rather than from big-ticket marketing agreements.

CEO Terry Semel said in a conference call he expects the ad business to "stay like it is today... we see growth in the total marketplace of our advertising into next year." He added that the small and medium size business customer is "a huge marketplace that is just in the beginning".

For the quarter, the company reported a net income of $28.9m, compared to a loss of $24.1m a year ago, on revenue that was up 50% at $248.8m. Excluding revenue gained from HotJobs, the site Yahoo bought in the first quarter, revenue was still up a respectable 36% on the third quarter last year.

Revenues from fees and listings rose 124% to $83.1m, helped by a 66% increase in revenue from the HotJobs property, but also due to more paying customers signing up for Yahoo Personals and SBC Yahoo Dial, a service offered with Yahoo partner SBC Communications Inc.

The remainder of the third quarter sales, some $18.3m, came from transactions, up 118% on last year. The company said a change in the pricing structure of its Stores offering, previously accounted for as a listings service, was responsible here.

With all Yahoo's business units evidently performing well, at least when compared to the six-quarter unprofitable spell that ended mid-year, the company was optimistic enough to raise its guidance for future quarters yesterday.

The company now expects 2002 revenue of between $930m and $955m, above current estimates of about $925m, and EBITDA of $190m to $200m. Next year, Yahoo expects revenue to be between $1.075bn and $1.175bn, approaching the heights it gained in fiscal 2000.

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