Yahoo! reported Wednesday that its second-quarter earnings and net income increased compared to year-ago results, with online advertising revenue still accounting for the bulk of the company’s income.
The portal giant reported second-quarter earnings of US$225.8 million, a 24 percent increase over the same period last year. Net income totaled $21.4 million, compared with a net loss of $48.5 million in the second quarter of 2001.
Revenue from marketing services was still 4 percent shy of last year’s second-quarter earnings, totaling $135.7 million. Yahoo! executives blamed decreasing renewal rates of previous advertising arrangements by Internet companies.
However, losses were partially offset by an increase in revenue from small and mid-size companies advertising through Yahoo’s sponsored search services and inside sales organization.
Giga Information Group analyst Andrew Bartels told the E-Commerce Times that a rebounding online advertising market played a role in Yahoo’s year-over-year growth.
“The advertising market was hit pretty badly last year, which obviously impacted Yahoo’s revenues and net income,” Bartels said. “The fact that their revenues are up so much is an indication that we are starting to see a pickup in online advertising.”
That is an encouraging sign for Yahoo, but its impact on the rest of the market is still unclear. Historically, a handful of large players — such as Yahoo, eBay and Amazon — successfully attract online advertisers, while flocks of smaller, hungry players vie for scraps.
“Yahoo! is likely the first one to see a revival, and we still have to wait and see how broadly the revival will go beyond Yahoo,” said Bartels.
Diversified Revenue Stream
The other part of the equation is Yahoo’s success in reaping revenue from nonmarketing sources.
“The company continues to successfully diversify its revenue stream,” Morningstar stock analyst George Nichols told the E-Commerce Times. “Now, roughly 40 percent of total sales comes from nonmarketing sources.”
For example, Yahoo’s fees and listings revenue soared to $74.1 million in the second quarter, a whopping 109 percent increase over same-period 2001 earnings. Company executives credited the company’s HotJobs acquisition for this revenue boost. Yahoo! Personals and a growing base of customers who pay for listing-based services also contributed to gains.
Meanwhile, transaction revenue spiked 179 percent over the year-ago period, reaching $16 million. Yahoo! said U.S. revenue increased by 26 percent, and international revenue climbed 16 percent compared with the same period in 2001.
Nichols also noted that Yahoo! is extracting more revenue per user, a good sign for continued growth considering that the company has 238 million users.
But while Yahoo! has diversified its revenue streams, the company vowed to maintain a steadfast focus on its business model.
“We continue to seek new ways to provide deeper value to our vast consumer base, and we are also attempting to build greater revenue, margins and returns from that core asset,” said Yahoo! chief financial officer Susan Decker.
“As we measure our progress, we will continue to focus on expanding revenues per user and growing revenue per employee, both important metrics which support our key objective to maximize free cash flow.”
Yahoo’s stock price increased 1.6 percent, to $12.39, after the earnings announcement.