Yahoo! Makes Big Splash with Q1 Profits

E-commerce powerhouse Yahoo! Inc. (Nasdaq: YHOO) wowed investors and industry observers with the release of its Q1 1999 earnings, which exceeded expectations with a net profit of $16.4 million (US$). The company reported net revenues totaling $86 million for the first quarter, ended March 31, 1999 — that’s nearly triple the revenues of $30.6 million reported in the comparable period of the previous year.

In comparison with fourth quarter revenues of $76.4 million (for the quarter ended December 31, 1998), Yahoo!’s Q1 revenues increased by 13 percent.

Tim Koogle, chairman and CEO of Yahoo! said, “We continue to see strong organic growth across our global network of media properties. During the quarter, we were proactive in further establishing Yahoo!’s leadership position for the future.” This activity included the announced acquisitions of GeoCities and broadcast.com, though neither is reflected in the first quarter results.

Why All the Hoopla

The news from Yahoo! produced an audible sigh of relief from the Internet business community, which thrives on news of actual profitability from e-commerce companies. Indeed, Yahoo! is one of the few e-commerce driven operations which has seen profits so early in the game.

Most online shopping businesses continue to report net losses as they continue to invest heavily in marketing and long-term infrastructure. For example, Amazon.com, which still generates a great deal of enthusiasm from technology stock investors, reported losses of $125.4 million for fiscal 1998 and expects to stay in the red through 1999.

Incredible Audience Growth

Yahoo’s audience growth rate in February (up 5.4 percent) was the fastest among the top ten Web sites, and twice the growth rate of the Web overall, according to Yahoo! statistics.

The company also reported that its network of Internet properties is ranked No. 1 in reach among work users (53.4 percent), No. 2 in home reach (44.1 percent), and No. 2 in combined work/home reach (51.8 percent). These findings, which are from Media Metrix’s February 1999 research, do not include GeoCities and broadcast.com, which Yahoo! is in the process of buying.

During the month of March 1999, traffic on the Yahoo! global network of properties reportedly grew to an average of 235 million page views per day, compared to an average of 167 million page views per day in December 1998. Yahoo! Japan’s traffic, which is included in the above page view totals, increased by 23 percent.

Major Initiatives

In addition to its GeoCities and broadcast.com deals, during the first quarter, Yahoo! continued to pursue its “Yahoo! Everywhere” strategy, with plans to further extend its services beyond the desktop, through relationships with PageNet and Online Anywhere.

Yahoo! and PageNet, a leader in wireless messaging and information, intend to make Yahoo!, My Yahoo!, Yahoo! Mail, and Yahoo! Calendar services available nationwide on PageNet pagers and other wireless devices.

Through a relationship with Online Anywhere, Yahoo! intends to employ Online Anywhere’s Author Once, View AnywhereTM service to optimize and deliver content and services to personal digital assistants and TV-based Internet appliances nationwide.

In the meantime, Yahoo! has continued to expand its presence on most popular PC desktops. Building on its prior quarter announcements, the company added distribution alliances with Compaq Europe, Gateway, Hewlett-Packard, IBM, Micron Electronics, and Toshiba.

The company also entered a marketing agreement with News Corporation in the first quarter, and kicked off a national network and cable TV advertising program, including tie-ins between Yahoo! and multiple Fox media divisions.

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