Yahoo Execs Outline Turnaround Plan

Company Acknowledges Customer Insights Have Been 'Underdeveloped'

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NEW YORK (AdAge.com) -- Yahoo used the first 45 minutes of its second-quarter earnings call to outline a strategy for turning the company around -- and acknowledges it better move fast as it's dealing with an impatient market.
Yahoo CEO Jerry Yang said he sees Yahoo differentiating itself by being the best partner to other companies -- both in content and advertising.
Yahoo CEO Jerry Yang said he sees Yahoo differentiating itself by being the best partner to other companies -- both in content and advertising. Credit: Yahoo


Yahoo's new CEO, Jerry Yang, said he intends to spend the next 100 days mapping out a strategic plan for long-term success. "We are well on our way with a top-to-bottom review of our business," he said, later adding: "There will be no sacred cows and we need to move very quickly."

Three areas of concentration
Then he addressed what is perhaps Yahoo's biggest problem -- that it's not Google. "Yahoo is too often defined by the competitive landscape. ... I am determined for us to find our own path," he said, outlining three areas of concentration for the company: insights, openness and partnership.

Yahoo's insights about its customers have been "underdeveloped," he said, noting that the company will take more care with them to create better experiences for consumers and advertisers.

He said Yahoo would adopt an open platform, which Yahoo President Sue Decker later said would "make it easier for anyone in industry to bring their value to anyone else in the industry."

And Mr. Yang said he sees Yahoo differentiating itself by being the best partner to other companies -- both in content and advertising. "We are good at partnering and we intend to scale that in an aggressive way."

Income down, revenue up
Yahoo's second-quarter net income dropped slightly to $161 million, or 11 cents a diluted share, from the $164 million level it was at during the same period in 2006. Revenues were up 8% to $1.7 billion; revenues excluding traffic-acquisition costs were up 11% to $1.2 billion.

"Our financial performance is not what we'd like to see long-term," said Blake Jorgenson, the company's new chief financial officer.

Ms. Decker addressed areas in which she said Yahoo had faltered, the first being its tardiness to the search-innovation game. When it bought Overture, it operated that separately and failed to make the innovations necessary to keep pace with Google. The second problem area was the company's aversion to risk and difficult personnel decisions. "Many observers have focused on recent turnover as a sign of concern, and while some departures are inevitably regrettable, in many respects the changes are necessary, a sign of renewed discipline," she said.

Executives talked about the reduced growth of its display business, which is now in the low to mid-teens, explaining that is not due to any particular vertical maturation but an "interest in inventory and competitive inventory that is out there at attractive prices." Ms. Decker also suggested Yahoo could do a better job targeting performance marketers and said its acquisition of Right Media could help with that as that company has the tools and technology to translate a cost-per-thousand-viewers ad to a cost-per-click ad. Yahoo closed its $680 million acquisition of the 80% of Right Media it didn't already own earlier this week.

Ad sales consolidated
Last month, Yahoo consolidated its search and display ad-sales teams under David Karnstedt, who will lead advertising in the U.S.

Ms. Decker also called Yahoo's new SmartAds, which allows creative to be targeted on the fly, the biggest innovation since behavioral targeting, and said behavioral-targeting advertising revenue is outgrowing all of Yahoo's other ad revenue.

Yahoo lowered its second half 2007 forecast, which it had warned of in June, due to the "continuation of the business trends we experienced in Q2," said Mr. Jorgensen, citing slower growth than originally expected in display and search affiliate declines.
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