Yahoo’s Revenue, Profit Soar
Yahoo Inc. said Wednesday that profit more than doubled and revenue nearly tripled in the first quarter as advertisers flocked back to the Internet.
With its eighth consecutive profitable quarter in the bank, the dot-com bust receded in Yahoo’s rearview mirror. It raised its financial forecast for the full year by about 12%, citing advertising gains, success in international markets and the increased willingness of people to pay for services, some of which used to be free.
The Sunnyvale, Calif., company earned $101 million, or 14 cents a share, in the first three months of the year as sales ballooned to $758 million. In the same period last year, Yahoo earned $47 million, or 8 cents, on sales of $283 million.
“I have a very big smile on my face,” Chief Executive Terry Semel told analysts. “This is by far the most successful quarter in Yahoo’s history.”
Yahoo shares, which slipped 42 cents Wednesday to $48.35 in regular Nasdaq trading, jumped 10% to $53.14 after the results were released.
“They did an extraordinary job,” said Mark Mahaney, principal analyst with American Technology Research Inc., a Greenwich, Conn., research firm.
Yahoo is benefiting from a general renaissance in online advertising. Altogether, spending for online ads grew 20% last year to $7.2 billion, according to the Interactive Advertising Bureau, a trade group.
The company also has positioned itself to benefit from the booming growth in search-related ads, which raised $2.3 billion last year. Such ads now account for 32% of all online ad spending, up sharply from 4.1% in 2001 and 15.4% in 2002, according to EMarketer, a New York research firm.
In February, Yahoo ended a partnership with search-engine rival Google Inc. and launched its own service, which it built by spending more than $2 billion last year to acquire Overture Services Inc. and Inktomi Corp.
Yahoo also began incorporating search technology and targeted advertisements into more of its Web properties. For example, it unveiled a service in March called SmartView that displays ATMs, restaurants and other businesses when users enter an address into Yahoo Maps.
Yahoo wouldn’t disclose how much of its advertising business came from search-related ads versus traditional, so-called branded advertising, such as banners and sponsorships. But with Overture in its fold, total advertising sales rose 235% to $635 million.
“The online advertising market is on fire,” said Derek Brown, an analyst with Pacific Growth Equities in San Francisco. “What has become clear is that Yahoo is the first stop for many companies looking to advertise online, whether they’re large or small.”
Yahoo’s stable of websites is the most visited destination on the Internet, with 110 million visitors a month, according to ComScore Media Metrix, a Reston, Va., research firm. Under Semel, Yahoo has persuaded more of those visitors to pay for offerings ranging from an online dating service to an Internet access partnership with SBC Communications Inc. Revenue from such subscriptions rose 39% to $88 million.
Yahoo ended the quarter with 5.8 million paying customers, up from 2.9 million in the same period last year.
Looking ahead to the full year, Yahoo predicted sales would reach $2.41 billion to $2.52 billion, excluding some costs related to attracting ad viewers. The company’s earlier sales forecast was $2.12 billion to $2.25 billion.
Yahoo said it would offer a 2-for-1 stock split May 11 to people who own shares April 26.
