Yahoo profits down 78% in first quarter

22 April 2009

SUNNYVALE, California: Yahoo, the online search company, registered a 78% decline in profits in the first quarter of this year on an annual basis, as its display and advertising revenues both posted a decline.

Among the major benefits of online outlined by Yahoo's Joanne Bradford earlier this year were that if offers high levels of flexibility, large audiences and an increased opportunity for brands to engage and interact with consumers.

The company's total revenues fell 13% in Q1 to $1.58 billion (€1.2bn; £1.1bn), with net income of $118m compared with $537m in the year-ago period, although this latter figure did include a substantial boost from a positive revaluation of its stake in Chinese operator Alibaba.

Search revenues shrank by 3% on an annual basis, with display sales also down by 13%, following on from a 2% decline in the final three months of 2008.

However, its search sales did enjoy an expansion of 3% in the US year-on-year, with Blake Jorgenson, the company's cfo, arguing, the "consumer product, technology, entertainment and surprisingly the auto sector" all showed "strong growth."

This was offset by a 29% drop off in international search spending, although currency fluctuations somewhat distorted this total from a 12% decline on a constant currency basis.

Carol Bartz, Yahoo's ceo, argued "marketing is generally one of the first expenses to be reduced" in a recession, and "branded advertising in particular often gets hit disproportionably hard."

However, she added that "pulling back on brand spending is a short-term solution that leads to long-term brand erosion," and forecast that "brand advertising will grow in an economic recovery."

Data sourced from Wall Street Journal/Seeking Alpha; additional content by WARC staff