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International: Yahoo! reports best quarter ever

13-April-2004
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International: Yahoo! reports best quarter ever

Yahoo! reported strong first-quarter 2004 results -- the company's best quarter ever -- underlining, perhaps, marketers' increasing comfort with the Internet as an advertising-supported marketplace.

The Sunnyvale, Calif.-based Web giant reported net income of $101 million compared with $47 million for the same period last year. Revenues jumped 168% to $758 million from $283 million for the previous period. One of the strongest revenue generators was marketing services, a segment that includes paid search and brand advertising, such as banner and pop-up ads. The segment grew 235% to account for $635 million of Yahoo!'s revenues, up from $190 million in the first quarter last year. Listings revenue grew to $34 million in the period.

While the company doesn't break out paid search from other online display revenues, both businesses are growing at a steady clip. David Card, a senior analyst with Boston-based Jupiter Research, said the online search business was growing faster than online display advertising.

"They had a great quarter. They are riding the search curve," he said. "There are really only two players, Overture [part of Yahoo!] and Google."

Mr. Card said that overall brand advertising was expected to grow 17% to 18% in 2004 from a base of $3 billion, while search revenues are expected to grow 30% in 2004 from a base of $1.6 billion. Yahoo! has said overall marketing services revenues are expected to grow 30% to 35% in 2004. Moving forward, Mr. Card said: "The biggest challenge is in the display side. They're doing very well, but they need to make sure they deliver a variety of packages for advertsiers and their various objectives. The competitors are tough."

Fred Rubin, a partner at iDeutsch, a unit of Interpublic Group of Cos.' Deutsch, has helped advertisers such as Revlon, Mitsubishi and Monster.com plan their online media.

Mr. Rubin said the creativity of online advertising was much more compelling than it has been, while the online sector as a whole has become much more business-like. "Five to six years ago I'd get a set of calls from different people all working for the same site," he said. "Yahoo! really raised the professionalism."

Jerry Schereshewsky, Yahoo!'s director of agency relations, credited the strong results to the efforts the company has made to work with marketers.

"Yahoo! has been a part of the industry and talking to people in a large and concerted way has paid off. ... If you looked at some of our top 200 advertisers four years ago, many aren't around today," Mr. Schereshewsky said. "One of the biggest changes is how normal the online advertising world has become."

Blue-chip marketers Ford Motor Co. and Hewlett-Packard are two of Yahoo!s highest-spending ad clients.

Last month, Yahoo! announced it was launching a new paid inclusion program that gives advertisers the ability to pay to have their links appear mixed in with non-commercial search results. The company said the "content acquisition program" was aimed at improving the relevance of search terms. However, the move attracted negative comparisons with Yahoo!'s main rival, Google, which clearly separates sponsored links in a separate area.

Source: Adage

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