Yahoo! Earnings Call Nuggets: Commercialization and Mobile Growth

Yahoo! Inc (NASDAQ:YHOO) recently reported its fourth quarter earnings and discussed the following topics in its earnings conference call.

Commercialization

Anthony DiClemente – Barclays Capital: First for Marissa. Marissa, just wanted to get your view on what you think the level of commercialization of the Yahoo! products is out there and do you think that the level of commercialization needs to be taken down first in order to improve users and engagement for some time before that clicks back in? And I guess that sort of line of questioning segues into a question for Ken about the guidance. I heard what you said about cost savings. The guidance does imply margin contraction for adjusted EBITDA year-over-year. So I just want to know is that conservative or should our takeaway be that your investment for growth somewhat outweighs the cost efficiencies that you guys hope to find throughout the year in 2013?

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Marissa Mayer – CEO, President and Director: Sure, on commercialization I would (on the ball) say no. I am a very active user of the site myself and I actually think that the ad add a lot to overall user experience. Every now and then we do see a property where we see ads that we don’t think enhance the user experience. And, for example, I think if you look at Mail, the launch that we did in Q4 eliminated the ‘What’s New’ page, which was essentially a page of advertising. We think that’s actually benefited the users in terms of getting them to their email faster and making the use of the tool more seamless and interestingly what we’ve seen there is while the product now has fewer ads, the ads that remain have actually increased in click-through rates and actually are delivering more value to our advertisers. While we haven’t yet been able to reprice those advertisements, and actually we will, it is something that we’re looking at moving forward as we collect more data post-launch.

Ken Goldman – CFO: Yeah, you would say based upon the guidance we provided and a small revenue increase speak that we provided that the margins going down slightly, again, I think if you look at ’11 to ’12, we took down headcount. So that was more direct. As we go into ’13 we’re really looking at how we can be more efficient in some of our other spending categories. We have some thoughts on that. We’re working hard on that. Some that’s been identified, some of it we’re still working on. At the same time we are going to invest. And so I think the balance of all that ends with numbers relatively consistent in terms of margins with ’12. You could say going down a little bit just because we do have some revenue growth, and again hopefully we’ll do better.

Mobile Growth

Youssef Squali – Cantor Fitzgerald: Two quick questions for Marissa please. First, what are the key metrics for us folks on the outside to actually track to gage Yahoo! success in mobile and I’m thinking particularly on the display how early do you think we’ll start seeing traction there, because if there was a surprise this quarter it was probably on the display side being little weaker than expected, so wondering just how much of a headwind growth in mobile is for you guys. And second, how do you see programmatic opportunity for Yahoo! this is something that you talked about great deal in the third quarter call. Did not hear much about it this quarter maybe just talk about how Yahoo! differentiates it’s offering here?

Marissa Mayer – CEO, President and Director: In terms of metrics to track for mobile, we are not breaking it out mobile separately right now. As you can see, we have offered new operating metrics this quarter, essentially on search. This is the PPC, the price per click and paid clicks. One is about pricing the other is about volume. And on display we have the number of ad sold and the price per ad. Again one volume went about pricing. I think here, I really believe this is about the user migration to mobile and the fact that we have 200 million monthly unique users on mobile, is particularly strong. So, I’d look at those overall user numbers, because I think the revenue will follow there. In terms of display in the last quarter and why it was maybe a little weaker than some people would ultimately expect. If you look at these new metrics we released, you can see is that impressions were down but they were reasonably stably down throughout the year at about 10%. In Q3 we saw a nice bump in terms of pricing which offset and drove the business back to being reasonably flat year-over-year. One of the reasons that happened is because we had really excellent Class 1 premium advertising opportunities in Q3 particularly around the Olympics. So, we will continue to look for opportunities like that moving forward to enhance pricing. Obviously, we’re working really hard on the number one business challenge we see which is increasing engagement and ultimately increasing the number of impressions that we have available and that’s ultimately what I would look at around display because as we increase those impressions and as we keep the (C1) mix high, that’s something that will help. There is a little bit of the shift to mobile affecting us there, but again we had historically seen that the mobile usage that we see across our products is generally incremental and additive to what we’ve experienced. On the programmatic advertising opportunities, we still are very excited about them. We have teams here working diligently on them. In fact, our investment in ad technology is one of the key strategic investments that we are making this year that you heard Ken refer to. So, we’ll have more to offer there. We do think that this is a great way for us to be able to ultimately serve our advertisers and it is an area where you’ll see us deliver in the future.

A Closer Look: Yahoo! Earnings Cheat Sheet>>