Later tonight we'll get Yahoo's fourth quarter numbers, and if you're using Google's blockbuster report from last week as a kind of barometer to handicap Yahoo, that may not be such a good idea, and here's why:
It's true that Google posted enormous numbers and cited a pretty big recovery in the marketplace as a key component to the news. As I've pointed out in previous posts and on the air, advertisers who left the web because of the economic downturn are returning, and those that continued to advertise through the downturn are expanding their spending because they now appreciate the true value proposition of all this. That certainly should bode well for Yahoo.
The trouble is, Google, like a wildfire, tends to generate its own wind. In other words, what's good for Google might merely be good for Google, and it's likely Yahoo won't be able to seize on the same marketplace trends. Citi's Mark Mahaney brings up some superb points in his Yahoo "cheat sheet." He points to the "significant strength" in Retail Search as a key driver for Google, but where "Yahoo has less of a presence." Contrast that with the continued weakness in the Financial Service sector, where Yahoo has a bigger presence, and Google less of one, and that bodes negative too. Combine all that with Google's "aggressive emphasis on its Display advertising efforts," where Yahoo had always enjoyed some historic strength, and the competitive headwinds seem to be gaining steam. (Despite all that, Mahaney maintains a "buy" and $22 target on Yahoo, thanks to the ad recovery and management's focus on margin expansion.)
Tonight, the Street is looking for earnings per share of 11 cents on net revenue, excluding traffic acquisition costs, of $1.23 billion. Gross revenue should be $1.67 billion. Other key metrics: EBITDA should be about $433 million, owned and operated display ad revenue likely declined by about 8 percent; gross search ad revenue should decline about 16 percent; listings revenue should have declined by 18 percent, affiliates sites revenue should be flat, and fees revenue should be about $204 million, or down 4 percent. All of those ranges come courtesy of the Mahaney "cheat sheet" at Citi.
Looking ahead to first quarter guidance, the gross revenue midpoint should be about $1.61 billion, and EBITDA should be $407 million. What Yahoo has to say about its presence in Asia, how the Google controversy in China might be incrementally beneficial to Yahoo, which has had its own deep problems in China, though it publicly aligned itself with Google recently on these issues, and any guidance about Yahoo's big, beneficial investment in Alibaba will all likely come up on the call.
Those are the numbers, but there's also a healthy amount of personality that becomes a big part of the Yahoo news, no matter what that be. CEO Carol Bartz recently graded her first year at the helm as a B-, according to our friends at Bloomberg. Kinda wonder what a C or a D would have been, when you consider that today's 11 cents in EPS expectations compare to 43 cents a year ago; net revenue today of $1.23 billion is off more than 20 percent from last year's fourth quarter. It's true that shares were at $11 or so a year ago, and are near $16 today, and for historically extremely patient Yahoo investors, that might be enough. And while Bartz and team have done a major overhaul of the company's expense line and its spread-out and non-focused executive staff, at some point, she's going to have to show a path to real growth, real marketplace gains, and a real return on the strange, outsourcing relationship it has forged with Microsoft (which is still awaiting Justice Department approval at last check.)
Yahoo, even at this late stage in its attempts at recovery, still seems to be more of a longer term play than anything imminent.
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