Yahoo's Q2 Revenue Jumps 42%
Web Design & Technology News, July 10, 2003

July 10, 2003

The jump was fueled by growth in the Internet ad business and its paid services
By Robert McMillan

Fueled by growth in its Internet advertising business and paid services, Yahoo! Inc. late yesterday reported its largest revenue-producing quarter in company history.

The Sunnyvale, California, company reported net income of $50.8M, or 8¢ per diluted share, on net revenue of $321.4M for the quarter that ended June 30. Net revenue was up 42% over the $225.8M it reported a year ago. Net income was also up from last year's $21.4M, or 3¢ per share.

Yahoo's results were in line with expectations of analysts polled by Thomson Financial/First Call, who had predicted earnings of 8¢ per share on revenue of $315.1M.

The good results this quarter were the result of more balanced growth in advertising and sponsored search revenue, and the conversion of consumers and small businesses to fee-based services from free ones, the company said in a statement.

"More marketers are recognizing that the Internet is a great complement rather than a replacement for traditional forms of advertising such as television," CEO Terry Semel said in a conference call. Growth in this area was also driven by industry standards, such as the Universal Ad Package sizes now being promoted by the Interactive Advertising Bureau.

Programs aimed at enticing advertisers in specific vertical markets like the automotive, retail and entertainment industries are also beginning to bear fruit, Semel said. The number of motion pictures promoted by Yahoo! in the quarter, for example, jumped from 13 a year ago to 53 in 2003.

Revenue from Yahoo's marketing services, which include sponsored search and advertising via the company's global marketing services, accounted for $219.2M, the lion's share of Yahoo's revenue.

Fee-based services, including premium services like Yahoo! Personals and SBC Yahoo! DSL, accounted for $69.9M in revenue, a 43% increase over 2002.

The company reported that 3.5M users now pay for Yahoo! services, making it the most rapidly growing group within Yahoo! The total global audience reached by Yahoo! is now 236M users -- up from 196M a year ago, said Semel.

Yahoo! is now less certain about its full-year 2003 revenue estimate, widening the range to between $1.26B and $1.31B, according to executives taking part in the call. It had earlier estimated full-year earnings at $1.28B.