We're blogging Yahoo's fourth-quarter earnings call live. Rumor had it the company would hold an all-hands at the same time. Now we're hearing that's tomorrow. For what's going on during the call, stay with us.
2:05, Jerry Yang, Sue Decker are on the call. Marta Nichols takes the lead.
2:07, Yang's talking. In october we announced big changes. We're making good progress. I'm confident we're headed in the right direction. We announced three objectives. To become the consumer starting point. To make Yahoo a must buy for advertisers. And to be attractive to developers.
2:08, Yang says you can't see it, but we're building momentum in owned and operated sites.
2:08, We're taking an agressive investment posture in 2008. In advertising and starting points. To allow us to compete and to differentiate. In advertising: the market is young. As an Internet leader we can get ahead of the curve if we invest correctly. Formula: to internally build a leading ad platform with acquisitions like BlueLithium and Right Media.
2:11, Second investment priority: Improve front page, My Yahoo, Mail, search and mobile. Increased investment is the only way we can build more market share.
2:12, We're also working with broadband partners to transition consumers to broadband. ANNOUNCEMENT: AT&T expanded its Yahoo deal. Mail, portal and mobile.
2:13, We expect our core business, excluding the broadband deals, to grow in the teens. To conclude: We feel urgency. Announcing new CTO: Ari Balogh
2:14, Thanks Yahoos around the world for their "fighting spirit."
2:15, Now it's Sue Decker's turn. On user experience improvements. They're gravitating toward simple starting points that allow broad roaming. Yahoo wants to bring home page, search, mail, My Yahoo, and mobile into one starting point.
2:17, We're deemphasizing opening to third parties. Like Brand Universe. (Confirmed.) Also, we're moving Yahoo Answers development to Europe.
2:19, Search is getting more visible on Yahoo front pages. Ambition: to change the game and win query share. There's a long way to go. Most users don't get what they want on their first search. On the back end we've made a major investment in algorithmic search.
2:21, We're still tops in mail and we want to stay that way.
2:21, In mobile, we announced Yahoo Go 3.0 at CES. We've also got a new widget developer platform.
2:22, We want to be a "must buy" for advertisers. Here's how that's coming. Panama financial gains in Q4. 20 percent improvement. Search rev. growth: over 30 percent.
2:24, As for display, which is about 90 percent of Web and Yahoo advertising, we went live faster than we expected with Comcast.
2:25, BlueLithium's products and sales teams are fully integrated.
2:25, Display advertising is up 20 percent.
2:26, We saw declines in finance, travel and retail advertising. But overall growth has offset "pockets of weakness."
2:27, We needed to catch up. Panama does that. For more revenue, we've restructured biz-dev deals. Renegotiated TAC rates.
2:29, To differentiate and innovate we're focused on key starting points and a scaled exchange.
2:29, While competitors are buying eyeballs. We're doing it through P&L.
2:30, We're moving from a catchup mode to one of true differentiation.
2:31, Now its on to Blake Jorgensen, the CFO. Lots of numbers. Want 'em? Find them here (PDF).
2:33, Revenue ex-TAC (excluding traffic acquisition costs) is up 14 percent year over year.
2:34, Revenue ex-TAC through search affiliates continues to decline. But we're expecting off-network display to grow throughout 2008. The Right Media Exchange should help.
2:35, In the fees business, paying customers are up 17 percent year over year.
2:36, Profits? Operating cash flow $527 million. $1.927 billion for the year.
2:36, Now we're to the business outlook. Reminder: We sold Overture Japan to Yahoo Japan in Q3, 2007. We're collecting service fees. So GAAP revenue will decline.
2:37, Our outlook reflects that broadband deals are about ad revenue sharing now. GAAP revenue should decline modestly. $300 million to $400 million payment expected from AT&T, though.
2:39, Sneaky Layoff announcement? Our outlook is that 1,000 people will be reallocated in the coming months.
2:41, Our outlook reflects strong underlying growth. Excluding the broadband partnerships and Yahoo Japan we expect rev growth in high to mid teens.
2:42, Call goes back to Yang. Recaps the call. We're confident we'll be "stronger and more competitive in 2009"
2:44, Time for questions.
2:44, What was your organic growth excluding the acquisitions?
2:45, They collectively only added 2 percent to growth.
2:45, JP Morgan. Considering selling Asian investments and buying back shares? Also a question about revenue per employee.
2:46, Yang: No.
2:46, Revenue per employee: We compare ourselves to similar competitors. We think our cost structure is lower than our two major competitors.
2:47, Citigroup: What kind of impact would a recession have on display and search? In search, how would that go? A decline in demand or user behavior?
2:48, Mark: We can't predict the economy. We predict solid growth for our company. Sue: We've seen pockets of weakness. The challenge is that secular trends in online advertising are overwhelming the cyclical environment. It's early to tell whether or not the housing problems will effect us. We're encourage by offsetting strength.
2:50, Morgan Stanley: What gives you the conviction display growth will improve? Also, online display ads are exposed to finance, retail and travel. What's your exposure?
2:51, Yang: We're not prognosticating the economy. We don't know. Why are we convinced? We saw 20 percent YoY growth in display last quarter. We think that'll continue. We're already seeing the growth as a trend. The challenge is that we have broadband revenues we need to cycle through. We're looking to have that falloff hit this year.
2:53, We believe investments in the platform will differentiate us in the market. With Newspapers, Telcos and the ISPs. It's not a transformation year. You're going to see progress in the first half of the year.
2:54, Bank of America: Are Panama clickthrough rates continuing to improve? Also, are spenders' overall ad budgets up, or just the online portion?
2:55, Panama continued to grow at the same rate. Display ad budgets are growing around 20 percent. We don't about overall ad budgets. Other than conversations.
2:57, Investments seem aimed at advertisers. How are you going to build inventory? Like in Finance and Entertainment, Where we've been seeing share losses. Hmm?
2:57, We're investing in starting points: front page, Mail, search, My Yahoo, and mobile. Finance, Sports and News. We're leading in all those positions. We want to make our sites more social. You know with the "social graph."
3:00, What was headcount at the end of the quarter? We didn't disclose it. But it's 14,300. As a reminder: we closed two acquisitions that added 200 heads.
3:01, Why were search affiliates weak? Price, Decker says. The TAC rate for the last two years has gown from 72 percent to 80 percent.
3:02, LAST QUESTION. Jason Post from ML. How's query volume growth?
3:02, Search revenue is up 30 percent plus. Query growth itself is up about 10 percent.
3:03, Yang: Thanks!