After a second straight quarter of not pleasing Wall Street analysts despite overall increases in their financials, the ominous specter of the 2000 dot-com crash has begun to loom.
Have analysts begun to spook the market? Is the blogosphere beginning to feel The Fear that online advertising has run its course as a viable revenue stream? Is it too soon to even think about this since Google’s financials don’t come out until the end of January?
Yes, yes, and yes.
Here’s how Yahoo’s financials compared year-over-year for the fourth quarter of 2005. Yahoo CEO Terry Semel said in the company’s earnings announcement that Yahoo had “revenue of $1.5 billion for the quarter, our 11th straight quarter of record revenues, and up 39% from the fourth quarter of the previous year. This makes our 2005 full year revenue of $5.3 billion, almost a 50% increase over the 3.6 billion in 2004.”
The Wall Street Journal noted that after “excluding gains, tax benefits, and other adjustments related to investments and Yahoo’s transaction with Chinese Internet firm Alibaba.com, Yahoo’s income was $247 million, or 16 cents a share.”
Analysts expected 17 cents per share. Uh oh.
Investors answered Wall Street’s opening bell the next day by smashing shares of YHOO down by about 12 percent to $35.05, off its pre-announcement close of $40.11. Intraday trading pushed it back up to $36.16 but shares dropped back down.
How’s the blogosphere handling The Fear? Steve Rubel sees the crash coming:
If Yahoo can’t make analyst’s numbers then clearly online advertising isn’t growing as fast as we would all like to think or hope. Keep in mind that Yahoo missed its estimates in a good advertising economy!
The Web 2.0 crash-ola is coming much sooner than I feared. Already Searchfox is toast. Who’s next? Sell GOOG that’s for sure.
BusinessWeek’s Rob Hof blogged on Rubel’s curbed enthusiasm:
Much as I see a lot of signs of a bubble, I think it’s a little early to call a crash. But aren’t you glad you didn’t buy Google at today’s closing price of $467? Oh, you did? Sorry. Looks like Yahoo’s sniffles are contagious. Don’t say we didn’t warn you.
Not only are they throwing Yahoo under the bus, they’re shoving Google in front of the next bus arriving at the station. That may be premature given Google’s purchase of dMarc for what may end up as a deal topping $1.1 billion over three years.
Google’s cash pile has been estimated in the $7 billion range; announcing they will spend $1.1 billion of that two weeks ahead of earnings sounds more like the fanfare before a solid announcement rather than a heads-up to investors to dump as fast as they can.
(Disclaimer: anyone taking the previous statement as investment advice should seek immediate medical attention, preferably in a city with excellent access to neurological diagnosticians and equipment.)
Considering the online advertising marketplace, Yahoo loses Microsoft’s business in June 2006, when MSN AdCenter replaces Overture on MSN’s sites. Yahoo CFO Sue Decker addressed that and Yahoo’s future efforts at monetizing search during the earnings conference call, and they seem confident in those efforts:
Regarding click through rate, we do have a number of relevancy initiatives that we’ve said in the past we would begin testing in the first half and we would roll out thereafter. We are going to stage a very systematic and deliberate roll out as not to disrupt hundreds of thousands of advertisers that depend on us.We had a very careful and phased global roll out and we will perform the same way as we roll out the monetization efforts. We’re very enthusiastic about it, but we don’t want to rush it. We want to do it exactly right.
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David Utter is a staff writer for Murdok covering technology and business.
