Yahoo! Posts Profits on Marketing, Fees Growth

As expected, Yahoo returned solid fourth-quarter results on Wednesday, as the portal turned a profit on solid marketing revenue growth coupled with buffed-up premium services.

For the three months ended Dec. 31, 2002, Yahoo recorded $285.8 million in net revenues, a 51 percent increase from a year ago. Net income was $46.2 million, sharply up from the net loss of $8.7 million recorded in the fourth quarter of 2001. Earnings before interest, taxes, depreciation and amortization (EBTIDA) came in at $85.3 million, up from $11.7 million a year earlier.

“We had a plan and we executed very well against that plan,” said Terry Semel, Yahoo’s chief executive officer. “The report card is in and the results speak for themselves.”

Yahoo said its revenues from marketing services, which include both its regular Internet advertising and paid search revenues, were $177.5 million, a 31 percent increase from the same period a year ago. The company said the strong growth was mostly due to the popularity of its paid listings services, which Yahoo provides through a partnership with Overture.

However, Yahoo said its Internet advertising business was faring better than most in the industry.

“We’re gaining market share from traditional blue-chip advertisers,” said Sue Decker, Yahoo’s chief financial officer.

In December, Yahoo’s chief executive, Terry Semel, said the company had experienced a surge in fourth-quarter advertising.

Since Semel took the reins 18 months ago, Yahoo has sought to add revenue outside of its traditional reliance on online advertising.

The strong marketing performance was aided by continued strong growth in Yahoo’s fees and listings segment, which includes its HotJobs unit, the SBC partnership for DSL service, and various premium services like auctions and personals. Thanks to adding a variety of services this year, including the SBC deal, Yahoo has seen this segment grow briskly. Revenues from this area were $89.4 million in the quarter, a 120 percent increase from last year.

Listings and fees now represent 31 percent of the portal’s revenues.

In the coming quarter, Yahoo said it expects to generate between $255 and $275 million in revenues and between $65 and $70 million in EBITDA. For the year, it expects to $1.1 to $1.2 billion in revenues and $295 to $300 million in EBITDA.

Semel said he expects Yahoo to continue its strong ad gains in 2003, growing marketing services more than 20 percent — with growth in both regular advertising and paid search.

“We are entering 2003 with a trajectory for steady growth in our traditional advertising business,” Semel said, adding that traditional advertisers like Gap and General Motors had moved from smaller ad buys to large brand campaigns.

He also anticipates listings and fees will continue rising at a faster clip, with the company ending the year with 2.2 million paying customers — a sharp increase from the 375,000 it had a year ago. In 2003, Semel anticipates 50 percent growth in subscription customers, particularly in email, access and personals. In three to four years, he anticipates Yahoo will have billing relationships with 10 million Yahoo users.

“We have just finished day one and much more is to come,” Semel said.

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