Yahoo Q4 2006 and Full Year Revenues Up

Unlike last quarter, Yahoo expressed satisfaction with its fourth quarter and full year financial results for 2006, stating revenues at $1.7 billion in Q4, and $6.4 billion for the year. In addition, the company announced it will unveil a ranking system to prioritize sponsored search listings based on quality in addition to keyword price on February 5. Stressing a commitment to “continuing this momentum,” CEO Terry Semel cited three key priorities for the firm going forward: improving search monetization, “widening” its display ad lead, and building out Yahoo’s social media, video and mobile capabilities.

Display ad revenue from the company’s top 200 U.S. advertisers rose 30 percent in Q4 of ’06 over the same period of last year, said Semel, pointing specifically to Consumer Packaged Goods, Financial Services and Pharmaceutical as verticals showing the most growth. The firm also expected ad network extensions to eBay, which distributes Yahoo display and sponsored search ads, as well as onto the Right Media Exchange to facilitate display ad growth. The company also plans to package media from other Right Media network publishers with its own to sell advertisers.

According to Nielsen/NetRatings AdRelevance, Yahoo’s display ad impressions rose 24 percent between Q3 2006 and Q4 2006, and sponsored links throughout the network were up 11 percent.

Q4 2006 revenues increased to $1.7 billion, up 13 percent from $1.5 billion in Q4 ’05. Marketing Services revenues rose to $1.49 billion in Q4 of ’06, also up 13 percent from that period last year. Revenues from premium services fees hit $213 million in the last quarter of 2006, up 15 percent from that quarter last year. Revenues minus traffic acquisition costs (TAC) came to $1.2 billion, up 15 percent from $1.07 in Q4 ’05.

Full year revenues in 2006 leapt 22 percent to $6.4 billion compared to last year. Fees revenue rose 20 percent over ’05 to $798 million; TAC-excluded revenues came in at $4.56 billion, a boost of 23 percent over 2005. U.S.-only revenues for Q4 ’06 were $1.15 billion, up 8 percent since that period 2005. Full year U.S. revenues climbed 19 percent in 2006 from 2005 to $4.4 billion.

It may take some time for Yahoo to assuage industry angst over the extended wait for its Panama ad platform, which could take until Q2 to have a positive financial effect on the company. Still, the firm counts the system as key to boosting search ad revenues. Yahoo CFO Susan Decker said search and display ad revenues are expected to grow 20 percent in 2007.

The upcoming search results quality ranking system, similar to Google’s AdWords Quality Algorithm, “should create a greater volume of high quality leads to advertisers,” in addition to producing improved results for users, said Semel.

Semel said the firm plans to have the “large majority” of its search marketing ad customers transitioned to Panama by the end of Q1 ’07, and intends to roll it out internationally beginning in Q2 this year, starting in Japan. Decker added the system will enable Yahoo to take “advantage of the enormous data and insight we have on the largest Internet audience in the world.” Yahoo’s traffic was up 6 percent year over year, from an average of 103.5 million unique visitors in Q4 2005 to 110.1 million uniques in Q4 of last year, according to Nielsen/NetRatings.

Last quarter, Yahoo expressed dissatisfaction with its earnings results. The Q3 report came on the heels of an announcement regarding a slowdown in ad revenues from auto and financial advertisers, which spooked investors.

Indeed, ’06 wasn’t exactly a banner year for Yahoo, with the firm garnering negative attention following the Panama delay, and an internal memo leak prompting much scrutiny of the firm’s inner workings.

Semel also highlighted initiatives and acquisitions made in order to “seize the opportunity” in video, social media and mobile, including the new Go for Mobile 2.0 search application, the purchase of user-generated contest site Bix, and integration of its user-driven Answers offering. He also noted recent video sponsorship deals with Doritos, Pepsi, and Nissan.

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