Yahoo Net Revenue Falls Again—But Less Quickly


A year into Carol Bartz’s tenure as Yahoo CEO, things—just maybe—are getting a little less bad at Yahoo (NSDQ: YHOO). Sure, the company posted a decline in net revenue for the fifth quarter in a row. But the 9 percent drop was an improvement over the 15 percent fall a quarter ago and results were in line with expectations. For the quarter, Yahoo said net revenue was $1.25 billion, down from $1.38 billion during the same period a year ago; analysts had been expecting revenue of $1.23 billion. EPS was $0.11, down from $0.17 during the fourth quarter of 2008; analysts had expected EPS of $0.11.

Noteworthy: The company says it expects to finally post year-over-year revenue growth during the first quarter of the year. And in a an ironic twist, Yahoo said it had spent $32 million in advisory and retention fees related to its search deal with Microsoft; (NSDQ: MSFT) Yahoo had previously spent at least $22 million during the summer of 2008 fending off Microsoft’s overtures.

Search: Yahoo’s search revenue tumbled 15 percent. That, however, was an improvement over the 19 percent decline the company posted a quarter ago.

Display: Display ad revenues fell by only one percent during the third quarter. That was a significant improvement, since Yahoo had posted a drop of 8 percent during the third quarter and some analysts had expected a 10 percent decline.


Yahoo’s Bartz: ‘Things Seem To Be Returning To A Normal State’


Some cautious optimism from Yahoo (NSDQ: YHOO) CEO Carol Bartz who said that the company’s business improved significantly during the fourth quarter, compared to the previous quarter. She noted that the company’s search revenue—and display ad revenue—had both grown sequentially. Huge caveat here, though, considering that both figures were down year-over-year.

Bartz did acknowledge, however, that her first year on the job had been “very bumpy:” “Frankly, like lots of business leaders, (I’m) very glad it’s over,” she said. But, given the economic difficulties, Bartz said, the company’s 10 percent year-over-year decline in revenue was “pretty darn good,” especially when compared to the results of traditional media firms. (Talk about lowering the bar.)

Some highlights:

More acquisitions coming: Yahoo recently sold its Zimbra e-mail and communications platform and has put up a series of its businesses for sale but Bartz said divestments would not be an emphasis this year. “Sure there might be a few,” she said. But “2010 is about acquisitions and investments to make Yahoo even stronger.”

Bartz said that the company was targeting content companies, as well as firms that had strengths in key geographies. She said however that the company didn’t have plans for “big acquisitions.”

Hiring: After going through several rounds of layoffs over the last year-and-a-half, Yahoo is hiring again. CFO Tim Morse said the company had added 700 employees during the quarter.

Marketing campaign: The company’s $100 million ad campaign is moving into “product-focus mode.” Asked about the campaign’s performance so far, Bartz said that the first phase of the campaign had been about reacquainting consumers with the Yahoo brand, not about driving user behavior.

Home page: Yahoo is getting rid of the much-maligned pop-ups on its home page. Bartz said that there were “people we were driving crazy” with the pop-ups—and advertisers had complained that their home page ads were being covered.

Search: Despite its falling share of the search market, Bartz said that the company’s search business was “picking up steam,” citing once again the sequential increase in the company’s search revenue. She reemphasized that the company’s search business was a “priority” and would be featured in the company’s ad campaign.

Display: Bartz said that the company’s competition here is television—and that it therefore would increasingly emphasize video.

Paid content: So what does Bartz think about the topic du jour? She says that “a lot of content isn’t unique enough” to charge for, so she doesn’t expect any big changes in the online content business model “overnight.”


Reality Coming Soon For Apple And Its Latest Creation

Apple Asks Press To

The Apple (NSDQ: AAPL) Tablet will save the newspaper industry, put Amazon’s Kindle out of business and change the way students read textbooks. It’s what technology CEOs write poems about, and it’s what Doonesbury considers fodder for a comic strip.

All of the fun ends tomorrow as reality sets in when Apple lets us all in on their precise plans. At 10 a.m. (1 p.m. Eastern) Apple will unveil what it is calling its “latest creation.” I’ll be on the ground in San Francisco to cover the event live, so check back here for updates.

If there were any doubters left in the crowd as to whether Apple was indeed launching some sort of tablet, e-reader, or mini-PC, it’s becoming increasing clear. As the final hour drew closer today, Terry McGraw of McGraw-Hill (NYSE: MHP), couldn’t help but spill the beans on CNBC: “We have worked with Apple for quite awhile,” he said, “and their… the tablet is going to be based on the iPhone operating system and so it’ll be transferable… So now, with the tablet you’re going to open up the higher education market, the professional market. The tablet… the tablet is going to be just really terrific.”

The big question is: Can Apple live up to the hype? It’s not just about managing expectations for tomorrow. Apple has a long road ahead. To be truly successful, the device (an iPad, iSlate or tablet or whatever) must create a new category that falls somewhere between a phone and a laptop—and not just for Apple, but also for the broader media industry. Charles Golvin, an analyst from Forrester, eloquently made that argument today on our site.

It must also get the volume needed to move the needle for the big media companies reportedly involved, like McGraw-Hill. You could even argue the iPhone hasn’t accomplished that yet. With roughly 43 million sold worldwide, it’s still relatively small. However, if you look at Apple’s growing family of devices, including the iPod Touch and now the Tablet, which will reportedly also run the same OS, we may just start seeing a big audience.


Art Brodsky: New FCC Commissioner Clyburn — The Next Net Neutrality Hero?

Last summer, when Mignon Clyburn was nominated to be a member of the Federal Communications Commission, few people in the telecommunications world knew what to think of her. She was, most obviously, the daughter of House Majority Whip James Clyburn (D-SC). She was a member of the South Carolina Public Service Commission who dealt mostly with electricity regulation. When she did engage in telecom issues, it was mostly on the side of BellSouth, the big telephone company.

Some people (including yours truly) raised the question where she would come down on the crucial issues, with the Bells, with whom her father votes, or with the Obama administration, which has pushed for an open Internet.

Since voting in October for a proposed rule to enact Net Neutrality rules, Clyburn has signaled her support for an open Internet with a couple of strong statements.

But after a speech she gave on January 22, Clyburn could well vault quickly from supporter to Neutrality Hero. The speech was to the Minority Media and Telecommunications Council (MMTC). This is a group that on one hand could provide her a sympathetic audience, were it not for the fact that their stance on Net Neutrality has tended to embrace the talking points for the telephone and cable companies. Late last year, MMTC, after having been criticized for edging up to, and possibly stepping over the line into, the Bell position on Net Neutrality, held its own little American Idol session, giving a number of parties a couple of minutes to describe their Net Neutrality positions. There was no debate, there was no feedback. Looks like anything Net Neutrality proponents had to say didn't make an impression.

In comments they filed in the Net Neutrality docket, MMTC and other organizations put forward the industry talking points that an open and non-discriminatory Internet could raise prices for consumers (citing a Bell front group as evidence). Then the groups raise the spectre of regulation of search engines and other applications, justifying this intrusion into the Internet as grounded in civil rights law, filtered through the prism of making certain that search engines don't harm minorities. Of course, this attack is one that AT&T, which generally disdains regulation, has put forward for years as a means of attacking Google.

In her MMTC speech, Clyburn answered all the questions emphatically, not only delivering a strong statement on behalf of a free and open Internet, but calling out minority groups for remaining silent or expressing wariness at new government regulation.

Noting that Web entrepreneur Jonathan Moore, a Net Neutrality supporter was able to start his Rowdy Orbit site with minority content for little investment, Clyburn noted: "Had the costs of access been much greater, however - say if he had to buy his way into priority status on one or more networks - Rowdy Orbit may never have seen the light of day."

She continued: "So in addition to the issue of how we tackle broadband adoption in communities of color, another central question we must answer is: How can we ensure that our communities can take advantage of this emerging economic force? And relatedly, how can we ensure that the current low barriers to entry remain low in order to prevent yet another communications model that has people of color once again on the outside looking in?

"To my surprise, most of the filings submitted and public statements issued by some of the leading groups representing people of color on this matter have been silent on this make-or-break issue. There has been almost no discussion of how important - how essential - it is for traditionally underrepresented groups to maintain the low barriers to entry that our current open Internet provides. I have seen virtually nothing on how important it is that we not allow what is today our Internet become theirs."

Clyburn then quoted from comments submitted by the National Hispanic Media Coalition, which does recognize the importance of Net Neutrality. She quoted NHMC, saying that high-speed Internet access is essential for small business owners to reach customers, to journalists and to content creators.

NHMC's comments were strong and direct. In one part that Clyburn didn't quote, the group said: "These (Net Neutrality) principles are necessary to ensure that all people - especially people of color, who have been traditionally under and misrepresented on mainstream media - enjoy opportunities to share their stories fairly and accurately. The Internet is one of the very few places where Latinos can respond to the vitriolic anti-Latino rhetoric that airs unopposed on some mainstream media outlets."

Clyburn also smartly linked the idea of a free and open Internet to MMTC's signature issue - minority ownership. She noted that MMTC has worked for 22 years to make certain that people of color "will have every opportunity to participate as owners, employees and suppliers in the electronic media and telecommunications industries."

She added: "These words, I believe, should apply directly to the Internet as well. Together we must ensure that people of color - and all Americans - can "participate as owners, employees, and suppliers" on-line. That cannot happen, however, if we passively permit a new set of gatekeepers to erect yet another set of barriers to entry."

Clyburn also pointed out the danger of using another Bell argument - the "unintended consequences" of government regulation: Some of you have expressed a concern that we must be wary of open Internet rules because of the potential for "unintended consequences." But the same argument can be made for any government regulation, especially those rules many of the folks here have sought on the media ownership front."

Considering the subject matter and the venue, this was as impressive a speech as an FCC commissioner can give.

★ ‘A String of Masterpieces’

On my flight to San Francisco yesterday, I finished reading Stanley Kubrick Interviews, an excellent collection edited by Gene D. Phillips. I was struck by this passage by Richard Schickel from Time magazine in 1975, a few weeks prior to the release of Barry Lyndon:

About his work Kubrick is the most self-conscious and rational of men. His eccentricities — secretiveness, a great need for privacy — are caused by his intense awareness of time’s relentless passage. He wants to use time to “create a string of masterpieces”, as an acquaintance puts it. Social status means nothing to him, money is simply a tool of his trade.

Reminds me of someone else.

Outbreak Adds Some Flare to the LG15 Universe

The lonelygirl15 web series franchise has always drawn its success from its fans. But ever since its original creators changed their focus to branded content over original, that has literally been the case thanks to The Show is Yours project, which allowed members of the community to submit their own series for production. And while the first round of the The Show Is Yours resulted in a bit of internal drama, it did keep the show’s brand going with minimal investment from EQAL and renewed fan engagement.

Two weeks ago, the second series to be commissioned under the TSIY banner, LG15: Outbreak launched under the creative lead of Gregory Austin McConnell, known originally to members of the fan community as Greg Mason, a fictional critic of LG15.

While it’s common for LG15 fans to create their own contributions to the series’ narrative, though, McConnell didn’t start off as a fan: “I really didn’t like the show,” he said via phone. “And being the sort of mean-spirited guy I am, I thought I’d give them a piece of my mind, so I created [Mason] within the universe of the show to criticize it.” However, the community responded positively to Mason’s comments, so he continued producing videos critiquing the show — and submitted his own idea when the second round of TSIY came up, figuring that he “could do a better job than they’re doing.”

The result, Outbreak, is a mystery-laden new entry focused around Crystal (Dani Martin), a mysterious and attractive young woman who refuses to discuss her past with her new YouTube friends, but appreciates the support they offer when, her first week in her new apartment, she experiences a strange break-in and advances from a creepy neighbor. The narrative so far is pretty light, with the focus on building up character taking precedence even over kinda-big plot developments like the Eiffel Tower being destroyed, but the fan interaction and use of text and video content is classic LG15.

The only notable difference is that Outbreak videos are filmed with a lot more visual flair than previous LG15 installments — a change to the house style, but cleverly explained. In Crystal’s case, the production quality of her videos are explained by her being a film school dropout who studied editing and animation; in the case of Mason, whose updates are the biggest hint at the larger mystery at work here, the dreamy style fits his circumstances.

A Missouri-based filmmaker, McConnell found the $5000 budget sufficient for putting together the show, though his production company, Tempest Films, already had a full complement of production equipment. Outbreak is scheduled to run for eight weeks, with new video or text content being posted every day. “Now that I’m doing what they did,” said McConnell, “I understand exactly what it takes and the kind of investment you need.”

From the very first episode, he and his team have been working to make sure that they kept the audience fully engaged with the narrative, in some cases rewriting entire storylines when fan response went in an unexpected direction. “In the first episode, Crystal pulled a book out from a box,” McConnell said. “It was a last-minute prop, because what we wanted was for people to ask what was inside the box. But instead they focused on the book, so we had to sit down and figure out how to build the plot around the book instead.”

But McConnell sees this sort of twist as key to the interactive nature of LG15. “You can’t really run a show like this without looking at the fan perspective,” he said. “The show thrives on having an audience who’s willing to play along.”