Yahoo's third quarter earnings report, showing a 42 per cent net revenue increase, is more than a result of its much talked about advertising strategy it has actually reaped its content sowings. On Tuesday, Yahoo Inc posted steady profits and higher revenues from advertising sales, and moderately raised its revenue target for the rest of the year.
The Sunnyvale-based corporation has reported a profit of $254 million. Third-quarter revenue rose to $1.3 billion and cash flow was $440 million, compared to revenue of $907 million and cash flow of $267 million in the third quarter last year. That quarter's $253 million profit included a one-time gain of $129 million from the sale of an investment.
The profits of Yahoo, which has more Internet users tapping into its email and entertainment offerings than any other Internet service, show that the company benefits from its vast array of entertainment-related offerings, including paid content.
"Yahoo had another record quarter and continued to see solid growth across our business. We introduced a number of new and innovative products and services and continued to provide more effective means for advertisers to engage with consumers," said Terry Semel, chairman and chief executive officer, Yahoo.
Yahoo has been aggressive in the competition against rivals like Google and Microsoft. Yahoo added Flickr recently, made a deal with Bellsouth, and announced its takeover of Whereonearth. The company has been, of late, laying a lot of emphasis on news and news-related original content. It recently elevated blogs to its news search section, and created a flutter in the news world last month when it announced the hiring of war correspondent Kevin Sites to produce a multimedia website which would report on conflicts around the world. Just as the Hot Zone was going live, the company declared that nine popular writers would be publishing personal finance columns on Yahoo.
It is this stress on content which is making research analysts prefer Yahoo's diversity over Google's monotonous revenue stream. Lauren Rich Fine, managing director of corporate strategy and research at Merrill Lynch's equity research department, wrote shortly after Yahoo announced its Q3 results that one reason the financial services company preferred Yahoo to Google was because of its more diverse offerings. "While Google has a higher share of search queries and revenues, Yahoo has much better user engagement that is being monetised through branded and fee revenues," Fine wrote.
A lot of Yahoo's services include paid content. Fee revenues rose by 54 per cent year-over-year. While one portion of that came from fees for broadband access bundled with content, other increases came from subscriber fees for music, and small business.
Yahoo, known to be a free portal, is not only growing its ad-supported content business, but also its subscriber revenues. "This development indicates that consumers are willing to pay for premium content or, at least, for the fun stuff. As in the offline world, enough consumers seem willing to shell out dollars for escapist offerings that subscriber revenues appear to be a viable source of support for some online programming," commented MediaPost.
