A Chat With Yahoo!’s New CEO

April 17, 2009
by Alex Hoye

I had the fortune of joining a group meet ing Yahoo’s new CEO Carole Bartz last night. It was an interesting juxtaposition with the Google earnings call that was going on simultaneously and so I’ll provide a brief comment on both.

First GOOG: The giant managed to pull off yet another positive surprise with its Q1 earnings – a 3% decline versus Q4 2008 but a 6% year-on-year increasing in revenues to $5.5B (£3.7B). At least as impressively, they improved their net income to $1.4B (£1.0B) up from $1.3B (£0.8B) last year due to a combination of the revenue growth and improved operating margin to 34% (versus 30% in 2009).

So, what is the real news? To me, four things stand out:

• First, when you look at the sales growth chart since 2006, it is the first quarter-on-quarter revenue decline ever; Down is the new down, even at Google

• However, usage is up. The fact that revenue only increased 6% over last year versus a 17% increase in paid clicks and their revenue declined 3% over last quarter versus a 3% increase in paid clicks makes clear that clicks are up, costs per click are declining. This confirms micro data we have that it is taking longer to get buyers through the funnel, but the cost of getting there is going down

• Third, even at GOOG, they are protecting the bottom line through the first decrease in staff I’ve seen (20,164 versus 20,222 – mostly through reduced sales, marketing and recruiting functions) and elimination of peripheral products, i.e., newspaper and radio ad services

• Finally, a prioritisation of the next phase that we at Latitude have been keeping on top of which will eventually transform television as we know it – Online TV advertising
As I look at that controlled deceleration at Google, you have to have some respect for the folks will be running the parallel Yahoo! call on Tuesday, where the web speculates there will be more layoffs and a clear direction laid out.

Carole came across as pragmatic, hard core, and ready to make some of the moves to push Yahoo! ahead. We had a chat and she seemed ready to listen, focused on building on Yahoo’s strengths. A few take-aways I put together partly from what she said and partly me adding some lines to the dots include:

• Focus on Yahoo’s strengths – behavioural targeting with display advertising across Yahoo! Finance, sports, music, photos (Flickr) and other content-rich sites

• That, of course, implies de-emphasis where they are less strong. That would be search. I encouraged her to do what all unofficial speculation implies, combine Yahoo and Microsoft’s search as soon as possible.

• Other areas of interest she underscored were mobile – and while Yahoo! leads on-deck (default portals)mobile advertising in the UK, she appeared to have the same view I have which is that on deck is akin to AOL in the mid-90s and the future of mobile is location-based ads on 3G PDAs, not on-deck

• She underscored the view that as much as we digital marketers are number crunching analytics geeks, we should not underestimate the power of branding online.

The Yahoo! team seemed pleased to have a firm hand on the helm with clear views and direction. I also liked the way that in the midst of a very English bangers and mash, fish ‘n’ chips meal, California woman that she is, she was given a salad – but she declined and dug in with the rest of us.

A tale of two major companies heading in different directions, but both reflecting the times. One thing in common - all companies need to look at their businesses, determine what’s core, get very competitive, and figure out where digital marketing fits in the mix.

2009 will be a market-maturing year, and we at Latitude are ready.

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