Well, when there is no outstanding earnings news to share, why not at least try to make the earnings call itself an outstanding presentation? At 5 pm on Tuesday evening July 16, 2013, Yahoo CEO Marissa Mayer and CFO Ken Goldman did exactly this - transforming their Q2 2013 earnings call into a video session complete with interactive graphics and visuals.
The earnings call itself was, for the most part, a non-event. The company's revenue is still down, and traffic to Yahoo's properties has been stabilized (see the chart below, which shows that traffic loss has been stemmed, though the 2013 trend line won't necessarily continue an upward trend - we'll know more next quarter if Yahoo has merely stemmed the traffic loss or if it has really developed a meaningful traffic growth pattern.
The underlying message from both Mayer and Goldman is that Yahoo has "stabilized." The financial numbers certainly underscore this, though we also need to note that Yahoo's 23.5 percent ownership of China-based Alibaba continues to provide a financial cushion in terms of total dollar worth. Alibaba also keeps Yahoo's own stock price afloat - which has moved from just under $16 per share a year ago to today's $26.88 per share as we write. Shown below are the key financial numbers.
For all practical purposes we can refer to them as entirely plain vanilla numbers. There is nothing here to suggest anyone can anticipate strong growth moving forward, and though the numbers do suggest the company has stabilized from the downward spiral it appeared to be in a year ago, there is also nothing to suggest (outside of Alibaba) that the stabilized foundation is in any sense solid.
It is worth noting that the key metric against which Yahoo must be judged - advertising revenue - continues to decline, but more specifically, it continues to decline within an ad industry that managed to grow 15 percent overall over the last year. Will Yahoo's new-found mobile-centric worldview turn this around? Well, it must, and the next two quarters will shed more light on the worthiness of the mobile foundation.
In truth, there is literally nothing else to say…yet. Mayer has taken a very carefully orchestrated multiyear approach to "fixing" Yahoo. Far better that she do this than try to deliver on short term fixes that do nothing more than cater to financial analyst needs to live in the moment. Yahoo's board certainly is on board with Mayer moving slowly to develop a real growth business.
The strategy has now moved from first fixing the company's human resources problems (lots of HR house cleaning, new work rules and streamlining) to a focus on developing a great mobile-first product base (e.g. redesigned core Yahoo apps, such as Yahoo Weather and buying Tumblr). That product base is now Mayer's focus. Her position is that great people are needed to build great products and that only great products will allow Yahoo's advertising model to work. For advertising to work, those products must deliver hugely improved mobile traffic, and that traffic in turn will, finally, break the revenue dam wide open.
That is the plan she has sold the board and it is not a plan that happens overnight. What it all means is that we will likely see nothing more than incremental improvements in revenue over the next year, but we must necessarily expect to see solid indications that great surges in traffic - especially mobile traffic - are in Yahoo's future. As we noted earlier, traffic has so far been stabilized but there is yet no indication of any pending surges. In fact, that stabilization may be nothing more than Yahoo finally finding a natural traffic bottom (that is, traffic has reached a point where it would have stabilized even if Mayer had done nothing about it to date).
Over 30 products and features have been shut down over the last twelve months, and the teams that were working on these have all been re-allocated to what Mayer believes will be far more revenue-generating products. There has been a 6 fold increase in mobile-focused engineers, and hundreds of them are now dedicated to mobile. Mayer rates Yahoo's mobile efforts over the year a grade of "A." Yahoo now has improved to 340 million monthly mobile users. Underscoring mobility, Mayer notes that, "Yahoo's future is mobile, and we are now a mobile centric company."
The $1 billion Tumblr acquisition at this point in time is merely that - an acquisition. There is no revenue to speak of, and Mayer did not outline her plans for monetizing the site - though of course it all comes down to Tumblr being able to take advantage of Yahoo's tools for personalization and content discovery - and through that then figuring out how to build a significant ad-based revenue-generating engine out of it. It's a very tall order.
The message is that Yahoo has now transitioned out of its people-fixing phase and into its product-building phase. The plan requires embracing the old adage - patience is a virtue. The Yahoo board looks to us to be intent on embracing it, but it will necessarily be a 12 - 18 month embrace. That is a huge amount of time in the tech world. Meanwhile, a mere three months from now we'll be looking for the next video earnings call. Look for more of the same messages and numbers. Our one open question: will CFO Ken Goldman do better with his teleprompter reading?
Interested in seeing the Yahoo Q2 2014 earnings call video? It isn't "must see TV" but yes, it's better than a phone-based conference call. And yes, you can very nicely watch it from the comfort of your mobile device.
TechZone360 Senior Editor
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