With Panama Locked, Yahoo Falls

    July 20, 2006
    WebProNews Staff

The difference between Yahoo’s second quarter net income between the second quarters of 2005 and 2006 can be explained as a one-time event, but pushing back the new advertising system to 2007 has not been accompanied by much of an explanation. Yahoo’s earnings announcement this week disclosed that the dropoff in net income could be attributed to some non-repeating factors. The company reached certain settlements and sold off some investments, and reaped those gains in 2005. According to Yahoo, without those gains they actually increased net income against the same period last year. It’s a fair point and one that has to be kept in context when looking at the overall business. Unfortunately, another key point also was taken into context, as Yahoo disclosed in its conference call that its next-generation paid search advertising platform, Project Panama, would be delayed until 2007. Shares of Yahoo fell 22 percent in trading the next day to 25.20, although they had gained back twenty cents in after hours trading. As to why Panama would be delayed, Yahoo executives cited a need to get things right before releasing the service. Yahoo still excels at branded advertising. It routinely draws big-name clients to pay premium prices for a lucrative slot on Yahoo’s home page and other web properties. Some of those clients pair with Yahoo for specific promotional deals and sponsor special features on the site. Branded ads do not seem to bring in the big online advertising dollars, though. Paid search has done so, and Yahoo still draws plenty of revenue with its program. When compared to search advertising giant Google, though, everyone else including Yahoo trails in its wake. This time next year, it could be a different story for Yahoo. A successful launch of a Google competitor that can match it on contextual relevance would benefit the entire search ad marketplace. Advertisers and agencies should hold out hope until then, but they probably won’t tolerate a greater delay.

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