Yahoo Spanked By Investors Over Ads

    January 18, 2006
    WebProNews Staff

Those weren’t warm overtures coming from Wall Street when Yahoo announced gaudy earnings that didn’t beat investor analysts, and the biggest problem may come from lagging behind in relevance for contextual advertising.

Yahoo Spanked By Investors Over Ads
Unhappy Investors Take Yahoo To Task

Yahoo posted higher revenues and net income in the fourth quarter of 2005 when comparing year over year figures. However, they didn’t beat the Street’s call for 17 cents per share earnings, only reaching 13 cents per share instead.

Investors quickly drove down shares of YHOO in after-hours trading. Yahoo attributed the figures to their costs in gaining a 40 percent stake in China’s Alibaba e-commerce company, a $1 billion deal that took place in 2005.

CBS News reported how Yahoo’s woes at matching Google’s AdWords/AdSense effectiveness may be holding Yahoo back:

Although Yahoo’s profits have been steadily rising in recent years, the company still hasn’t been able to come up with a formula that’s as effective at serving up moneymaking ads as Google, its biggest rival.

“Frankly, Google has done a better job than us,” Yahoo Chairman Terry Semel acknowledged during a Tuesday interview.

Both Yahoo and Google display text-based ads on hundreds of Web sites in addition to their own, but only get paid when the links are clicked on.

Google’s knack for enticing clicks has generated a long stretch of stellar earnings growth that has eclipsed Yahoo’s. As a result, Google is currently worth twice as much as Yahoo, even though it is a younger company.

The GotAds? blog suggested a course of action Yahoo CEO Terry Semel should take with its Overture advertising company, in citing Semel’s comments that better advertising algorithms won’t be introduced until later this year, with their impact being felt in 2007:

Maybe if Yahoo execs spent less time listening to Hollywood producers pitch online reality shows, and more time kicking the underachievers at Overture in the pants…So Overture is targeting 2007 to get its ad system up-to-par with Google! What have they been doing for the last 18 months!?

Good question.

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David Utter is a staff writer for WebProNews covering technology and business.