Fri, Oct 10, 2003 - Page 10 News List

Ad sales double Yahoo's quarterly profit

RECORD REVENUE The Internet giant said it expects to report as much as US$286 million in operations income this year, and the company had record quarterly revenue

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Yahoo Inc, owner of the most-used group of Internet sites, said third-quarter profit more than doubled because it sold more advertising. Revenue of US$356.8 million was the company's highest ever.

Net income increased to US$65.3 million, or US$0.10 a share, from US$28.9 million, or US$0.05, Yahoo said in a statement. Revenue rose 43 percent at the Sunnyvale, California-based company. Revenue totaled US$248.8 million in the year-earlier quarter.

Chief executive Terry Semel has boosted ad sales by offering "sponsored search" advertising in which companies pay to have their Web sites listed prominently in Internet search results.

He's also selling more ads on other parts of Yahoo's Web sites to companies including Universal Studios and Ford Motor Co.

"The quarter's results really highlight the leverage that the Yahoo business has," said Anthony Valencia, an analyst at TCW Group Inc. in Los Angeles.

"It's just really phenomenal that they've been able to grow revenue the way that they have," he said.

Yahoo said it expects to report income this year from operations of as much as US$286 million. The company had previously forecast income from operations of no more than US$260 million for the year.

Yahoo began offering sponsored-search services in November 2001 under an agreement between the company and Overture Services Inc, which provides sponsored-search listings for other Web sites, including Microsoft Corp's MSN.

Yahoo completed its acquisition of Pasadena, California-based Overture on Tuesday for US$1.83 billion in stock and cash.

"The combination of Yahoo and Overture has created the largest online advertising platform in a growing advertising market," Semel said Wednesday in a conference call with analysts.

Overture and MSN have had "positive discussions" about continuing their relationship, Yahoo chief operating officer Daniel Rosensweig said on the call.

Some analysts have speculated that MSN, which competes with Yahoo for Internet traffic, will stop using Overture's paid search listings. MSN spokeswoman Michelle Simpson declined to comment.

Yahoo will benefit from buying Overture even if its other customers stop using its listings, chief financial officer Susan Decker said.

The purchase of Overture followed Yahoo's acquisition in March of search-engine developer Inktomi Corp for US$235 million.

Yahoo redesigned its search engine in April to try to take traffic from Google Inc, owner of the world's most-used search engine. Yahoo also is using Inktomi's and Overture's technology to develop new services, including one started last month to help consumers who shop online find products they want to buy.

Sponsored search revenue more than doubled, Decker said on the conference call. Sales of other types of advertising rose about 20 percent, she said.

The company also is selling more subscription services to its customers.

Those include a high-speed Internet-access service, which it offers in partnership with regional phone company SBC Communications Inc, and an online dating service.

Revenue from fees charged to consumers rose 38 percent to US$79.4 million.

The company said revenue from "listings," which included employment advertising, rose 26 percent to US$32.4 million.

The number of visitors to Yahoo's Web sites rose about 22 percent to 245 million from a year earlier, Semel said.

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