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Yahoo Net Profit Marginally Up; Display & Search Revenues Decline; Operational Highlights

Yahoo has reported a net profit of $295.57 million for the quarter ending December 31st 2011, marginally up from $293.29  reported during the corresponding period last year. Year-on-year, revenues for Yahoo were down 3% at $1.169 billion, from $1.205 billion.  Note that this does not include revenue from traffic acquisition costs or TAC.

Yearly: Revenue ex-TAC was $4,381 million for the full year ended December 31, 2011, a 5% decrease from the same period of 2010. The year over year decrease was primarily due to the revenue share related to the Search Agreement with Microsoft. Income from operations increased 4% to $800 million for the full year ended December 31, 2011, compared to $773 million for the same period of 2010.

Future Outlook: Yahoo expects revenue for the first quarter of 2012 to be between $1.025-1.105 billion, and profit to be around $105-155 million.

From the new CEO: Yahoo’s newly appointed CEO Scott Thompson said “In 2012 we will be aligning resources behind key areas of focus to enable us to move aggressively in market and grow our business, bringing innovative new products and experiences to both our users and advertisers.”

“We’re going to work not just at scale, but with speed. We will focus on generating real, sustainable growth and value creation. ” We have to get great, innovative products that matter into the market, absorb feedback quickly from our customers and grab those products constantly,” he added.

On the nature of Yahoo’s business Thompson clarified that Yahoo! was fundamentally both a media company and a technology company and that it should perform well in both. On the company’s strategy he said, ” We will focus on balancing our investment resources and our allocation of capital on the products of today, of tomorrow and of the long term. Being a leading company in any industry requires intense focus on the right allocation of capital. To strike the right investment balance, I believe the majority of our resources should be dedicated to our current core business, that is, the products that are driving results today. But I also believe that we must dedicate a very significant percentage of our capital to investments in the businesses of tomorrow, the products that we’ll launch over the next year.”

He admitted that the company needed better execution to accelerate time-to-market and to better monetize the engagement it has with customers.

Operational Highlights

Yahoo’s unique visitors grew by 11% and its media property page views increased by 8% for full year 2011, largely through a combination of content and product rollouts.

On the content side it launched its TENTPOLES and ANCHORS strategy with aggressive programming around the Super Bowl, Oscars, Royal Wedding and several other major events. In 2012, it plans to focus on the same momentum with a major TENTPOLE event of the U.S. elections and the Olympics.

– The company struck new partnerships, including an alliance with ABC news. For video, it launched Yahoo! Screen as a destination site and introduced 14 new shows into its collection of short form original programming. It claims that one in 6 Americans online watched a Yahoo! original video in December.

Yahoo acquired interclick, inc., which according to claims has built an industry-leading data valuation platform optimized to work with large data volumes across multiple providers and marketplaces.

Yahoo, AOL and Microsoft announced agreements to allow ad networks operated by the three companies to offer each other’s premium nonreserved online display inventory to their respective advertising customers.

It launched Livestand, a personalized living magazine for iPad. Livestand weaves together content from leading third-party publishers and Yahoo!’s global media network to create a visually stunning and deeply personalized digital experience tailored to its users’ interests and passions.

– Yahoo also introduced additional products for the iPad such as Yahoo! Mail and IntoNow, an app that makes watching TV more engaging, social and fun.

Yahoo, in conjunction with Playtone and Reliance Entertainment, will be the exclusive online broadcast partner for Tom Hanks’ multi-dimensional animated series “Electric City”.

– It has extended the Yahoo! Publishing platform to more than 130 sites, improved click-through in key properties with its core personalization engine, introduced products like the SocialGuard and News, omg! and Shine, expanded its new Mail platform to 80% of its global users, including 27 new markets and 22 new languages.

– The company also launched new products related to Search with new front-end user experiences like Search Direct, App Search, QuickApps and a revamped image search, while it claims to have meaningfully improved algo relevance with the transition of Microsoft’s algo platform in 60-plus markets around the world.

– Yahoo says that it has engaged in a variety of discussions with potential partners to enhance shareholder value and is in active discussions with Asian partners to significantly restructure its holdings in Alibaba Group and Yahoo! Japan.

Search operating cost reimbursements from Microsoft: Yahoo!’s results for the quarter also reflect $48 million in search operating cost reimbursements from Microsoft under the Search Agreement, which amount is equal to the search operating costs incurred by Yahoo! in the fourth quarter. Search operating cost reimbursements are expected to decline as Yahoo! fully transitions all markets to Microsoft’s search platform and, in the long term, the underlying expenses are not expected to be incurred under Yahoo!’s cost structure. Microsoft has agreed to extend the RPS Guarantee in the U.S. and Canada through March 2013.

Microsoft implemented several improvements that generated greater clicks for advertisers, especially on critical dates like Black Friday and Cyber Monday. Next on the Search Alliance agenda is to roll out adCenter in the U.K. and France in first half.

– Advertising: Search advertising revenue continued to decline for the company, down 3% year on year. Display advertising revenue also decreased 4% YoY. Search Query volume decreased 4% in the US.

– APAC Region: In terms of geographical contribution to revenue, the APAC market contributed $171 million to Yahoo’s income, no change compared to the same quarter last year. The Segment Contribution margin for the region was 78% for the region, compared with 81% for the same quarter last year.
– Americas: The Americas contributed $683 million to revenues, down 8% from $747 million a year ago. A 266 basis points reduction in segment margin to 81% and a 10% increase in direct costs.

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