Yahoo Earnings Confirm Strength in PPC Search Engine Advertising

Yesterday, Yahoo, Inc (NASDAQ: YHOO) reported that revenues were $1.7 billion for the third quarter of 2008, a 1% increase compared to the same period of 2007 (view press release). As the stock price hovers near $12 today, investors can only fantasizA Closer Look at Yahoo Earningse about revisiting the recently missed opportunity Yahoo rejected to sell to Microsoft for $47.5 billion, or just about $33 per share. One might think that Microsoft could yet be interested. If they liked Yahoo at $47.5 billion, then the current market capitalization of $17.5 billion must look like a steal! There are plenty of articles out there examining the overall earnings numbers, but I want to focus specifically on what these numbers mean to the pay-per-click (PPC) advertising industry.

Deeper Investigation Reveals Strength in PPC Search Engine Advertising

Search generated revenues from Yahoo’s owned and operated websites (O & O) were $438 million for the third quarter of 2008, a 16% increase compared to $375 million for the same period of 2007 (view report provided by Yahoo). This number is significant because it verifies ongoing strength in the PPC advertising industry. Yahoo was able to pull off this revenue increase despite a decreased year-over-year search query volume. This seems to indicate an increase in what PPC advertisers are spending per click, an increase in the number of advertisers, or both. Though Yahoo showed little or even negative growth in many areas, the demand for PPC advertising at strong brand names like Yahoo and Google clearly remains quite strong and increasing.

Just last week, Google announced a 26% year-over-year increase in earnings. In regards to their paid click revenue, Google said that the number of paid clicks rose 18% compared with the same period a year earlier.

Other Interesting Yahoo Earnings Notes

Yahoo announced a cost-reduction strategy that includes eliminating at least 10% of its roughly 15,000-member workforce. Refer to the Alley Insider for a copy of the actual memo sent to Yahoo staff members. 

Display advertising revenues increased 3% compared to same time period a year earlier but decreased compared to the prior quarter.

Revenue generated from Yahoo’s distribution network decreased from the previous quarter and compared to the same quarter at this time last year.

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