Yahoo Earnings Tell Bigger Picture

10/23/2013 9:00 am EST


Jim Jubak

Founder and Editor,

Yahoo's third quarter earnings announcement reveals a disquieting trend, not just for them, but for the entire online ad system, says MoneyShow's Jim Jubak.

Yahoo, or Yahooooo, went out and announced its third quarter earnings on October 15. They weren't terrible. They beat by a penny. They announced 34 cents for the quarter instead of 33 cents, but there are some disquieting trends in those numbers that aren't just disquieting for Yahoo, but disquieting, really, for the whole online ad system.

Now the problem that Yahoo had, I'm going to have to consult my numbers here, is they saw a big drop in display advertising, down about 7% year to year, they saw a big drop in search revenue, down about 8% year to year. The thing that's interesting here is that the number of paid clicks was up but the price per click was down, down around, oh, 4% year over year, so what you're seeing is more action but lower prices.

This is the problem that's really shown up in earnings for Google, and a lot of other online advertising vehicles that, with the advent of mobile, we've got a whole new sort of passel, a whole new empire of available space to sell, which, of course, would, by itself, drive down ad rates, but if you've got more places to put ads and therefore demand and supply are a little out of whack, but also that companies aren't willing to pay yet as much as for a display or for any kind of ad on mobile, as they're willing to pay for an ad on a PC, or even say, a notebook.

So, what you're seeing in the Yahoo numbers is, besides any particular problems that Yahoo's having, and Yahoo's clearly having problems driving display revenue, that's been a problem that it's had and it continues to have. The overall problem for the sector is really in that falling rate, that the number of clicks is going up but the dollar per click is going down and until that gets fixed, this sector is not going to produce the kinds of numbers that really knock anybody's socks off and certainly not for anybody except the very top-tier players such as a Google.

This is Jim Jubak for the Video Network.

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