But there are signs that the worm may be turning. Yahoo’s share price jumped 10% in after-market trading yesterday after the company said that its advertising business was finally showing signs of recovery. Although profits fell 5% last quarter, revenues were up 12% to $1.76bn – still small by the standards of Google (which is running more than four times as many searches) but above market expectations.
Yahoo has been working hard in recent months to stop the rot. In June co-founder Jerry Yang stepped in to run the business after former CEO Terry Semel was ousted by shareholders. It has also been implementing Project Panama, an upgrade to its advertising technology designed to make it more competitive with Google and generate more money from searches. This boosted online advertising revenues.
It has also managed to reverse the year-long decline in its display advertising business, thanks to various acquisitions and partnerships with other online firms like healthcare portal WebMD.
Of course, Yahoo is not out of the woods yet. It doesn’t appear to be making much of a dent in Google’s dominance of the search market (although the fact that it is still hanging onto its coat-tails at all, while so many others have fallen by the wayside, is testament to its staying power).
And the rules of the game are constantly changing – today’s tie-up between Skype and MySpace highlights the way that online firms are being forced to explore new ways to generate additional revenues or increase market share. Yahoo needs to be careful that it doesn’t become so obsessed with battling Google that it misses a competitive threat from an unexpected angle.
Still, it does seem that Yang may be starting to turn things around. Which just goes to show – if you want a job doing properly, do it yourself…