Yahoo Gives Upbeat Outlook for Continued Growth

Despite being a well-established player, Yahoo can outgrow the overall Internet industry in coming years, company executives told analysts and investors this week.

Yahoo used its annual media day on Wednesday to paint an upbeat portrait of the company’s future and to lay out a broad menu of new features it would offer its millions of users.

Chief Financial Officer Susan Decker said the company can outgrow all Web firms but acknowledged growth would probably not be sustainable at the 30-percent range, the top of the company’s own forecast for this year.

Decker said it will likely be sometime next year before Yahoo’s revamped online search advertising platform begins to significantly impact results. She added that more than half of the growth it achieves will come from boosting revenue from existing users.

“More than 50 percent of our revenue growth will come from increased revenue per user,” she said. Asked to pinpoint an overall rate of growth, Decker said Yahoo would expand “faster than the industry growth rate.”

The comments were well received by analysts and investors, who have seen Yahoo’s stock move mainly sideways recently amid questions about growth in the face of stiffening competition from Google, Microsoft and relative newcomers, such as Ask.com and News Corp.’s MySpace.com.

Growing Up

Yahoo was “overly defensive” about the threat posed by MySpace, according to JupiterResearch analyst David Card. He said the social networking site is “way ahead of Yahoo in creating a network of communities of teens and young adults, if not monetizing it.”

In its defense, Yahoo said it was resisting fads in favor of true business opportunities and that the portal it creates will be one that more consumers can trust with their personal information — and their money — and where advertisers will want to be seen.

“Yahoo is well-positioned to continue as a — if not the — leading online media company,” Card added.

Despite that positioning, Yahoo has found its stock stuck in neutral for much of this year, with the shares trading at US$29.28 in midday trading Friday, compared to a 52-week high of nearly $44 reached in January.

For 2006, Yahoo has projected revenues of $4.6 billion to $4.85 billion, with the top of that range representing 31 percent growth over 2005. Decker suggested that type of growth was not sustainable over the longer-term.

Indeed, given its sheer size and relative longevity as a Web company, Yahoo might be expected to post even more subdued growth numbers, which could help explain why investors have seemed to favor the stock of Google recently.

Decker also said Yahoo would become more profitable as it monetized more of the traffic to its network of sites, but it was also likely customer acquisition costs would continue to increase over time.

During his presentation, CEO Terry Semel said Yahoo was making four “big bets” for the next five years, including enhanced Web user experience using technologies such as Ajax — which is featured prominently in the re-designed home page Yahoo launched earlier this week. Other strategies including using Flash; launching a social networking site; providing more original content; monetization of traffic; leveraging its platforms in new markets; and becoming a “three screen” media firm that delivers content and ads to the PC, the television and the mobile device.

The five-year time frame is significant because it was almost five years ago that Semel took the helm at Yahoo and began to transform by creating multiple revenue streams to lessen the portal’s dependence on interactive advertising, which at the time was in the doldrums. He also brought ties to Hollywood, helping Yahoo strike partnerships that have given it access to multi-media content.

Craving Details

Yahoo is also betting on the human element in its search battle with Google and Microsoft, with the “social search” aspect represented by Yahoo Answers — which returns results found by others — emphasized during the presentations.

Analysts had mixed reactions to Yahoo’s pitch, with many saying they were hoping for more insight into how Yahoo’s ad platform — known as Panama — will impact its profits going forward.

UBS analyst Benjamin Schachter said he “would have preferred to hear more detail on the financial implications” of the search upgrades. “Reading between the lines, we expect more meaningful media partnerships to be announced throughout the year.”

He added that Yahoo appears to be “focused on improving the marketability of its properties by improving content.”

Among the specific future products previewed was a Java-based version of Yahoo Go meant to extend more of Yahoo’s content and community services to cell phones and other mobile devices.

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