Yahoo Chief Executive Scott Thompson plans to bring the Web portal to its former glory by doing away with everything that does not contribute to its core business of profit-driving ads and e-commerce. On Tuesday, Thompson, who left eBay’s division of PayPal to become CEO and president in January, held his first earnings call with Wall Street analysts after the Sunnyvale, Calif.-based company reported fairly positive first quarter results. More important than how the company did was what Thompson planned to do to raise profits, reverse a sales slump and bring back users who have left for Google and Facebook.
The problem, as Thompson sees it, was in Yahoo’s size.
Asked what he planned to do different in the restructuring, Thompson gave a vague answer of making better use of data, traffic, advertisers and “the next-generation experiences that we can build.”
“Yahoo has been doing way too much for too long and was only doing a few things really well,” he said. As a result, Yahoo is going to get smaller by consolidating its various platforms and jettisoning 50 properties that do not contribute to its core business of selling advertising and products on any device, including the PC, tablet or mobile phone.
To lure visitors to ads, Yahoo would focus on a smaller number of media categories: news, finance, sports, entertainment, email and a handful of others. The company would move engineers into its commerce businesses and dedicate some of its “best and brightest” workers to innovate in those areas.
On the backend, Thompson said the company would make the platform more “scalable, nimble and flexible” and therefore less expensive to run. For advertisers, the company was going to make better use of its user data to improve advertiser return on investment. “Really understanding our advertisers’ needs will position Yahoo to better monetize all our traffic globally,” he said.
One area Yahoo planned to find revenue was in licensing its intellectual property. The company recently showed how aggressive it would be by suing Facebook for alleged patent violations. “Other leading companies license our patented technology and Facebook must do the same or change the way it operates,” he said.
Thompson said he understood that Yahoo had to move fast and the changes he made during the first quarter, including cutting 2,000 jobs, or 14 percent of the company’s global workforce, was to reduce costs and streamline the operation. “Yahoo must be nimble, responsive and act with a real sense of urgency,” he said. “We have to think and to move like a growth company.”
Thompson introduced this month a restructuring plan that carved Yahoo into three areas, one focused on consumers, another on regional advertising and the third on the company’s technology assets. Online retail would be a big part of the consumer division and the company planned to continue focusing on such areas as travel and shopping. Asked what he planned to do different in the restructuring, Thompson gave a vague answer of making better use of data, traffic, advertisers and “the next-generation experiences that we can build.” Beyond, that Thompson said details would be announced during the current quarter.
Yahoo’s first-quarter results marked the company’s first sales increase in more than three years. Total revenue after traffic acquisition costs rose 1.2 percent to $1.22 billion. Revenue from search ads rose 7.6 percent, while the company’s core display-ad business fell 3.6 percent. By comparison, Google’s ad revenue rose 24 percent, while the online ad market as a whole increased 23 percent.
The job cuts and other cost-reducing measures helped Yahoo earnings. Net income rose 28 percent to $286.3 million from $223 million the same period a year ago.
For the current quarter, Yahoo said revenue would be from $1.03 billion to $1.14 billion