Yahoo! Inc - Weak Ad Market Results In Quarterly Losses, 2001

WEAK AD MARKET RESULTS IN QUARTERLY LOSSES (2001)

Further weakness in the online advertising market affected Yahoo!'s financial performance in 2001. Several stock analysts downgraded the company's stock at the beginning of the year. After a year-long slide, Yahoo!'s stock had lost 90 percent of its value. Profits for the first quarter were down 87 percent from a year ago, and second quarter losses of $48.5 million were accompanied by reduced earnings forecasts. In March chairman and CEO Tim Koogle gave up his CEO title but remained as chairman. Terry Semel, a former entertainment executive who was once co-CEO of Warner Bros., was hired as the new CEO. In April the company laid off 421 employees, some 12 percent of its 3,510 workers. Co-founder Jerry Yang noted that Yahoo! was in a transition from a period of tremendous growth to one of long-term growth in a volatile economy. To sustain that growth Yahoo! sought to balance its revenue from advertising, e-commerce, and services. One analyst speculated that Yahoo! would begin charging subscription fees for services such as multimedia content, enhanced financial services, and enhanced instant messaging.

In an effort to boost revenue and develop new revenue streams in 2001, Yahoo! Auctions began charging listing fees in January. In February it introduced a Sponsored Sites program for B2B and shopping, whereby paid listings would appear in some search results. Later in the year Yahoo! began charging U.S. customers for domestic voice calls made over the Internet as part of an updated version of Yahoo! Messenger. Yahoo! also expanded its B2B efforts by introducing three Industry Marketplaces for computer hardware, software, and electronics.

The addition of multimedia services also appeared to be a key part of Yahoo!'s plan to develop new revenue streams. The company began using streaming media to encourage online shopping on Yahoo! ShoppingVision and entered into a strategic relationship with ValueVision International, the third-largest home shopping network. Yahoo! also added video to its instant messaging service, which ranked third behind America Online and the Microsoft Network. Yahoo!'s $12 million acquisition of Launch.com added streaming music videos and music news as well as an Internet radio station. Yahoo! also entered into a wide-ranging agreement with Sony that included online movie marketing, e-commerce, and Web site development. For corporations, Yahoo! introduced Yahoo! Broadcast Services to give them Internet broadcasting capabilities for videoconferencing.

Despite its financial woes, Yahoo! continued to be one of the most popular Internet destination in 2001. In March it was the number one Internet property in terms of both page views and unique audience, ahead of such sites as eBay, Amazon.com, America Online, the Microsoft Network, and the Lycos Network. According to a mid-2001 study by Jupiter Media Metrix, Yahoo! was one of four Internet sites that accounted for more than half of all the time spent online by Internet users in the United States. With more than 192 million registered users as of mid-2001, Yahoo! had more people using its site than any other company.