Yahoo’s Search Revenue Is A "Disaster" (YHOO)


Yahoo’s tanking search revenue (down 19%) ruined what would have been an otherwise strong earnings report last night. 

Carol Bartz blamed sliding search revenue on Microsoft’s adCenter not delivering high enough revenue per search — her implication is that the ads aren’t as relevant as they were under Yahoo’s system, so users aren’t clicking on them as much.

Danny Sullivan, one of the smartest journalists watching the search business, took a long look at Bartz’s claim and Yahoo’s search business, and he thinks Bartz is too quick the place the blame at Microsoft’s feet.

He found that Yahoo’s search business was declining before the Microsoft deal. It has continued that decline at a steady rate — even if you subtract out the 12% that Yahoo pays Microsoft now that Bing is powering its search results.

Sullivan offers an alternate reason why revenue per search has continued to drop after the Microsoft deal: Bing offers better organic results than Yahoo did, so users are clicking on the actual search results and not relying as much on the ads.

Whatever the reason for the drop in Yahoo’s search, Sullivan calls it a “disaster,” and warns, “The search revenues need to reverse themselves, and quickly, for Yahoo to be convincing that the deal it hawked is really paying off. Otherwise, when 2012 rolls around, and those headwinds have finally slacked off, Yahoo might find it has slowed down to earning Blekko money.”

chart of the day, yahoo search revenues, april 2011

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By: Dr. Augustine Fou Thursday, April 28th, 2011 news

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