YHOO Conf Call: Thompson Outlines ‘Six Points’ of Strategy

Following Yahoo!’s (YHOO) report this afternoon of Q1 results that beat expectations and a Q2 revenue forecast that topped expectations as well, CEO Scott Thompson said he was encouraged by the quarter’s 1% growth in revenue, year over year, which he noted was the first quarter of revenue growth since Q3 of 2008.

Thompson said he was “not satisfied,” however, with that pace of growth and won’t be until “we’re growing at least in line with the market.”

The company’s search advertising revenue was ahead of Yahoo!’s own projections, noted Thompson, driven by changes the company made to the “search experience” to produce greater click-throughs. Thompson said that the alliance with Microsoft (MSFT), which has technical responsibility for search, is not yet delivering what Yahoo! expects.

“I’m personally working with Microsoft to ensure the alliance does deliver going forward,” said Thompson.

Results in display advertising revenue, which fell 4%, year over year, were disappointing, he said.

“Our display business is nowhere close to where it needs to be in any of our three regions,” said Thompson.

CFO Tim Morse noted that the company’s operating margin, excluding “traffic acquisition costs,” or TAC, was 16%, 3.5 percentage points ahead of the midpoint company’s own forecast.

Morse said Yahoo! aimed to hit a minimum operating margin of 25% “over the next few quarters.”

Turning to strategy, Thompson said it was important for Yahoo! to define what it would not do as much as what it will do, and he said he’d come up with six points the company will follow, which included shelving some projects to return focus to Yahoo!’s “core” properties:

We’re consolidating technology platforms and shutting down or transitioning roughly 50 properties that don’t contribute meaningfully to engagement or revenue. Second, we’re clearly defining our core media, connections, and commerce businesses including news, finance, sports, entertainment, mail, and a handful of others. Those properties that generate the majority of our engagement and revenue. Third, we’re moving engineers into our commerce businesses to put them closer to our users and dedicating some of our best and brightest Yahoos to meaningful innovation in those core businesses. Fourth, we’re accelerating the deployment of the platforms and technologies we’ve built to make each of our properties more scalable, nimble, and flexible and there for less costly and time consuming to run. Fifth, we’re making better use of Yahoo’s vast data to personalize user experiences and dramatically improve advertiser ROI. Sixth, we’re refocusing our R & D on Owned and Operated properties and stopping development of a number of initiatives including platforms for outside publishers and theoretical science that were outside of our core. All of this puts us in a position to achieve the most important objectives which is to produce clear, measurable results for our advertisers, including genuine insights from our vast data so that they can see real ROI, really understanding our advertisers needs will position Yahoo to better monetize all of our traffic globally.