Covering Yahoo’s second-quarter falter

Posting a quarterly profit isn’t enough for Yahoo CEO Marissa Mayer. The earnings coverage on Tuesday across the board called the results “faltering” and called into question her ability to turn the ailing Internet giant around.

Here’s the lead from Reuters:

Yahoo Inc trimmed its outlook for 2013 revenue after revealing a sharp 12 percent slide in ad prices in the second quarter, signs that CEO Marissa Mayer’s attempts to revive the struggling Internet giant may not produce quick results.

The company is now forecasting revenue of $4.45 billion to $4.55 billion this year, down from $4.5 billion to $4.6 billion previously. Yahoo also reported that second-quarter net revenue was down slightly at $1.071 billion, though it posted adjusted profit that was ahead of Wall Street targets.

Yahoo, in a novel post-results livestream akin to a TV newscast with Mayer and CFO Ken Goldman playing news anchors, acknowledged the pressure on prices but stressed that Yahoo was developing new ad formats and technology that would reverse the trend.

“We can do better in display, and this is going to be a clear focus for the business,” a relaxed Mayer said onscreen, referring to Yahoo’s display advertising business.

On Tuesday, the company reported a 12 percent slide in price-per-ad in the second quarter from a year earlier, outstripping the first quarter’s 2 percent decline.

The New York Times had this piece on Yahoo’s results, which had a similar tone and lead:

During her first year as chief executive of Yahoo, Marissa Mayer made big strides in changing the company’s culture. But reversing Yahoo’s declining revenue is turning out to be a far stiffer challenge.

The difficulty was underscored Tuesday, when Yahoo reported that revenue from the company’s two primary moneymakers — display and search advertising — fell sharply in the second quarter.

Since arriving from Google last summer, Ms. Mayer has reversed a decline in Internet traffic, and she has tried to improve employee morale by offering new smartphones and free food in the cafeteria. She also helped start a national debate about flexibility and efficiency in the workplace by ending Yahoo’s work-from-home policy. But perhaps more important, Ms. Mayer, 38, has shown that she can move quickly and decisively in executing her plan to improve the company’s fortunes.

“We have made real progress over the last year,” said Ms. Mayer, in a live webcast, emphasizing several products Yahoo released in that period, including new mobile apps, and a redesign for the home page and search. “The people are here. The engine is now up and running.”

Despite the slow ad sales, Yahoo reported that net income in the quarter rose 46 percent from the same period of 2012, to $331 million, or 30 cents a share, primarily on the growth in its investment holdings. Revenue over the same period fell 7 percent, to $1.14 billion, falling slightly short of Wall Street expectations and underscoring the company’s trouble with reviving growth in its core advertising business.

The Wall Street Journal also chose to highlight Mayer’s challenges as she works to right the company:

Yahoo Inc. chief Marissa Mayer delivered another mixed report card on her yearlong turnaround effort, showing a 46% jump in quarterly earnings for the Internet pioneer but continued revenue declines that underscore her challenges.

Ms. Mayer’s willingness to sacrifice immediate gains as she positions the company for future growth has led to the continued deterioration of its core business of selling online ads. Yahoo posted a second-quarter revenue drop of 7%, though the decline was just 1% when excluding Yahoo’s payouts to its business partners.

Yahoo’s display-ad revenue, which represents roughly 40% of the company’s sales, dropped 12% on declines in the number and prices of graphical and video ads. Search-ad revenue fell 9%.

By contrast, the U.S. online-advertising market grew by 15% last year, according to the Interactive Advertising Bureau, a trade group. Rivals such as Web-search giant Google Inc., social network Facebook Inc. and messaging service Twitter Inc. have been garnering an increasing share of marketers’ budgets while Yahoo’s growth has faltered.

Bloomberg chose to focus on the lowered revenue forecast:

Yahoo! Inc. (YHOO) gave a revenue forecast that fell short of analysts’ estimates as Chief Executive Officer Marissa Mayer puts more focus on building products than drumming up immediate sales at the largest U.S. Web portal.

Sales, excluding revenue passed to partner sites, will be $1.06 to $1.1 billion in the current quarter, Yahoo said on its website today. Analysts were projecting revenue of $1.12 billion, the average of estimates compiled by Bloomberg. Second-quarter sales fell 1 percent to $1.07 billion, also missing analysts’ $1.08 billion prediction.

Mayer, one year into her leadership of Yahoo, said on a call with analysts that she’s in the early stages of a turnaround centered on creating new products aimed at luring new users and advertisers from Google Inc. (GOOG) and Facebook Inc. (FB) While her efforts have added users, investors expecting revenue growth will have to be patient, said Paul Sweeney, an analyst at Bloomberg Industries.

So while Mayer is having a hard time attracting advertisers, their acquisitions are helping them make money – especially in Asia, according to the New York Times. She’s also gotten gains from acquisitions.

Employees also seem to be more optimistic. Yahoo, which is based in Sunnyvale, Calif., has had a notable decline in attrition, and 12 percent of new hires this year were returning Yahoo alumni. Of Ms. Mayer’s 17 acquisitions in the last year, most were to bring in more engineering talent for social, mobile, gaming and video products, she said.

The recent $1.1 billion acquisition of the popular microblogging site Tumblr has been the most prominent purchase, delivering a younger and more socially connected audience to Yahoo. But it has also generated skepticism as to whether Tumblr’s popularity can be turned into dollars. Other Yahoo purchases, like Qwiki, a New York based start-up that allows users to produce short videos on their phones, and Xobni, a Silicon Valley company that helps people more easily search mobile in-boxes, have brought Yahoo talent and technology in mobile and video — areas where Facebook and Google, the company’s rivals, have reported stronger advertising growth.

The deals also signal that Ms. Mayer is moving to compete in those areas. Yet in the earnings webcast she emphasized that investors would not see significant change in overall revenue from new and revitalized products until 2014.

Mayer’s high profile and the many profiles written about her turnaround strategy make earnings even more important for business journalists. Her strategy is for the long-term, but many shareholders and analysts are looking for the short-term proof that something is going right at Yahoo. Here’s to holding her accountable for her media tour and her plans to make the company profitable for the next few years.