Yahoo earnings live blog

The following is a record of a live report of Yahoo's conference call with financial analysts discussing the company's first-quarter results.

2:01 p.m. PDT: The call is getting started. For background, here's a link to Yahoo's financial results for the first quarter of 2008. To recap, Yahoo's net income was essentially flat, excluding a gain from its stake in business-to-business site Alibaba, but revenue excluding commissions paid to partners rose 14 percent to $1.532 billion.

2:02 p.m.: It's starting.

2:07 p.m.: Chief Executive Jerry Yang: "We are very proud of our first-quarter results...We are raising our cash flow guidance for the year."

2:09 p.m.: Yang adds, Yahoo's results "are all the more remarkable when you consider the environment and the uncertainty resulting from Microsoft's unsolicited proposal."

2:11 p.m.: Nothing much new on Microsoft's attempt to acquire Yahoo: "The board's decision to reject a proposal was based on our business and our plans," Yang said. "Our board and management team continue to be open to any and all alternatives," including a deal with Microsoft. The company is "exploring a number of strategic alternatives."

2:15 p.m.: There are uncertainties from the overall economy, but like Eric Schmidt at Google, Yahoo was bullish: "We have a diverse advertiser base and expect ad budgets will continue to move online. Targeting continues to get more attractive during (economic) softness.

"We are rapidly building out and differentiating our advertising network," Yang said. The company is adding to capabilities in video, mobile, search, and display ads.

2:18 p.m.: President Sue Decker said search has improved, including relevance scores that show how well ads match what searchers are looking for. "We've come from behind and closed the relevancy gap," she said. Citing various statistics, she added, "These are the most material gains in key numerical indicators...since five years ago."

2:19 p.m.: Yahoo stock is down 19 cents to $28.35 in after-hours trading.

2:23 p.m.: Video is getting more important. The launch of Flickr video earlier this month already "quadrupled video uploads by users across the entire Yahoo network," Decker said.

2:24 p.m.: Decker says Yahoo will be getting more personal: "Soon we'll begin testing content optimization capabilities on the home page."

2:30 p.m.: Lots of happy talk about display ads. Yang: "While we believe in search, our largest opportunity is in display. We have positioned ourselves to gain share in this huge opportunity." Decker: Yahoo is "on the verge of fundamentally changing the game" in the display-ad business.

2:32 p.m.: Decker has sweeping words for the company's position. "We are innovating more rapidly and effectively, delivering on our roadmap, expanding our partnerships, and receiving positive customer reviews."

2:39 p.m.: CFO Blake Jorgensen says the overall ad market in the first quarter was strong among advertisers in the automotive and consumer packaged goods areas. But there was "some softening" in finance, travel, and retail. And of online advertising in general, he said: "Advertisers' budgets may fall, but we believe the return on investment of online ads compared to other media may cushion the impact on our industry."

2:42 p.m.: Jorgensen: Yahoo's headcount dropped from 14,300 at the end of last year to 13,800. That includes 600 new hires, offset by the company's layoff.

2:49 p.m: Traffic acquisition costs (TAC)--the commission rates Yahoo pays to partners that host Yahoo ads--are up 4 percent because the company has to compete, Jorgensen said. "There is still upward pressure on TAC rates and (what we) pay partners as the competitive dynamics get more difficult," he said.

2:50 p.m.: Decker said things are doing well on user clicks on ads. "We're very pleased where we stand on click yield," which is ad coverage times click-through rate.

2:52 p.m.: Variable minimum bids have launched with a limited number of search keywords in the U.S. "We'll be rolling it out to larger markets outside the U.S. later this year and to emerging markets most likely next year," Decker said.

2:59 p.m.: The advertising weakness among finance, travel, and retail advertisers has meant slower growth or "modest declines," Decker said. The relative weakness hit both display and search ads. On the flip side, both types also stand to gain from online advantages, she said: "There are strong return-on-investment components that are very measurable in both search and display." In other words, advertisers can measure bang for their buck.

3:02 p.m.: "We did see very strong growth in paid clicks in the U.S. vs. the market," Decker said. Paid clicks are a very important measurement for search ads, both in terms of relevance and as a way to actually generate revenue.

3:04 p.m.: Asked if advertisers were spooked by the Microsoft offer, Yang said it was a relatively minor point. "We are watching the economy a lot more than the Microsoft uncertainty. It's hard to say (there was) any impact."

3:05 p.m.: Yang bids everybody adieu without any closing arguments or discussing the various elephants in the room--stay tuned for further thoughts on that point. So we'll close by mixing two of his earlier metaphors: "Our results this quarter demonstrate we are on the right track. We are pursuing the right strategy and it's beginning to bear fruit."