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Chief Yahoo looks into future

CEO Tim Koogle shares his thoughts on how Yahoo can improve profitability.

SAN FRANCISCO--Although Yahoo (YHOO) surprised Wall Street last quarter by posting a $96,000 profit, it is still going to have to do better than that.

Yahoo CEO and president Tim Koogle is hard at work figuring out exactly how that's going to be done. Koogle appeared this week at the Robertson Stephens & Company Technology 97 conference to explain to the investment community how the company achieved its surprise profit for the fourth quarter ending December 31. In an interview with CNET after the event, he discussed how Yahoo is thinking about going even further in future.

Some of the ideas on the list--and Koogle stresses they are just ideas at this stage in the game--involve delving more deeply into e-commerce.

But Koogle is thinking about tweaking the company's business model in future. He said the company will launch as early as next quarter a new site that will provide a search engine to help customers find particular products or merchants. The site will generate revenue for Yahoo through advertising sales, he said.

Koogle says that this new site may eventually provide Yahoo with another source of revenue.

"If we bring enough value to merchants by bringing people to their sites, I would think they would be happy to pay us a portion of the transaction," he said. He added that Yahoo would wait until a commercial site had been running at least a year before proposing such a concept to merchants.

Koogle is also considering breaking off popular content areas within the Yahoo site into their own sites. Yahoo's stock-quote content area, for example, has generated two to three times the volume the company originally anticipated.

"Popular subject categories on the Yahoo site may ultimately be broken out into a specialty site," Koogle said.

Such sites could cost more to market, but Yahoo could charge more for advertising because the audience would be more defined.

With such plans under consideration, Koogle sounded a confident note this week about Yahoo's growth path. But he doesn't want investors to expect too much too soon.

"We continue to invest in the company and run a disciplined company...We're not expecting to achieve sustained profitability until early 1998," Koogle said. "We plan to run at a break-even rate through the year, but if our revenues are stronger than anticipated, then it'll drop to the bottom line."

Yahoo, which currently derives its revenues from advertising, may experience the same seasonality in its advertising revenues that publications encounter: a slower first quarter coming off the busy holiday push and a summer lull during the third quarter, Koogle said.

Yahoo, which turned a profit several quarters sooner than Wall Street had expected, reported net profits of $96,000 in its fourth quarter on revenues of $8.5 million. Its operating income broke even.