Yahoo! Inc.'s (Nasdaq: YHOO) second quarter results confirm the company's status as one of the Internet's 800-pound gorillas. That's not news, but what is surprising is how much Yahoo's international properties are contributing to the company's success.
Yahoo properties such as Yahoo Japan are now almost contributing 10 percent of the company's revenue, which came in at a lofty $115 million. Most analysts were expecting revenue of $103 million. Yahoo also handily beat estimates with operating earnings of 11 cents a share.
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When pressed, Yahoo officials said the better-than-expected revenue total could partly be attributed to success overseas. Yahoo is grabbing market share abroad as it launches sites in new territories such as Brazil. Yahoo now owns and operates 19 geographic services around the world in 12 languages.
International advertisers are roughly a year behind their U.S. counterparts when it comes to spending, but when they do get Web fever they are likely to go to Yahoo.
Yahoo Japan's traffic increased to more than 22 million page views per day during June, up from 17 million a day in March. Yahoo had 65 million registered users and delivered 310 million page views in June.
CEO Tim Koogle said that international traffic on Yahoo's home page and overseas subsidiaries now account for 30 percent of the company's traffic.
The scary part is that 30 percent from abroad isn't being counted in Yahoo's reach ranking, which is already at a whopping 59.7 percent, according to Media Metrix.
Koogle said Media Metrix reach ratings undercount users at work, focus too heavily on at home users, and don't have the proper sample sizes to measure reach on a global basis. Media Metrix reach figures are also focused on the U.S.
Koogle said Yahoo anticipates about half of its users will come from abroad. Local Yahoos in Japan, the U.K., France and Germany are either break even or posting a profit. And as Yahoo execs love to point out -- Yahoo owns and operates the subsidiaries. According to Koogle, Yahoo owns about 33 percent of Yahoo Japan, and 70 percent of its European sites. Softbank, which owns 70 percent of Ziff Davis, owns the remaining percentage of those international sites.
"We look at this as a huge opportunity," said Koogle.
In addition, Yahoo can be a more dominant e-commerce player abroad. In the U.S., Yahoo faces off with eBay Inc. (Nasdaq: EBAY) and Amazon.com Inc. (Nasdaq: AMZN) in the auction arena. Internationally, Yahoo has a wide open market.
Considering the majority of Yahoo's conference call was spent talking about the company's international sites, it's easy to see where Yahoo's future lies.
Mulling Yahoo's metrics
"It's not a surprise," he said. Mallett added that Geocities was a construction zone in the quarter with Yahoo's improvements not being completed until the second month of the quarter. Yahoo will talk Geocities up a bit more this quarter and see some synergies. Henry Blodget, an analyst with Merrill Lynch, was one of the few analysts that ventured a page view guess for Yahoo. He was dead on.
Yahoo added that there won't be a lot of heavy lifting when it comes to integrating Broadcast.com, which will run as a independent subsidiary. Geocities had a lot of overlap and had to be "right-sized."