Barring some explosive revelation, Carol Bartz is out as CEO of Yahoo (NSDQ: YHOO) because she couldn’t show any way up. During the Q2 earnings call, Bartz had to admit that at a time when others were seeing improvements, Yahoo’s U.S. display ad dollars were down—and warned investors to expect a flat Q3.
Though Yahoo’s display advertising revenue in total was up 5 percent to $467 million in Q2 results, that was less than analysts anticipated. In response, Bartz told analysts that she was not “happy,” and also expressed some surprise. She pleaded for a time, saying the company was reorganizing its sales force and planning new products that she said would lead to improved gains. (The call came just weeks after a shareholder meeting where Roy Bostock, the chairman of Yahoo’s board, backed Bartz.)
Analysts suggest Yahoo is facing difficult trends that will only deepen its display decline. Yahoo’s share of the U.S. display ad market is projected to fell to 13.1 percent this year compared to 14.4 percent in 2010, according to eMarketer. While it’s tempting to blame the weakening economy for the slight drop in Yahoo’s hold on display, the overall U.S. display market is expected to jump 24.5 percent to $12.33 billion in 2011, up from $9.91 billion in 2010, eMarketer notes—substantially higher gains than Yahoo’s display business has seen in recent quarters.
Yahoo’s core problem is that there are more competitors capturing display’s share. Where once it was focused primarily on search, Google’s display moves are paying off after three years. The search giant will reach $1 billion for the first time in 2011, as the company’s share of overall US display revenues grows to 9.3 percent, eMarketer estimates, from an 8.6 percent share in 2010.
At the same time, Facebook’s portion of U.S. online display ad revenues is projected to grow to 17.7 percent in 2011, up from a 12.2 percent share last year.
In many ways, Yahoo faces the same problems as AOL (NYSE: AOL). For years, analysts have talked about the decline of portals, as users have chosen to spend more time on sites that are more customized to their interests as opposed to destinations that attempt to reach a more general audience.
Yahoo has made moves to build up its ad exchange business, but with less than 15 percent of online advertising being funneled through real-time bidding platforms, that’s not enough to pick up the slack that Yahoo has lost.
That’s not to say that Yahoo’s display sales are drying up completely. Agreements from companies like Gannett (NYSE: GCI) and Belo to have Yahoo support their local ad sales efforts is an crucial vote of confidence in the value of Yahoo’s ability to target consumers. Despite those deals, marketers’ wider display plans favor Yahoo’s rivals at this point.
It didn’t help that Bartz was hired because of her management background, not her advertising acumen or experience. Maybe that’s one mistake they won’t make twice.