Yahoo Execs Tout Internet Advertising Boom

This home page is provided by Yahoo, of Yahoo co-founders David Filo, left, and Jerry Yang, right, Monday, May 15, 2006 at Yahoo headquarters in Sunnyvale, Calif. Internet powerhouse Yahoo! Inc. unveils the most extensive makeover of its front Web page in a decade, offering 402 million users more interactive features and more information compiled from the activity in other sections of its site. (AP Photo/Yahoo!) (Yahoo - AP)

SAN FRANCISCO -- Hoping to win back recently disillusioned investors, Yahoo Inc. assured stock market analysts Wednesday that it's poised to make more money off the Internet advertising boom and tighten its grip on the Web's largest audience.

Yahoo's top executives used their most extensive analyst meeting in two years to emphasize a variety of features that have been built to encourage its 402 million worldwide users to create and share content.

The Sunnyvale, Calif.-based company believes its community of faithful users, combined with a variety of tools for sharing photos and information, provides a significant advantage over its chief rivals, particularly Internet search leader Google Inc.

While promising to bolster the company's strengths, Yahoo's leaders also shared more details about changes aimed at its weaknesses in the lucrative field of distributing ads next to search results. Yahoo plans to introduce a new formula for picking out those ads in the final quarter of this year.

But Yahoo's improvements in this area aren't likely to boost the company's profits this year, said Chief Financial Officer Susan Decker, echoing remarks that she made a month ago. Decker estimated Yahoo's current share of the Internet's worldwide advertising market at 13 percent.

By Yahoo's own admission, Google has done a better job signing up advertisers to its search network and then determining which ads are most likely to be clicked on by Web surfers. Those clicks are crucial because they generate commissions for the search engines and their advertising partners.

Citigroup analyst Mark Mahaney estimates Google's click rates on search ads have been running at least 20 percent above Yahoo's.

Yahoo's shortcomings in search advertising have hindered its profit growth, contributing to a 23 percent decline in its stock price so far this year. It has wiped out $11 billion in shareholder wealth.

The company's shares dropped 86 cents Wednesday on the Nasdaq Stock Market to close at $30.11 _ just slightly above its 52-week low of $29.75. The shares have traded as high as $43.66 during the past year.

Despite the company's stock funk, Yahoo executives were overwhelmingly upbeat Wednesday.

"We feel more excited today and I feel more invigorated than ever before," said Yahoo Chairman Terry Semel, who has made more than $425 million cashing in his company stock options since becoming chief executive officer five years ago.

Dan Rosensweig, Yahoo's chief operating officer, said the company has formed much closer bonds with its audience than other major Web sites, making it easier to extend its reach into mobile computing devices and other opportunities.

"We don't feel like we have to shuck and jive to find new businesses," Rosensweig said.

Lloyd Braun, who oversees Yahoo's media group, said the company will continue its recent effort to develop more of its own content while continuing to license most of its material from other providers. Yahoo's internally produced content will be like "salt and pepper in the meal, not the meal itself," he said.

Braun provided a glimpse at an upcoming change to Yahoo's Internet-leading finance section to provide more interactive features to stock market charts. The changes appear to be similar to features that Google introduced when it unveiled its own finance section in March.

Yahoo expects the worldwide Internet audience to increase from about 1 billion users today to 1.75 billion in 2011, with much of the growth centered outside North America.

That makes international growth a top priority for Yahoo, which generated about 30 percent, or $470 million, of its first-quarter revenue outside the United States. International markets accounted for 42 percent, or about $945 million, of Google's first-quarter revenue.

Yahoo envisions spending on Internet ads to nearly double during the next four years, rising from a projected $31.9 billion worldwide this year to $54.9 billion in 2010.

"We are thinking long term," Semel said. "We are laying lots of seeds and trying lots of things."