Yahoo Reports Another Decline in Advertising

Is this a sign of things to come for the industry as google and others become harder to use awash with spam advertising? Yahoo reports a decline in advertising. Aivars Lode

Two years into Marissa Mayer's tenure at Yahoo Inc., YHOO +0.06% advertisers are still sitting on the sidelines.

Yahoo on Tuesday reported that its total revenue, minus commissions paid to partners for Web traffic, fell 3% in the second quarter, its fourth decline in the past five periods and below the company's estimates. Of particular concern, revenue from display ads, excluding the traffic costs, dropped 6.9% to $394 million.

"A transformation of this size will take several years," Ms. Mayer told analysts. "It will take a little longer than we originally forecasted."

That sentiment differs from Ms. Mayer's comments just three months ago, when she said the first quarter was "evidence we are on the right course." Those results—Yahoo's first revenue growth in more than a year—now appear to be a blip as Ms. Mayer struggles to persuade advertisers to shift their budgets from Google Inc. GOOGL -0.18% and Facebook Inc., FB +0.29% which command the bulk of the online and mobile ad markets.

Yahoo's shares fell 2.3% in after-hours trading to $34.78. Its market capitalization is about $35 billion.

The troubling progress report comes as Ms. Mayer needs advertisers most. Pressure on the chief executive is increasing as Alibaba Group Holding Ltd., the Chinese e-commerce company in which Yahoo owns a 23% stake, prepares to hold an initial public offering that will shift investor focus from that asset to Yahoo's stagnant core business.

Alibaba will give investors something to cheer about for the time being. Alibaba and Yahoo agreed to reduce the number of shares that Yahoo is required to sell at the IPO to 140 million shares from 208 million shares. That will give Yahoo less cash from the IPO but will allow it to hold on to shares that could increase in value as Alibaba grows. Yahoo will unload about 27% of its stake in Alibaba, rather than a previously planned 40%.

Alibaba's expected IPO valuation is a moving target. The e-commerce company last week valued itself at $130 billion ahead of the offering, but some Wall Street analysts valued the company at as much as $230 billion.

Yahoo's chief financial officer, Ken Goldman, said he expected the sale of Yahoo's Alibaba shares to be fully taxed and would return at least half of the proceeds to shareholders, though he didn't specify how.

B. Riley & Co. analyst Sameet Sinha estimated Yahoo's total stake in Alibaba is valued at about $38 billion. Assuming it pays a capital-gains tax of 35%, Yahoo would make about $6.7 billion in IPO proceeds, Mr. Sinha said. That would give shareholders more than $3 billion in the form of share buybacks or dividends.

The average price for Yahoo ads declined 24% in the second quarter—compared with a 5% drop three months earlier. The drop was a sign that Yahoo's new ad offerings, such as "in-stream" ads that appear in the center of sites such as Yahoo News and Yahoo Finance, aren't attracting much demand from advertisers.Regardless of the Alibaba outcome, Yahoo must find a way to turn around its advertising business before investors lose patience.

Ms. Mayer also said demand has dropped off for one particular type of ad, the FPAD, a small, square-like advertisement on its home page, which she plans to reconfigure and reprice.

More generally, advertisers are moving away from higher-priced, graphical banner ads that have been Yahoo's specialty. In their place, they are spending more on cheaper ads targeted to individual visitors, an area where Facebook and Google have excelled.

Ms. Mayer's reorganization of the company's executive ranks hasn't stopped the bleeding. The company's ad sales still declined in the wake of Ms. Mayer's firing of Henrique de Castro, her former operations chief and top liaison to the ad industry.

"It's remarkable how bad" ad revenue in the quarter was, said Brian Wieser, an analyst at Pivotal Research. "Such are the problems when there is no head of ad sales."

That job has been taken up by Ms. Mayer herself, who says she has recently gone on a listening tour meeting with more than 500 ad-industry executives representing more than 50 top brands. But she is still seen by some in such circles as a technologist out of touch with Madison Avenue. In one highly publicized incident, she arrived nearly two hours late for a meeting with top ad-agency executives in Cannes, France.

Yahoo has announced a bevy of new ad offerings—such as native ads, digital magazines and Web video shows—but marketers say Yahoo still lacks the popular appeal with consumers. "They all feel like 'could-be's' for brands, not big money bets," said Greg March, the CEO of ad agency Ikon3.

Yahoo reported second-quarter profit of $272.6 million, down from $335 million a year earlier.

—Mike Shields contributed to this article.

Environmentalists Denounce Repeal of Australia’s Carbon Tax

Australia repleals the carbon tax. Hmm, what do you think a backwards step on good enviromnetal stewardship or the elimination of a tax set will do to AL Gore's riches? Aivars Lode

By MICHELLE INNISJULY 17, 2014

SYDNEY, Australia — Opposition politicians and environmentalists in Australia reacted with dismay Thursday to the country’s repeal of laws requiring large companies to pay for carbon emissions, saying that it made Australia the first country to reverse progress on fighting climate change.

The Senate voted 39 to 32 on Thursday to repeal the so-called carbon tax after Prime Minister Tony Abbott’s conservative government secured the support of a number of independent senators. The House of Representatives had voted earlier in the week to repeal the unpopular measure, which has been a highly contentious issue in Australian politics for seven years.

The tax was devised to penalize hundreds of Australia’s biggest producers of carbon emissions, setting a price of 23 Australian dollars, or $21.50, per metric ton of carbon dioxide when it was put into effect in 2012 under then-Prime Minister Julia Gillard of the Labor Party, which is now in the opposition. The price rose to 25 Australian dollars this month.

Mr. Abbott, of the conservative Liberal Party, who took office in September, made repealing the tax a central pledge of his election campaign, arguing that ending it would reduce electricity prices and enhance economic growth. But he struggled twice to get the measure through the Senate before the vote Thursday. The government now plans to introduce a range of measures that it says will encourage business to reduce pollution, rather than penalizing polluters.

After the vote Thursday, Mr. Abbott characterized the tax as a “useless, destructive tax, which damaged jobs, which hurt families’ cost of living and which didn’t actually help the environment.” He called it a “9 percent impost on power prices, a $9 billion handbrake on our economy,” and said the repeal would save the average household 550 dollars a year.

Australia is among the world’s biggest producers of carbon emissions on a per capita basis. The government is committed to reducing emissions to 5 percent below levels recorded in 2000 by 2020.

Politicians from Labor and the smaller Greens party said the repeal would undermine Australia’s efforts to address climate change. The Labor leader, Bill Shorten, described Mr. Abbott as an “environmental vandal.”

“Today, Tony Abbott has made Australia the first country in the world to reverse action on climate change,” Mr. Shorten said. Christine Milne, a senator from Tasmania and leader of the Greens party, said, “History will judge Tony Abbott harshly for his denial of global warming and his undermining of Australia’s effort to address it.”

John Connor, chief executive of the Climate Institute, a Sydney-based advocacy group, said that some governments had pulled back from carbon reduction targets, including Japan after the Fukushima nuclear reactor disaster in 2011, but that “no one else in the world has repealed a working, functioning carbon pricing mechanism.”

“We are taking a monumentally reckless backward leap even as other countries are stepping up to climate action,” Mr. Connor said in an interview. He said that Australia is the highest per capita emitter of carbon in the Organization for Economic Cooperation and Development, the group of developed countries, and that it ranks in the top 20 globally, emitting around 25 metric tons of carbon dioxide per person every year. “Australia’s economy is much more carbon-intensive than the U.S. economy,” Mr. Connor said.

Mr. Abbott has said that the repeal will lead to lower energy costs for consumers. But Mr. Connor said that while Australian electricity prices have indeed risen, that was due in part to power companies investing in infrastructure. “The government effectively used the carbon tax as the scapegoat for higher energy costs,” he said.

But representatives of major industries, including agriculture and mining, said that the costs passed along to other businesses because of the emissions penalty were high. While the agriculture sector was exempt from directly paying the tax, its costs “hit Australian farmers every time they paid for essential electricity, fertilizer, chemicals and fuel supplies,” Brent Finlay, president of the National Farmers’ Federation, said in a statement.

Brendan Pearson, head of the Minerals Council of Australia, said in a statement that the removal of “the world’s biggest carbon tax is an important step towards regaining the competitive edge that Australia lost over the last decade.” The council estimated that the tax cost the mining industry 1.2 billion dollars per year.

A representative of independent grocers also applauded the repeal, saying that the cost of electricity and refrigerant gases had skyrocketed since the carbon tax was introduced. “A small, corner store operator will save about 17,000 Australian dollars a year,” said Jos de Bruin of Master Grocers Australia, which represents about 2,400 independent supermarkets.