Yahoo! 3rd Quarter Results Lead to Panama

Yahoo! released a disappointing 3rd quarter financial report Tuesday. According to the report, Yahoo!’s total revenues rose 19% over the same period last year but it’s net income dropped by almost $95 million.

Yahoo! Chief Terry Semel expressed his concern over a 37% drop in Yahoo!’s 3rd quarter profits bluntly stating, “I am not satisfied with our third quarter financial performance.”

Semel’s comments came as part of a speech he delivered at the start of an open conference call with financial analysts and media. Blaming an overall slowing in online corporate advertising, Semel notes that a few of Yahoo!’s largest clients had redirected or limited their ad spending, “… because of their own business issues.”

Some of those issues might stem from corporate testing of new and improved opportunities offered by social networking sites MySpace, YouTube and Facebook, using ad-budgets that would otherwise be directed to Yahoo!. “The market is going through a significant transition with new forms of inventory becoming available from a range of new and established competitors,” Semel said.

While they clearly retain the number two place in the business of paid search advertising, the meteoric rises in quarterly results investors have become accustomed to seeing, are likely a thing of the past. The way the numbers play out, it appears Yahoo! is spending far more than Google is on the cost of acquiring and retaining advertising clients.

To brighten the outlook among its investors and advertisers, Yahoo! used the occasion to announce an earlier than expected launch of their long awaited paid ad-platform upgrade, Panama. Yahoo hopes Panama will make it easier to establish and direct paid search marketing campaigns, giving it advantages similar to those enjoyed by Google AdWords.

Panama will be rolled out on a market-by-market basis in the US starting immediately. As a courtesy to online retailers, Yahoo! will not force advertisers into the new system until after end of the holiday season.

According to a statement released by Yahoo!, “This marks a significant turning point in our efforts to deliver additional value for advertisers, helping them better manage their campaigns to realize increased returns. In addition, we believe that through this platform, we will be able to unlock the full potential of our large global user base and improve our search monetization capabilities.”

A small number of well known search marketers were invited to Yahoo!’ Search Marketing’s Los Angeles offices to get an early look at the Panama platform. Here are links to a few reviews from, Andrew Goodman (Traffick), Barry Schwartz (SERoundTable), and Greg Sterling (Screenwerk). Loren Baker from SearchEngineJournal is running a long story on Panama with numerous screen shots.

Yahoo! has experienced a difficult year thus far but Semel closed his comments pledging to, “… close the gap in the monetization of search”, “… expand Yahoo!”s lead in graphical advertising, and concentrate on “… social, video and local search” opportunities.