Yahoo Planning To Cut 10% of Jobs on Profits Loss
by
on October 21, 2008,
Contrasting to Apple’s impressive results of the 4th quarter announced today, Yahoo has also announced results of its 3rd quarter - and these results are far from impressive with net revenue dropping by 64%.
In the 3rd quarter of 2008 Yahoo generated $54 million of net income which is definitely terrible compared to $151 million in the same period of 2007. Revenue in the 3rd quarter was at $1,8 billion which is still a 1% increase compared to the same period of 2007.
At that the company was doing pretty well in terms of product development and traffic. Among the highlights here are beta release of the homepage, promised major improvements for a number of Yahoo properties and recent release of Yahoo profiles as well.
But the problem was not in the existing and new products - it was mainly about advertising with Yahoo heavily relying on display advertising as a revenue stream. And while the overall usage of Yahoo sites was up (pageviews 17% higher than in the same period last year), the monetization of the traffic was low.
Of course Yahoo attributes the loss in profits to the general slowing down of the online advertising market. For Yahoo display advertising is quite predictably to blame. The most remarkable drop in the strength of display ads was noted in finance, auto, real estate, and travel - so while no surprises here, there was nothing Yahoo could do to improve the situation in revenue.
But obviously when you can not influence revenue, you should influence the costs. Of course when you announce the results this bad, you need to instantly offer the measures you are supposed to take to improve the situation. And the solution Jerry Yang offered was long expected: he first mentioned the planned 10% layoffs by the end of the year during the conference call and then confirmed it in an email to all employees. Given the current number of Yahoo employees at 14,300, this means that at least 1,430 people will be out of their Sunnyvale jobs this year. And of course further layoffs are possible next year.
This measure along with some other cost containment actions planned is supposed to help Yahoo cut its annual expenses of $3.9 billion by $400 million. Other measures include relocating operations, improving procurement, consolidating real estate, and standardizing its infrastructure.
To me it is good watching Yahoo determined to build a healthier company with a solid range of high-quality web products, healthy costs structure and operations with these efforts. And while 1,500 unemployed people is definitely no good, it will be interesting to see if such measure will actually help Yahoo survive the recession.
