Yahoo’s Bartz: Sales Reorg Hurt Display Ads

Shares slip in aftermarket on 5 percent revenue drop

Another quarter, another less-than-stellar report from Yahoo.

While executives at Apple spent Tuesday afternoon blowing away analysts with reports of yet another record-breaking performance, Yahoo CEO Carol Bartz and CFO Tim Morse used their quarterly conference call to explain why they were reporting a mixed bag of “good,” “encouraging,” and “unsatisfactory” results.

While the company said net earnings per diluted share were up 18 percent to $0.18, compared to $0.15 in the second quarter of 2010, they said revenue fell 5 percent from the second quarter of 2010 to $1.08 billion. In after-hours trading, the stock dropped about 2 percent to $14.29.

On the call, Bartz said the company made progress in search and engagement on its media properties, but took some hits in U.S. display ad revenue.

“Obviously, I’m not happy about our U.S. display ad performance,” she said.

The executives said the issue was not about changes in the competitive landscape, the economy, or engagement, but about comprehensive changes to the company’s sales leadership, organizational structure, and overall sales force.

“Our U.S. sales force is under transition and we simply didn’t have appropriate coverage to close Q2 [as we planned],” said Morse.

Instead of getting salespeople face to face with top-tier clients to close the biggest deals, Bartz said some premium ad units were sold through its ad exchange, as non-premium inventory at lower prices.

But while the company underestimated the effects of the sales reorg, she said Yahoo’s sales team is staffed back to where they were six months ago. When asked when the company expects to restore sales productivity, Bartz said “six months” is the minimum of being able to carry a full book of business.

On a more positive note, Bartz said that where Yahoo has strong relationships with advertisers, they’re hearing good things about the new way they’re pitching and delivering ad packages.

“[We’ve] substantially changed the way we sell,” Bartz said. Instead of just talking up Yahoo’s reach and scale, she said they’re pitching more creative, customized, multi-platform ad solutions.

“It’s much more of a commercial experience now,” she said.

For Bartz the past few months have been rocky, amid whispers that Yahoo’s board is looking for a replacement and outright calls from investors asking for her resignation. On the call with analysts Tuesday, she struck an all-business, roll-up-your-sleeves type tone.

When pressed to explain why the company had not yet reached a written agreement with the China-based Alibaba over the company’s online payments arm Alipay, she said they’re working daily to negotiate the contract.

Despite the display setbacks, Bartz said the company is still talking about 7 to 10 percent growth next year.

Asked about rumors that Yahoo might buy Hulu, Bartz said she couldn’t comment but tacked on a “thanks for asking!”