Yahoo is expected to report a quarterly profit of 11 cents a share on $497.9 million in revenue for the period ending March 31, according to consensus estimates from Thomson First Call.
Yahoo reports revenue excluding traffic acquisition costs (TAC), which refers to the percentage of revenue it shares with third parties that display paid search ads from its Overture Services subsidiary.
The practice has come under criticism from some Wall Street analysts who believe that TAC clouds Yahoo’s true financial health. Yahoo said TAC-less revenue is a more accurate portrait of its overall business.
Analysts are not expecting any drastic changes at Yahoo and predict continued revenue and profitability growth, fueled by paid search and online advertising.
“I don’t foresee paid search having too much downward pressure,” said Martin Pyykkonen, an equity analyst at Junco Partners. “I’m expecting it to be up year over year.”
Yahoo CEO Terry Semel said search continued to be the company’s main priority in 2004, helped by last year’s acquisition of Overture and the integration of search technology provider Inktomi.
Most of Yahoo’s moves were prompted by heightened competition against popular search engine Google, which is beginning to look more like Yahoo. Google once powered Yahoo’s algorithmic search engine, but Yahoo dropped Google in February and replaced it with its own technology.
Last week, word leaked that Google is planning to launch its own free e-mail service called “Gmail,” which will offer people a gigabyte of storage. Yahoo offers 4 megabytes of storage and then requires people to pay a yearly fee for extra memory.
The company’s premium e-mail is folded into a larger business of paid services, which includes fantasy sports, online personals and its broadband partnership with SBC Communications.
In the fourth quarter of 2003, Yahoo reported $62 million in paid services revenue, most of it stemming from its SBC deal.
Yahoo is also expected to show some gains in its listing business, which is primarily comprised of its HotJobs subsidiary.