Yahoo gears up for the battle

Lisa Baertlein

SAN FRANCISCO: Yahoo Inc. is ready for the next round of online battles as the Internet media company expands overseas and takes aim at numerous rivals, including Web search leader Google Inc., Yahoo Chief Executive Terry Semel told analysts.

"Yahoo always continues to have competitors. Yahoo clearly is a leader on the Internet and intends to continue to be a leader on the Internet," said Semel, a former Hollywood studio head. He, in his three years at Yahoo has steered the company back to a leadership position after the dot-com bust and helped diversify its revenue stream with pay-for-use services.

Amid fierce competition with soon-to-be public Google, Yahoo has dubbed itself a "life engine" to reflect the breadth of its consumer offerings, including Web search, online dating, games, shopping, e-mail and broadband access.

In April, the Sunnyvale, California-based company delivered quarterly results that outpaced Wall Street's expectations. It also raised its sales outlook on strength in its advertising business, which contributes much of the company's revenue.

Semel told analysts that online ad spending was poised for rapid growth as advertisers, who are chafing over the rising cost of marketing to television's shrinking viewing population, will soon begin following audiences to the Internet.

Rising Web use also will fuel growth in the company's other main business, its premium services, he said.

"We are in the infancy of both of those businesses. The best is yet to come," said Semel, who boosted Yahoo's paid longer-term subscriber target to 15 million from 10 million without providing a time frame.

The company made no change to its previously raised 2004 forecast for revenue of $2.4 billion to $2.5 billion, excluding traffic acquisition costs Yahoo pays to distribution partners.

FOCUS ON INTERNATIONAL OPERATIONS

After rebuilding in the United States, Yahoo has turned its focus to international operations, which are expected to see revenue between $500 million and $550 million, that is more than double, by this year.

International operations contribute a smaller percentage of total revenue at Yahoo than at other Web companies like eBay Inc. Amazon.com and Google. As Yahoo's overseas efforts take hold, Chief Financial Officer Susan Decker said there was the potential for that part of the business to become more profitable.

At various times, Yahoo has locked horns with powerful rivals including Time Warner Inc.'s and Microsoft Corp.

Google, which stole the Web search market from Yahoo and other early innovators, has attacked with a planned free e-mail service with a gigabyte of storage to rival those from Yahoo and Microsoft's MSN, which are focusing on search and have Google in their cross hairs.

After investing more than $1 billion in Web search and being out of that market for several years, Yahoo said it now powers half of all searches in the United States and will continue the global roll-out of its search technology in 2004.

In a widely expected move, Yahoo this summer will start a phased introduction of enhanced e-mail services. Users of its free service will get 100 megabytes of storage, up from 4 megabytes currently. Paying users will get "virtually unlimited" storage in addition to other perks.

On other fronts, the company this year plans to introduce Yahoo Messenger to more than a dozen new market. It also plans to turn on its Overture search ad service in several countries, including Taiwan, where Yahoo is the No. 1 search provider and recently began charging users to list items on its auction site.

"All we want to do is win and it's the only thing that excites us," said Semel, who added that the company's management bench has expertise in all forms of media and everything that relates to the Internet.

"The better and the harder we're pushed the better we have performed," Semel said.

© Reuters