Ads Down, Yahoo Expects a Hard Quarter

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"With the demand for online advertising continuing to fall, Yahoo has put much more emphasis on developing services for which businesses or consumers will pay fees. Indeed, revenue from such services increased 3 percent in the quarter, to $34 million, even as advertising revenue declined 11 percent, to $132 million."

We’re closely monitoring the transition to fee services, but Yahoo! has not been very aggressive in that field as of yet. Even worse, they tapped into their coffers this quarter: "Yahoo’s deferred revenue, essentially its backlog of business for the next two quarters, declined $10 million, to $110 million." Recognizing revenue more aggressively, as well as having decreasing recurring billings, is often a sign of worse things to come.

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