Sales Force Turnover Blamed for Yahoo!’s Slip in Display Revenue Growth

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ADOTAS – Apparently on top of its search revenue woes, Yahoo! has also fallen on tough display times. Yahoo display revenue grew only 5% to $467 million vs. 10% in the previous quarter. While display in the EMEA and APAC regions were  up 27% and 20%, the Americas region was flat, with U.S. Display taking a dive. On the plus side, consumer engagement with ads was up.

Yahoo! believes it has found the culprit for the quarter’s lackluster U.S. sales, which started softening in June soon after Yahoo!’s Investor Day meeting. At that get-together, Yahoo! announced and executed a rehaul of its U.S. sales organization structure, which included changes in leadership and huge turnover at the field sales level — far bigger turnover than the company was expecting.

“[W]ithout our sales force operating at full capacity, many of the ad units we would typically sell on a guaranteed or premium basis were, instead, run through the exchange as nonpremium inventory at far lower prices,” said CFO Timothy Morse on the conference call.

In particular, Morse noted that guaranteed placements on Yahoo!’s primest real estate, the homepage, were way down in the second quarter compared to the prior year.

However, display advertisers looking to buy premium Yahoo! inventory for cheap through the Right Media Exchange may have missed their chance as CEO Carol Bartz said that the sales ranks refilled these positions with a lot of new sales hires (Yahoo! doesn’t just lay off people?) and that Yahoo! is planning to build an even larger salesforce, armed with better tools and training.

“With our massive user base, too often it was easy to fall back on pitching Yahoo!’s huge reach and scale,” Bartz said. “But selling on reach and scale alone leaves meaningful revenue opportunities on the table. We need a sales organization that can craft customized solutions and creative executions because this is what distinguishes Yahoo! from our competitors in display.”

Third quarter guidance estimated flat display revenue to account for hiring and training efforts for the sales force, also signaling that Yahoo! will not meet its 13% to 16% long-term display growth target for 2011. Bartz said the company is “committed to getting back into that range next year.”

Once the ace in Yahoo’s advertising hole, it appears both Facebook and Google will bring in more display revenue this year than the beleaguered portal. However, that’s fitting for the repeated theme of the Yahoo! saga: caught in a constant state of organizational flux, the promised turnaround is always around the corner… But why does it feel like the corner keeps shifting further away?

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