Yahoo (YHOO) Traffic Grinds to Halt: Fat Lady Singing?

JMP Securities analyst William Morrison takes a detailed look at Comscore's global traffic trends for the year through July.  He writes an excellent macro piece, with several important findings, including the latest horrendous news at Yahoo.

The only trend that train-wreck Yahoo had going for it--global user growth--is no longer going for it.  If the company can't reverse this trend in short order, its only hope will be to sell itself (our thesis, not Bill's). According to Comscore, Yahoo!'s global traffic and usage actually declined year over year.  Yahoo's few remaining shareholders have been clinging to the hope that no matter how pathetic its recent business execution, its global audience and usage would eventually bail it out.  Well, now it seems as though this hope, too, may have long been in vain.

Importantly, the traffic decline is not just for the site as a whole, and it's not just pageview-related.  (Yahoo explains away some of its slow pageview growth by pointing out that it now uses a lot of video and AJAX.)  Rather, it includes some of Yahoo's most important and most profitable properties...

Morrison:

Yahoo attracted total worldwide users of 476 million in July, down 1% annually.  Pageviews declined 7% in the period, and minutes spent were down 1%.  Annual usage at Yahoo Mail declined by 9%, at Yahoo Games by 47%, at Yahoo News by 6%, and Yahoo Sports by 11%. On the positive side, Yahoo Messenger grew by 36%...Yahoo Answers by an astounding 332%, and Flickr by 198%.   While [this is] promising...these areas are typically monetized at a fraction of the rate of Yahoo!'s premium content areas.

Short of saying "Comscore is wrong," it's impossible to put a positive spin on this.  In fact, it's an absolute disaster.  Perhaps the reason Jerry Yang doesn't plan to announce a significant restructuring when he finishes his 100-day review is because he's realized there's no reason to bother.

Comments

[Still Inside]

I have no reason to doubt Comscore's numbers, but in situations like this I'd personally like to follow the money, not the page views. The "we use AJAX" thing might be FUD from YHOO, but it might be very real. Numbers like this can easily be explained by Comscore's definitions of "pageview" not keeping up with technology.

Money, on the other hand, can't be faked (or rather if it can, we don't care). Does Comscore or anybody else have any corresponding drops in revenue for these specific properties?

The next question is, if YHOO is losing ground in these areas, where are the users going? Are they going somewhere else, or are they losing interest altogether? Certainly the answer to that can tell us whether to short YHOO or the whole sector...

SI

[johnmckinley]

It's a simple issue: we are starting to see a flattening out of the total PC-based internet engagement in each of the more mature online markets (the same markets where the lion's share of ad revenue comes from). Each new internet "hit" (e.g., YouTube, MySpace, FaceBook, etc.) is now a net loss by the traffic incumbents. As a scale player, you need to ask yourself honest questions about your real ability to organically manufacturer a steady stream of your own hits (noone by Google and the Facebook franchise-model have demonstrated any real traction there). If you can't create new experiences, then will you be better than the rest at identifying and acquiring new hits at an early-enough stage? If not, you will be relegated to investment banker-led auctions, and the non-GOOG/non-MSFT folk all have pretty limited ability to pay those kind of premiums on a regular basis. Tough sledding ahead, given the lofty multiples several of these players are still trading at. It is hard not to be a bear on the incumbents' prospects at this point.