Yahoo Earnings: Fair to Good

Yahoo announced its earnings after hours today, profits were inline with analysts expectations and revenues were a bit higher than expectations. The stock sank a bit in after hours trading, apparently on concerns over TAC (traffic acquisition costs) – a metric that is a relatively new concept for Yahoo. Overture, which as we all know was purchased by Yahoo late last year, lives in the world of TAC – the costs associated with splitting advertising revenue between the ad service (Overture) and the portal (Yahoo). Increasingly, Overture was in a no win situation, as it had to give more and more of its margin up to its partners. Now Yahoo is in the same business, and analysts, used to pure revenues, have to grok Overture’s more complicated model. A good summary of this is in Jim Hu’s Cnet piece posted yesterday.