Yahoo! Pumps out Profits and Quells Boycott

Last week, Yahoo!, Inc. may have shown its critics that the company is not only capable of turning a profit, but also able to quell a customer revolt swiftly — before it got out of hand.

Yahoo! said profits before charges for the second quarter ended June 30th rose to $28.3 million (US$), or 11 cents per share, from a year ago’s profit before charges of $1.46 million, or 1 cent per share. Analysts were forecasting Yahoo! to earn 8 cents a share. However, the so-called “whisper number” discussed throughout the day was 11 cents per share.

In addition, revenues for the Santa Clara, California Internet portal more than doubled to $115.2 million from $44.9 million a year ago — surpassing many analysts expectations.

Yahoo!’s stock jumped nearly $6 per share in after-hours trading to $173 on the news. The company also announced that it registered an average of 310 million page views a day in June compared with an average of 235 million in March. Plus, it added more than 80 million unique users in June. This rise in page views reflected Yahoo!’s acquisition of Web site-housing company GeoCities for about $4.6 billion this earlier this year.

But the acquisition of GeoCities, a community Web site, hasn’t been trouble-free for Yahoo!

A potential firestorm

It was just two weeks ago, when unhappy users of GeoCities decided to call off their boycott of Yahoo!, according to the Wall Street Journal. Jim Townsend, an Internet-software developer who was one of the leaders of the boycott, posted a headline stating: “It’s over.”

“Overall I think they addressed all the concerns that the majority of us were boycotting over,” he said, adding that its new terms-of-service agreement is “clear, short and to the point.”

The controversy was fueled by Yahoo!’s imposition of its terms of service on GeoCities users, a step taken as part of the final integration of GeoCities into Yahoo!. Users objected to language in Yahoo!’s terms of service requiring them to grant to Yahoo! “the royalty-free, perpetual, irrevocable, nonexclusive and fully sublicenable right to use, reproduce, modify, adapt, publish, translate, and create derivative works” from their content.

Swift resolution

Two weeks ago, Yahoo! modified its terms of service by adding language that made it clear that the company didn’t want to claim ownership rights to content posted on its sites “unless we specifically tell you otherwise when you submit it.” The new agreement also states that Yahoo!’s claim on user content would end if users deleted their material from the site and further stated that Yahoo wouldn’t change the portion of the agreement dealing with claims on content use without notifying and getting acceptance from users.

Townsend said he was impressed with the speed in which Yahoo reacted to users’ concerns, it reacted “very quickly — much quicker that I would have thought possible.”

When you add this kind of agile management to the rising revenue and profits of Yahoo, it becomes clear that critics of the Internet pioneer may have greatly underestimated the company’s focus and potential. Perhaps its stock price is not as overpriced as some analysts claim. In fact, maybe the price really reflects a potential soon to be realized.