Next: Part 2 »
Tom: Tim Koogle, thanks for joining us this weekend.
Koogle: Sure, my pleasure.
Tom: First quarter revenue and earnings are in, sales up 120% from last year in the same period. Earnings… I thought Internet companies didn't make any money, but Yahoo! turned in more than $63 million in earnings for the quarter and now is averaging more than 600 million page views per day in the month of March. Tim, I'm wondering from this first quarter report what it is you're most proud of?
Koogle: Wow, how long do you have? I'm actually pretty proud of the whole team here at Yahoo! It kind of starts with our global team here at the company, but in terms of results, I'm real proud of the base consumption. Our audience grew hugely in the quarter. We exceeded 145 million unique users worldwide during the month of March and that's up quite a bit from December. I think we were at 120 to 125 million in December. Just in the three months, we grew 20-25 million additional new users and consumed a lot more. As you pointed out, we're averaging 625 million page views per day average in March, that's up from 465 million in December.
Tom: I'm looking down at our numbers here at The Motley Fool -- we don't actually have the numbers, but 625 million page views per day, I think you guys are ahead of us.
Koogle: That's probably true, but if Mac runs for president, maybe your page views will increase.
Tom: Very good point.
Koogle: I'm also real proud of the growth in earnings. The first quarter is typically the least strong in the mainstream advertising world and we just powered right through that and increased quite substantially.
Tom: Congratulations. It was a great quarter. I'm wondering when you look back five, six, seven years in the development of the Internet and think about the competitive space that Yahoo!'s operated in, I'm wondering if you could share one or two reasons that you think Yahoo! has, I think it's fair to say, beaten Excite and Lycos, and Go.com and AltaVista -- all which may have attractive services but none of which is of the size or scope or has developed the brand that Yahoo! has. What are one or two reasons that you've been able to pull in first by such a large margin?
Koogle: It's always a combination of things. I think from the beginning we had the right strategy, and by that strategy, we identified one key thing that has served us really well all along which was branding. When we started our business, we thought about it, I think, correctly and differently from all of those folks that you just named. We always thought of it as a consumer-based franchise and a type of media business from the very beginning, so branding, content, and distribution always mattered. We built a strong brand. We've never diverted from that and a whole bunch of other parts to the strategy that were quite different, and we also have never had to change because I think we had it correctly from the beginning.
The rest of it is execution. We've got a really good team. We focused on establishing our culture here, the right infrastructure for managing the business, and growing it aggressively. And one final thing -- we correctly surmised that this could be a quite large and quite global business, and we began executing on a global basis the direct operational presence very early in the company's life and very early in the market cycle and that's serving us really well right now.
Tom: Tim, you were just mentioning the business culture at Yahoo! I'm wondering if you could describe briefly how that may differ from a more industrial- or manufacturing-based business model. What is it about Yahoo!'s culture? Is it very hierarchical? Is it dress-down casual? Can anyone e-mail anyone at any point in time? How is Yahoo! different as a company?
Koogle: There are different aspects to talk about here. One of them is kind of structural in reporting relationships kind of all bundled up in one and it's not hierarchical. We do have a structure in the company because you need a structure to have some order on things, but it's a pretty flat organization. We've always run very flat and what that means is all of our plates are super, super full all the time, but the great thing about it is that we make decisions on a distributed basis here at the company.
We get real clear about what we're going to do -- not necessarily how -- so we've got a focused strategy. But then we drive decisions out to the organization and that's real different from kind of past generations of business if you will, that were very hierarchical where most of the decisions had to flow up through the chain and flow all the way back down the chain. Here we actually do distribute the decisions out to everyone who's got authority to build great product and great service. But what it means is you're making a lot of decisions in parallel and what that means is you can execute faster and that's a real key in our environment because it's growing real fast, changing all the time, and there is a lot of competition.
David: Tim, sometimes on the show we play a game called "What Went Wrong," and what we'll do is introduce a company name, usually a very successful company, and then we pretend to fast forward it 10 years into the future and for some reason that company's market cap is a small percentage of what it is today and then we say "What went wrong? What could have possibly gone wrong?" So just for the fun of it -- Yahoo! is worth about $80 billion today -- let's pretend 10 years from now, Yahoo!'s worth $10 billion. What would have to go wrong to make something like that happen?
Koogle: Oh, my goodness. Some things that I don't think will happen.
David: I'm sure that's the case. In other words, is Yahoo! an unstoppable machine? Can nothing go wrong? What are the risks?
Koogle: Oh no, it's not unstoppable. No company in the whole world is. Things change all the time. I mean, as you grow in scale, you face a different competitive set and you have to morph with available technology and everything else. We stay real paranoid around here, believe me, and I think we take nothing for granted and every company in the world would be better served if they took that kind of attitude. So, I don't know -- standard execution. We're very passionate about this thing. We've got our eyes on the ball, hands on the wheel, and all those sorts of things. Base things apart from the market tanking itself. The market tanks itself -- we don't have any control over that and that's exactly the way we think about it. We're focused on building the best, strongest, most profitable, and largest business we can here, so I think it always comes down to execution.
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