Yahoo Europe’s Emmanuel Frantz

The internet service provider's European CFO discusses budgeting in the downturn.

As Yahoo says hello to its new CEO Carol Bartz, former chief executive of software house Autodesk, and goodbye to Blake Jorgensen, group CFO since 2007, the finance team at the $7.2 billion (€5.3 billion) US internet service company must not miss a beat. Amid those internal changes, the economic downturn, stiff competition and an on-again-off-again takeover bid from Microsoft have made Emmanuel Frantz’s first year as CFO of Yahoo Europe eventful to say the least. The big concern is that, as in the last downturn, the portion of corporate marketing budgets going towards online advertising spending could shrink dramatically. So what is Yahoo’s plan of action? From his base in Switzerland, Frantz discusses not only how the Silicon Valley company intends to continue growing market share among advertisers and consumers alike on this side of the Atlantic, but also how Yahoo’s finance team is using an old planning tool to help the company reach new heights.

Yahoo’s new CEO talked about “re-energising” its European business at a recent conference. What does that mean? Despite good fundamentals, there are some concerns. Overall as a group, our share of audience time is shrinking. So far the new social networks have not succeeded in monetising their network as well as we do, but nevertheless they are competing for users’ attention. We are working to turn this around. If our audience time continues to fall, we won’t be able to optimise our monetisation, which means we will lose margin and this triggers a downward spiral.

But bear in mind that more than 550m people globally use Yahoo every month-that’s half of the total worldwide. As for Europe, more than 70m users are connecting to Yahoo daily, including more than 10m people visiting our news site, making us tied with the BBC as the number one online source for news.

One of the areas that Europe’s leadership team is focusing on involves advertisers. We’re working on new features that extend their control over where and when an ad is shown, including what time of day and what day of the week campaigns run, and what age and gender they would like to reach. We’re also promoting an “open” strategy-that is, the ability for consumers to add social functionalities on our home page to integrate content and services from third-party developers and publishers. Finally, there’s the mobile internet. Even in these tough times, companies still want to experiment on mobile technology. At the moment, Yahoo reaches 850m wireless subscribers through partnerships with 70 operators and equipment manufacturers worldwide. Those components are all part of a clear strategy of growing market share. Now we need to execute it.

But what an environment in which to be doing all that. How is Yahoo coping with the downturn? If you look at our annual results, you’ll see that revenue growth has slowed to 6%, while our operating cash flow margin has been eroding, and has been flat for the past three years. But typically of a very entrepreneurial internet startup, the costs have not slowed accordingly. Since the company began 14 years ago, it was always assumed that everyone just needed to come up with ways of spending money, because our revenue growth could afford that. That needs to change. Over the past few months, the company has had to take a deep breath and look at where and how we’re spending money.


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