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Analysts hungry for information were looking for some meat in



conference call Tuesday evening. Instead, the Internet giant threw them only a bone.

Wall Street wanted a sense of how Yahoo!'s ad revenue was holding up, especially because many dot-coms that once placed tons of ads are now watching their cash levels. The figure also could provide a sense of how the Internet sector was faring.

But Yahoo!, traditionally a parsimonious company when it comes to information about customers and its financial outlook, stayed true to character. It budged only slightly to provide something beyond the steady diet of usage information -- page views, unique users and messages sent, for example -- it dispenses to the Street on a quarterly basis, offering two extraordinary nuggets.

New CFO Sue Decker allowed that 25% of the company's revenue comes from business services and international advertising -- two areas in which dot-coms play a negligible role. And, after careful scrutiny of the company's accounts, Yahoo! has determined that "financially questionable" clients -- not necessarily dot-coms -- account for less than 10% of the company's revenue going forward.

And that little bit of information may amount to even less than meets the eye. In an interview with

following the company's earnings call, Yahoo! Chief Operating Officer Jeff Mallett said his gut feeling was that the troubled-account estimate isn't significantly different from what the company would have come up with had it done the same calculation a year ago, thanks to Yahoo!'s traditional scrutiny of potential customers. "We're pretty anal and pretty tough on ourselves," he said. "We don't want to get caught short, either."

Whatever extra information Yahoo! was or wasn't dispensing, investors were taking it well. With the company reporting $270 million in revenue for the quarter -- about $20 million above estimates -- and beating analysts'

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earnings estimates, Yahoo's stock

rocketed in after-hours trading.

Over a longer haul, two major questions remain for Internet stock investors and Yahoo! shareholders in particular. One is how the rest of the Internet companies dependent on consumer advertising and commerce will do in this earnings season. The second is whether Yahoo! will be able to maintain the torrid growth rate implied by the company's lofty stock price, the

subject of several recent sell-side reports.

The answer to either question isn't immediately apparent.

Extrapolating from Yahoo!'s performance to the state of the online advertising business is problematic because it's increasingly apparent that Yahoo! is in a rarefied position shared by

America Online


and few, if any, other Net stocks. With advertisers drawn more and more to the largest media properties -- as they are in the off-line world -- the success of a company like Yahoo!, which reaches nearly two-thirds of U.S. Internet users, won't necessarily trickle down to your garden-variety pet-care site.

But in Mallet's estimation, one can draw two major generalizations from Yahoo!'s performance: "The value proposition of the Web as an advertising and transaction vehicle is not in question," he says. And, he adds, it's likely that industrywide advertising revenue will continue "2x-ing," as he puts it. "The pie continues to grow," he says.

Meanwhile, whether Yahoo! can continue its impressive growth as Internet usage shifts to new markets is also unclear. Yahoo! CEO Tim Koogle said the company is focusing on five different areas for future growth: global operations, commerce, rich media (e.g. streaming audio and video), business services and ubiquity (for example, accessing the Internet through wireless devices).

Mallett readily acknowledged that investors should be concerned about how Yahoo! manages the transition to wireless devices and the high-speed Internet. "There's challenges. I make no bones about it," he says. But he says he believes that no company is better equipped to meet those challenges than Yahoo!.