Yahoo’s Q2 earnings call is something of a judgement on Marissa Mayer’s first 12 months in the job – as she took over as CEO almost exactly a year ago – but the mixed picture shows that much of the hard work is still to be done.
GAAP revenue stood at $1.14bn (£750m), a seven per cent decrease on a year ago, but on a brighter note, profits increased by 46 per cent to $331m, largely as a result of Yahoo’s investment in Chinese eCommerce site, Alibaba. If you take revenues minus traffic acquisition costs (the money internet companies pay out to affiliates and other third parties who drive traffic to their sites), revenues are down just 1 per cent from $1.08bn to $1.07bn, and remain flat from the previous quarter. Yahoo’s display revenue was $472m, a 12 per cent decrease compared to a year ago, and search was down nine per cent to $418m.
Reacting to the results, Karsten Weide, IDC’s program VP of digital media and entertainment, told Mobile Marketing: “Yahoo‘s stock price has gone up by 70 per cent since Marissa Mayer took over, and that has made a lot of people happy. However, most of that growth was due the perceived value of Yahoo’s stake in Alibaba. Alibaba will soon go public, and people think it is going to send a lot of money Yahoo’s way, and theirs.
“In terms of Yahoo’s core business, not much has happened that would justify this increase in stock price. Display advertising has been weak lately. For one, that’s because a lot of display advertising now goes mobile, and Yahoo is weak on the mobile platform. For another, a lot of advertising agencies now want to buy advertising automatically and in this new, so-called “programmatic trading” segment, Yahoo is weak, while Google and Facebook are strong.”
Yahoo spent a net $1bn in cash for acquisitions during the period, $970m of this on Tumblr. Mayer counts eight buyouts, including Astrid, GoPollGo, MileWise, Loki Studios, Tumblr, Playerscale, Ghostbird and Rondee, plus Summly, although this closed late in Q1 and was announced in the previous earnings call. Eight of these had some mobile element to them, everything from the Summly news aggregator to Astrid’s popular productivity apps and location-aware gaming from Loki Studios.
“Generally, companies of their size are buying mobile start-ups – they need the talent, especially user interface and user experience, along with audience and ideas,” said Julie Ask, VP and principal analyst at Forrester. “Consumers’ time is increasingly spent on mobile devices – whether a phone or a tablet or other. Yahoo and others who depend on ad revenue need large, engaged audiences there – not only for growth, but also to maintain a revenue base.”
While six of these ‘acqui-hire’ companies have closed and been rolled into Yahoo’s mobile teams out of NYC and California, including putting Summly centre stage in the new Yahoo app, Tumblr and cross-platform back-end gaming service Playerscale have remained intact, with Astrid, which had 4m users in September last year, to remain in operation for 90 days from 1 May. Yahoo believes that the combination of Tumblr and Yahoo will grow its audience to more than 1bn monthly visitors. It reached 300m monthly mobile visitors in Q1.
Although a great deal has been made of Yahoo’s aggressive acquisition strategy, totalling 12 for the first half of this year, Google has actually made almost 150 acquisitions in its 12-year history, compared to Yahoo’s 83 in 16 years.
Marcos Sanchez, VP Global Corporate Communications at App Annie, was positive about the work being done to change Yahoo’s fortunes. “From all accounts, Mayer has been doing a great job of breathing life back in to Yahoo, from re-focusing, to improving company morale to revamping products with a definite mobile bent,” he said.
“The mobile products have been streamlined and she’s put a focus on usability, which is likely to be a contributing factor to the apps at least not losing ground. From an acquisition standpoint, don’t forget, there are many reasons for an acquisition, and not just for a technology. Mayer has proven savvy even here, shuttering some, keeping a few alive, but maintaining teams that are focused on bringing yahoo back to its’ glory days.”