Yahoo's Q4 Report Hints at Mobile Strategy
Yahoo's turnaround story under CEO Marissa Mayer continued with a stronger-than-expected fourth quarter earnings report. While search revenue showed unexpected growth, the key to long-term health and a return to stability still hinges on mobile ads, products and services.
A boost in search revenue helped Yahoo beat expectations on its Q4 earnings report released Monday, even though display advertising revenue fell.
The company reported net income of $272.3 million, or 23 cents per share, down from the $295.6 million, or 24 cents per share that it reported the same time a year ago. Yahoo said revenue was up 2 percent to $1.35 billion from the same time in 2011.
Yahoo's search revenue was $482 million on the quarter, a 4 percent rise compared to the $465 million it brought in a year before. That uptick was offset by losses in display advertising. Display ad revenue minus traffic acquisition costs was $520 million, down 5 percent from the same time a year earlier. The number of ads sold was also down, dipping 10 percent year-over-year.
Yahoo's earnings report comes six months into chief executive Marissa Mayer's tenure at the company, which now has its fifth CEO in as many years. Investors hope she can help the Internet pioneer regain its place as an industry leader, despite competition from tech giants Google and Facebook.
g During her brief leadership, she has begun improvements to Yahoo's e-mail product and Flickr photo service, signed distribution and branding deals with NBC and CBS and acquired mobile apps developers Stamped and OnTheAir as part of a bigger push for a greater mobile presence.
"The company is beginning to articulate some aspects of what might be its corporate strategy," Brian Wieser, analyst at Pivotal Research Group, told the E-Commerce Times.
Yahoo did not respond to the E-Commerce Times' requests for further details.
Keeping Search Momentum Going
Yahoo's search boost was a bright spot for the company this quarter, said Greg Sterling, founder of Sterling Market Intelligence.
"Yahoo's uptick in search revenue was surprising considering that it has been consistently losing market share over time," he told the E-Commerce Times. "Yahoo can improve search revenue if it attends to the user interface and user experience of search on the site. But without a gain in market share and audience, the opportunity is limited."
Taking advantage of that opportunity means keeping search growth momentum will be critical going forward, considering Yahoo's competition in that space.
"Search is clearly a bright spot for Yahoo presently, although our primary concern with this business is how long the company can sustain recent levels of growth given Google's ongoing dominance of the sector," Weiser pointed out.
The Keys to Going Mobile
Mayer said in the conference call that no one company has quite figured out the best way to win the relatively new mobile space, giving Yahoo a huge opportunity to experiment with innovative product ideas.
She also told analysts and the media that her team at Yahoo is working on building out many of its traditional products such as e-mail and its home page in the hopes of attracting more eyeballs and ads to the site.
Capitalizing on monetization opportunities in the mobile space is one way the company can raise both display ad and search revenue, said Gordon Owens, digital marketing professional at GO Digital WSI.
"Ads are rarely targeted simply because there aren't enough ads in the network," Owens told the E-Commerce Times. "Yahoo has an opportunity to do something different and creative to gain mobile market share from Google. They could use new technology to create a mobile ad network accessible to businesses of all sizes and controlled by the user's preferences."
Yahoo also has opportunities to increase its mobile search presence and revenue, said Sterling.
"In mobile, by improving its suite of apps and its mobile websites and by embedding search in each of those products, Yahoo can grow mobile search revenues and develop an audience," he said. "With smart execution and consistent attention to the user experience, as well as by integrating a search box into all its mobile sites and apps, Yahoo can carve out some mobile usage."
Given its current challengers in the space, however, any mobile pursuits must be part of a long-term initiative.
"It's unlikely that over the near-term Yahoo, as a stand-along search engine, can do much to dent Google's roughly 95 percent search market share from the mobile browser," Sterling noted.