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It's still way too early to say, but in today's third-quarter earnings report came a glimmer of hope. After many quarters of falling revenues, the long-struggling Internet company finally reported sales growth and a higher-than expected profit thanks partly to surging sales of mobile ads.
Mayer said in a statement that the company grossed more than $200 million in mobile revenues in the quarter, or about 17% of total revenues, and is on track to top $1.2 billion in mobile ad sales this year. That would be more than a quarter of total revenues of $4.3 billion that analysts expect. "We have invested deeply in mobile and we are seeing those investments pay off," Mayer said in a statement. "Not only are our mobile products attracting praise and engagement from users and industry awards, they are generating meaningful revenue for Yahoo."
Yahoo reported a much higher-than-expected profit of 52 cents a share before stock compensation costs and subtracting $6.3 billion in proceeds from the sale of shares of China's Alibaba, up from 34 cents a year ago. That's far higher than the 30-cent profit Wall Street had expected. What's more, revenues after subtracting payments to website partners for traffic rose 1.5%, to $1.09 billion. Analysts had forecast a 3% decline.
Still, it wasn't entirely clear initially how Yahoo managed that 52-cent profit, because operating profits fell 10%, to $156 million. Update: It looks as if that upside may have come not from the core business but two items in the income statement's "other" category. One is a onetime $20 million patent-related payment, and the other is increased revenues from a "technology and intellectual property license agreement" known as TIPLA, under which Alibaba pays pay Yahoo a percentage of its revenue.
Also unclear: how much of the mobile revenues were from search and how much were from display. Update: Chief Financial Officer Ken Goldman said during the earnings call that mobile search ad revenue is "somewhat higher" than display and is growing faster than mobile display.
At least initially, investors liked what they saw. After shares rose 2.3% in trading today, they rose about 2.5% more in initial after-hours trading following the earnings report.
Mobile didn't appear to account for all the upside revenue surprise, however. Search ad revenues rose 6% to $450 million before traffic acquisition costs.
But despite the mobile momentum, revenues in Yahoo's mainstay display ads continued to plummet. Display sales before traffic acquisition costs fell 6% to $396 million as ad prices spiraled down 24%.
During the earnings webcast, Mayer said native ads, or ads that appear in the stream of news on Yahoo's pages, have reached $80 million in revenues per quarter. It was not clear how much of those ads were on the desktop vs. mobile devices.
Yahoo's decline had prompted investors to put more pressure on Mayer, who joined in July 2012 from
On the earnings webcast, Mayer was expected to provide more details on her turnaround plans, in particular the use of proceeds from selling part of its stake in Alibaba to make one or more marquee acquisitions, though details were not much more forthcoming than in previous quarters. She was reported by TechCrunch to be interested in buying video advertising firm BrightRoll for between $500 million and $1 billion, but obviously before any potential announcement, she didn't talk about that either. But Mayer did have some new stats and plans to share:
* Mayer is focusing in a big way on mobile. She cited 550 million monthly active mobile users, and showed a chart that illustrated Yahoo's mobile numbers were improving more than the overall market, though it's unclear how that was determined.
* Tumblr's ready to roll. Mayer said Tumblr revenues could reach $100 million next year--still not that much, but at least noticeable.
* Bigger acquisitions could be on the way. Mayer noted that initially acquisitions were small ones that brought in new talent. Then there were "building block" acquisitions. Finally there were bigger strategic acquisitions: Tumblr and mobile analytics firm Flurry. Of the $1.6 billion spent on purchases overall, 80% was spent on Tumblr and Flurry alone. She also said Yahoo has returned $7.7 billion in shares repurchases--the clear implication being that all those several dozen acquisitions really didn't drain the coffers much, relatively speaking.
* Video will be a big investment area. Mayer said Yahoo needs at least two things: enough premium video like Yahoo Screen and Yahoo's digital magazines that will keep people coming to watch video, and a video ad network to make money on those views.
