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Ad Revenue Slides as Yahoo Pins Future on Mobile

  |  July 17, 2013   |  Comments

Yahoo cleared $331 million in net income on $1.07 billion in revenue, a 46 percent increase and 1 percent decline respectively from the year-ago period. The latest numbers from Yahoo highlight the challenges being confronted by the 19-year-old company as it sold fewer display ads and charged a lower price per ad on average than a year ago.

Yahoo appears to be stabilizing as it closes its first year with Marissa Mayer at the helm. The company is banking more profit but ad sales are on the decline from a year ago.

Yahoo cleared $331 million in net income on $1.07 billion in revenue, a 46 percent increase and 1 percent decline respectively from the year-ago period. The latest numbers from Yahoo highlight the challenges being confronted by the 19-year-old company as it sold fewer display ads and charged a lower price per ad on average than a year ago. Search is the only area bearing increased revenue for the company. Indeed, growth in search is being offset by a troubling decline in display.

Yahoo's display business generated $423 million, an 11 percent decline from last year. The number of ads sold declined by 2 percent while the average price per ad sold decreased about 12 percent. Search generated $403 million in revenue, up 5 percent, while paid clicks jumped 21 percent and the average price per click slid 8 percent.

“Our display business has felt some negative impact, particularly due to the shifts around programmatic buying,” Mayer says on the Yahoo earnings webcast. “We need to do a much better job here in order to reverse these trends… In addition to improving our user-facing products, we are also investing in our ad technology to enhance our advertiser offerings and increase our platform’s capabilities in the phase of a very competitive display marketplace. We can do better in display and this is going to be a clear focus for the business.”

Yahoo is now reaching more than 340 million users on mobile each month, almost double the size of its audience online. But mobile doesn't pay the bills like online and therein lies the all-to-familiar problem. Like other online giants, Yahoo is looking ahead to a future of greater mobile ad revenue and placing its bets accordingly.

Mayer notes that “aggressive hiring and strategic acquisitions” have led to a six-fold increase in Yahoo’s dedicated mobile headcount. Instead of dozens, there are now hundreds of Yahoo engineers exclusively focused on mobile, she adds.

“Mobile is a strong growth driver. And with the right mobile ad units, we believe that mobile will be a large revenue driver. Yahoo’s future is mobile and we are delivering our products mobile first,” she tells investors and analysts.

Yahoo closed the last quarter with $4.8 billion in cash, a war chest that is expected to cause more waves of anticipation throughout the industry. The company made nine acquisitions over the three month period, averaging three deals per month, culminating with the blockbuster $1.1 billion Tumblr acquisition.

“Looking across the four areas of search, mobile, display and video, Tumblr represents significant opportunities across the board. David Karp (founder and chief executive of Tumblr) and I firmly believe that native advertising can be every bit as good as the content itself and we intend to develop monetization that meets that standard,” Mayer adds.

Mayer doesn’t expect Tumblr to contribute “meaningful revenue” this year, but she is hopeful that Yahoo’s many new and improved products can boost revenues in the second half of the year.

“Now that we are actually growing traffic across our network when you consider PC and mobile, we see the opportunity to run more ads,” she says. “So while that hasn’t translated to revenue growth yet, we think that it ultimately will and that will happen more in Q4.”

Meanwhile, earlier today, Yahoo announced the acquisition of Admovate, a mobile ad technology startup. According to a blog by the company, Admovate has created technology that helps marketers reach their desired audience at the right time and place. This is especially important for mobile ad experiences that engage consumers on smaller screens. 

"This acquisition is part of our efforts to invest further in our ad tech platforms—Apt, Genome, and Right Media—and make buying easier for advertisers and agencies. Admovate’s personalization technology accelerates our capabilities in mobile advertising, and we gain an exceptionally talented technical team," notes the blog.

Admovate’s engineers will join Yahoo’s display advertising team in Sunnyvale.

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ABOUT THE AUTHOR

Matt Kapko

Matt Kapko has been writing about mobile since 2006, before it became cool. Based in Long Beach, CA, he has covered mobile entertainment, digital media, marketing, and advertising for several business media outlets. A former editor and reporter for RCR Wireless News, paidContent, and iMedia Connection, Matt is a regular freelance reporter for ClickZ. You can follow Matt on Twitter at @MattKapko or drop him a line at matt@kapko.co.

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