Business

Two years on, Yahoo under Marissa Mayer still treading water

Yahoo released second-quarter earnings today, and they depict a company that’s still struggling to find answers for its flagging display and mobile ads business.

Investors are trying to hang on to the initial good feelings they had for CEO Marissa Mayer when she took the helm two years ago, but quarter by quarter, they’re finding it harder to do so.

All Alibaba

The main storyline in the minds of Yahoo investors right now has nothing to do with Yahoo’s main business lines. It’s the 20 percent stake Yahoo holds in privately-held Chinese Internet giant Alibaba.

Alibaba, which has been a cash cow for Yahoo, is expected to hold an IPO next month. In perhaps the key take-away from today’s earnings announcement, Yahoo said it will hold onto a greater share of Alibaba post-IPO than originally planned.

“We have entered into an amendment to the share repurchase agreement with Alibaba, reducing the number of shares that Yahoo is required to sell at the IPO from 208 million shares to 140 million shares,” Yahoo CFO Ken Goldman said in a statement.

Alibaba has an estimated market value of $150 billion, while Yahoo is valued at $35 billion.

Yahoo said during the earnings call Tuesday that half the proceeds from the IPO would go to shareholders.

Now the bad news

Yahoo’s overall revenue came in at $1.08 billion, down four percent from the same quarter a year ago.

“Our top priority is revenue growth, and by that measure we are not satisfied,” Mayer said in today’s announcement.

The company reported $270 million in net income (or 26 cents per share) for the second quarter, down 19 percent from the $331 million (30 cents per share) in earnings it reported in the second quarter of 2013.

Net income came in well below the expectations of Wall Street analysts, who had projected net earnings of 33 cents per share.

Yahoo’s legacy display ad business showed further decline: It fell to $436 million, an eight percent decline from the year ago quarter. Google and Facebook, on the strength of superior social analytics and ad targeting data, have been steadily eating away at Yahoo’s market share.

What about mobile ads?

Perhaps most disturbingly, Yahoo has little to say about how it intends to grab a piece of the $17 billion (and growing) mobile advertising market. The company didn’t even break mobile ads out into a separate line item in its earnings report, which speaks volumes about the state of that business line.

Sure, advertising isn’t everything. It could be argued that Yahoo is improving its apps and services. Progress has indeed been made in rounding up the talent and resources needed to rethink and redesign Yahoo’s mobile apps.

But, you know, the ads pay the bills.

Yahoo should be well positioned — through long-standing relationships with major brands — to go toe-to-toe with Google, Facebook, and Microsoft to fight for share in the mobile ads space.


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21 comments
Daniel Reed
Daniel Reed

Also, Yahoo, please finally fucking die already.

Manish Patel
Manish Patel

The search is cluttered. Typical user when they see a tease to watch a video probably sees what the title is and looks it up on youtube to play the video without the 30second ad in yahoo's model. I don't think Yahoo can work as it is. Offer users the 5second opt out of video ads is a start.

Adam Taylor
Adam Taylor

I can hardly blame her for Yahoo's woes. We should all be amazed that Yahoo is still even referred to as a big web company.... we should be amazed it's still referred to at all.

Roman Pixell
Roman Pixell

Now let's get really excited when someone says "our call is having fun while making the world a better place"

Coury Shen
Coury Shen

She need time n support to make it!

Marko Nikolic
Marko Nikolic

Embrace the toolbar space and you'll gain market share. :)

Scott Smith
Scott Smith

give her a break for fuck sake, she grabbed the wheel of the titanic. I'm suprised it's still afloat. Yahoo hasn't been relevant in tech for nearly 10 years can't believe they still exist

Chris Grey
Chris Grey

She gets a prize for one of the luckiest CEOs in history. Alibaba created all the value on her watch. She really hasn't accomplished anything. In her defense, Yahoo was a disaster before she arrived.

Steven Pena
Steven Pena

Im gonna give Yahoo mail a try. Gmail is boring me.

Scott Wilson
Scott Wilson

Some people just aren't cut out for leadership. 

Christopher Jackson
Christopher Jackson

Yawn. There's certainly more to life than this bs. Maybe the top priority should be adding value to the world, instead of taking value from the world.

Eric Penzel
Eric Penzel

I haven't used Yahoo in over three years and I don't miss it at all.

Bala Ganesan
Bala Ganesan

Yahoo mail is getting a lot worse and yahoo finance is the only other "product" of any value now...

Ronnie M
Ronnie M

Their news comment sections are filled with either Ultra Hippies or Apartheid Extreme Right Wing members. There's no in between. So I can see why

Tim Heile
Tim Heile

I want to be optimistic, but the only changes I've noticed is screwing up my mail with 'innovations' and tricking me into clicking on articles that are obviously designed to deliver ads rather than meaningful content (which I don't do anymore). I'm surprised their ad revenue isn't up though....

Paul Meekin
Paul Meekin

Just port all those yahoo java games to IOS and you got yourself a profit margin.