Yahoo on Tuesday reported flat Q1 growth as its key display ad business continued to slump in the first three months of 2013.
Revenue, excluding payments to partners, was $1.07 billion
compared to $1.08 billion a year ago. The company posted an adjusted profit of 38 cents a share, up 39% from 27 cents a share in the year-earlier period.
Wall Street analysts polled by Thomson
Reuters, on average, had forecast that Yahoo would earn 24 cents a share on revenue of $1.1 billion.
During the earnings conference call, Yahoo CEO Marissa Mayer said the company was
“off to a solid start” this year, while reiterating that the long-term effort to revive growth will take several years. She noted internal steps taken so far that have resulted in halving
the company’s attrition rate while tripling resumes coming into Yahoo.
Since taking over last July, CEO Marissa Mayer has been credited with infusing Yahoo with a new sense of optimism
and energy. That’s in part because of a series of “acqui-hires” she has engineered to add new talent and technologies, most recently app startup Summly.
Focusing on mobile strategy, Mayer has also overseen the relaunch of the
Yahoo Mail Flickr apps, with more updates planned for other key apps. Yahoo in February also unveiled a redesigned home page with a Facebook-like news feed of top stories.
Those moves and
others have fueled investor enthusiasm that has led to a 54% jump in Yahoo's stock price during Mayer’s nine-month tenure, from $15.60 to about $24 a share. But so far the changes have not
translated into faster revenue growth, especially on the display side.
For the quarter, Yahoo saw display ad sales fall 11% to $402 million. The volume of ads sold dropped 7%, while the price
per ad fell 2%. The company attributed the decline in part to the reduction of ads on Yahoo.com and the revamped Yahoo Mail to help improve the
overall ad quality. Mayer also indicated that the shift toward increased mobile inventory, priced lower than the desktop, was having a near-term impact on overall display pricing.
The
Interactive Advertising Bureau on Tuesday reported that U.S.
Internet ad revenue climbed 15% in 2012 to $36.6 billion, with display advertising up 9% to $12 billion.
The research firm eMarketer forecast that Yahoo’s share of the U.S. display ad
market is expected to fall to 7.7% this year from 9%, while Google’s share will rise to 17.6% and Facebook’s to 15.5%.
Yahoo again had better results in its search business.
Revenue in the fourth quarter, excluding partner payments, rose 6% from a year ago to $409 million. That growth rate, however, is less than half the 14% it had in the prior quarter.
Ken
Goldman, Yahoo’s CFO, pointed to a 16% increase in paid clicks, which helped offset a 7% dip in price per click resulting from a higher mix of lower-quality affiliate traffic. Goldman said the
price for clicks on Yahoo’s owned-and-operated sites was up modestly.
While the company has seen improved ad performance through its search partnership with Microsoft, the guarantee on
revenue-per-search (RPS) Microsoft provides to Yahoo under the deal ended in the first quarter. In a recent research note, JP Morgan analyst Douglas Anmuth estimated that the end of the guarantee
could cost Yahoo $40 million to $60 million in 2013.
To accelerate search revenue growth, Mayer said Yahoo will continue to improve monetization and invest in making search “even more
immersive” in the coming quarters.
During the conference call, Mayer emphasized the company’s commitment to mobile growth as well. She pointed out that Yahoo had 300 million daily
mobile users as of the first quarter, compared to 200 million last year. She also suggested that further acquisitions were in store to bolster its mobile and other offerings.
“We’re continuing to look at smart acquisitions,” she said -- looking for companies “that we can integrate quickly and easily into our business.” That points to Yahoo
snapping up more outfits like Summly, the newsreader app created by 17-year-old Nick D’Aloisio.
Separately, Yahoo last month was rumored to be in talks to acquire
popular France-based video site Dailymotion as it seeks to become more of a video hub to boost engagement.
Looking ahead, the company projects revenue (minus costs) of $1.06 billion to $1.09
billion for the second quarter of 2013, and $4.5 billion to $4.6 billion for the full year.
Yahoo shares were down
more than 4% to $22.69 in after-hours trading after closing Tuesday at $23.79.