In its
quarterly report filed with the SEC Thursday, Yahoo stated that its mobile sales in the first
quarter had doubled from a year ago, but were still not material to total revenue.
The company said as much during its quarterly earnings call last month, so it doesn’t come as a big
surprise. But the fact that mobile (search and display) revenue doubled and still didn’t amount to anything worth reporting underscores just how far Yahoo has to go in ramping up its mobile ad
business.
That has not stopped Yahoo CEO Marissa Mayer from talking up Yahoo's mobile traffic growth. In
an interview with
The Wall Street Journal Wednesday, she suggested the
number of mobile users will outstrip those on the desktop in the next eight months. Yahoo says it currently has 430 million mobile users, up 43% from a year ago, while the desktop audience of 700
million remains flat.
Both Mayer and Adam Cahan, Yahoo’s head of mobile, have suggested the company is following the familiar digital strategy of building up the audience and user engagement
through its revamped apps and mobile sites before the ad sales start to kick in. To aid monetization, Yahoo in February introduced Gemini, an ad platform specifically tailored to mobile search and
native ads.
But it has been a year since Yahoo began rolling out its native Stream ad unit across its key desktop and mobile properties, and still hasn't put mobile ad revenue on the radar.
Yahoo's display ad revenue did pick up in the first quarter—growing 2% after declining for four straight quarters -- but it's not clear how much, if anything, that owes to mobile display
advertising.
By contrast, Facebook began reporting meaningful mobile ad revenues within a couple of quarters of extending news feed ads to its mobile site and apps. And now mobile makes up
nearly 60% of the social network's total ad revenue, and 80% of Twitter's.
Ironically, Facebook has begun to pursue a path Yahoo is already on -- of launching a set of single-purpose
apps as a way to diversify its mobile portfolio beyond its flagship app. But for now, and the foreseeable future, the main Facebook app is the moneymaker. It's by far the top-ranking app in the U.S.
with 75% reach, according to comScore.
The main Yahoo app is not even in the top 15. Yahoo Weather and Yahoo Stocks are, mainly by virtue of being default apps on iOS. And the overhauled
Weather app, for all its slick design and graphics, doesn't lend itself to the streaming ad format like the Yahoo home page or newer Yahoo News Digest.
And while talking up mobile audience
growth, Yahoo has not shared many details about engagement -- where people are going, what they are doing and how much time they are spending on its mobile properties. For now, Yahoo isn't under much
pressure from Wall Street over its lag in mobile monetization.
That's in large part because of its investment in Alibaba, which has insulated its entire core business from harsher appraisal by
investors and analysts. With the Chinese e-commerce giant filing to go public this week, Yahoo stands to reap an estimated $10 billion from the sale of part of its stake in the company's initial
public offering.
Speculation has already begun about how Yahoo will spend that windfall. It could accelerate mobile ad sales overnight by snapping up mobile ad network Millennial Media, which
just got a lot cheaper after its stock tumbled 37% Thursday following disappointing first-quarter results.
But as Yahoo's audience shifts increasingly from desktop to devices in the coming
months, the company come under increasing pressure to prove it can make money in mobile. It will be hard for Mayer to continue extolling Yahoo as a mobile-first company without being able to generate
measurable mobile revenue.