Yahoo’s Q1: Mobile Revenue Surges, But CEO Mayer Cites ‘Increased Pressure’ From Programmatic

yahooq12015Although Yahoo continues to plow ahead on mobile, the company’s Q1 2015 disappointed. Yahoo’s revenue clocked in at $1.04 billion, missing analysts’ estimate of $1.06 billion.

During the company’s investor call with analysts, CEO Marissa Mayer suggested programmatic has lowered the prices that Yahoo can command for its inventory.

“We see a lot of advertising demand both for native and programmatic advertising. The programmatic ad marketplace is very efficient in terms of targeting and placing ads in favor of the advertiser, which we think is great and delivers great value,” she said. “But it puts increased pressure on our programmatic ads and, implicitly, the premium ads moving into the programmatic sector.”

The company broke down its mobile-sourced, or ‘MaVeNS’ revenues – CEO Marissa Mayer’s somewhat forced acronym for mobile, video, native advertising and social. Yahoo made $234 million in mobile revenue, up from $145 million YoY, but down from $254 million in Q4 2014. Overall MaVeNS revenue was $363 million this quarter, up from $230 million at this time last year.

In terms of display, GAAP revenue came in at $464 million last quarter, increasing 2% YoY. Display revenue minus traffic acquisition costs, however, decreased 7% YoY to $381 million. The number of ads sold went up around 29% YoY, although price-per ad decreased roughly 17% since Q1 2014. [More in the investor press release.]

With Mayer at the helm, Yahoo has made mobile a major focus. The company launched its Mobile Developer Suite in February, combining Gemini with its recent acquisitions of mobile analytics company Flurry and video DSP BrightRoll.

The Flurry analytics SDK now gathers intel from around 700,000 applications, and mobile monthly actives on Yahoo are at 600 million, up about 20% YoY.

“Yahoo is investing passionately in the developer ecosystem to improve the quality and the monetization of our partner applications,” Mayer said.

The jury is still arguably out, however, considering that Yahoo is competing with Facebook and Twitter for love from the dev community.

On the video side, Mayer said that Yahoo demographic and behavioral data has been integrated into the BrightRoll marketplace, along with Yahoo-owned and -operated video inventory.

But Yahoo had a somewhat sadder tale to tell in terms of programmatic, which saw what Mayer called “steep declines” YoY in both premium and programmatic PC advertising, which accelerated in Q4 2014, continuing into Q1.

“We have seen more than $100 million in decline each quarter [and] our premium advertising declined 40% year over year, mostly due to the decline in sales booked directly to our properties,” Mayer said. “Audience declined 19% year over year due to lower prices paid per ad through programmatic pricing. We continue to do everything we can to stabilize and slow this decline.”

To offset the dip, Mayer is placing most of her hope into three baskets: mobile, native and video. She also pointed to Yahoo Ad Manager Plus, a self-serve tool that clients can use to manage their Yahoo native and display campaigns, as “an important element in modernizing our legacy PC display business and creating continuity with MaVeNS.”

Gemini, Yahoo’s native ad marketplace, is also key to that vision. Yahoo saw around $110 million in revenue from native as sold on Gemini in Q1 2015, compared to the $250 million Yahoo brought in from native on Gemini in all of 2014.

Although Mayer said Yahoo hasn’t quantified how many advertisers are participating in its Gemini ecosystem, she noted that “we certainly have thousands.”

“It implies a vibrant marketplace. Our native ads, of course, are foundational to our mobile monetization,” Mayer said, noting that CPC and CPM pricing on the platform is up, a trend she sees continuing throughout the year.

But the programmatic sector is not faring as well, Mayer admitted, pointing to “pricing pressure.”

That said, Mayer asked the investor community to focus on the positives.

“We know we have more to do, but with your support, we will return this iconic company to greatness and growth,” she said. “And we are closer than we’ve ever been to realizing that renaissance.”

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