A year after Yahoo CEO Marissa Mayer said there was more potential “upside” for the portal’s revenues in search than display, its Q3 performance suggests it will not reverse its declines soon.
Among the topline results in Yahoo’s Q3 (read the earnings release):
- GAAP display revenues fell 7% to $470 million. Last year, this percentage was at least flat. In general, display dollars — not including traffic acquisition costs — were $421 million, also amounting to a 7% decline.
- In a sign that seven is not a lucky number for Yahoo, its ad prices dropped 7% during the quarter.
- The number of ads sold (outside of Korea) were up a mere 1% year over year.
Meanwhile, GAAP search fell 8% to $435 million, while non-GAAP search in Q3 gained 3% over the previous year, as paid clicks were up a decent 21%.
In keeping with the earnings call format Mayer has used the last few quarters, she hosted a TV news-like interview session where she opened by talking about the company taking a variety of “sprints” designed to turn the company around. “People, product, traffic and revenue” are the specific sprints Yahoo is running right now, Mayer said, suggesting a plea for more patience from investors.
As is well known by now, Mayer has said Yahoo’s primary focus is refining its user experience around mobile products to prepare for the future of digital media, not the next three months. Granted, a year-plus is not a long distance, especially in Yahoo time.
Traffic turnaround: “We reached 800 million global monthly unique users for first time ever, a 20% increase over the past 15 months,” Mayer said. “Q3 was an unprecedented and the reversal of this kind of traffic scale. It’s a clear testament to our progress of our product sprint and increased engagement.”
On mobile, Yahoo saw 390 million users per month, a 15% increase over the year before. “And these mobile and PC traffic numbers do not include Tumblr, whose growth has exceeded our expectations.”
Native ads will win: After a rundown of the specifics of Q3 by CFO Ken Goldman, Mayer turned back to mobile and display. There has been a great deal of hand-wringing about the inability to place a greater number of display ads on mobile than on the PC Web. Mayer pointed to the trend toward native ads as a way to combat that issue.
“It could turn out that fewer native ads may bring in greater revenues than traditional display,” she said. “It’s not a guarantee, but we’ve done a lot of tests to indicate that we could see improved pricing on mobile vs. desktop. And the wider activity in the industry suggests the same.
Asked about “premium” display at the end of the call, Mayer acknowledged some “challenges” related to audience buying, something a number of traditional publishers like The New York Times Co. have repeatedly inveighed against during quarterly earnings calls. Still, she said the sell-through rate on the homepage and Yahoo’s display pricing have been stable.
March toward programmatic: The subject of programmatic hasn’t been a frequent one; Mayer has addressed it only generally. For example, there was little mention of Yahoo’s exchange product Right Media, a pioneer in real-time bidding that Yahoo bought six years ago but failed to deploy effectively. And there was also no discussion of Genome, Yahoo’s “big data” play. The acquisition of mobile data and hyperlocal analytics provider AdMovate was brought in up in passing, Mayer is aware analysts and agencies want to hear more about it. Earlier in the presentation, Mayer mentioned that the company has added about 1,000 engineers, with the expectation that many of them would be focused on ad products.
When asked about Yahoo’s “march toward programmatic,” Mayer pointed to pricing pressure from exchanges, but overall, programmatic methods have helped improve Yahoo’s run-through rate. However, she didn’t offer specifics. Again, she pointed to possible integration or overlap with native ads, such as in the new videocentric Yahoo Screen ads, as likely to drive up yield on the portal’s inventory.
No comment on queries: Turning to Yahoo’s search alliance with Microsoft’s Bing, Goldman and Mayer declined to provide a look at the share of the queries the company is driving. Over the past couple of years, Yahoo’s search share has declined, Mayer said, but she believes there is an opportunity to turn that around with mobile. “Overall, I feel solid on our click volume [from search,]” she said. “We’re endeavoring to gain share. The 100 experiments we did during the quarter were all about creating a sense of differentiation around our functionality.”
As an example of how it’s working to stand out in the search marketplace, Mayer pointed to the introduction of “direct display units,” where users get answers within the search window. “That’s how we drive user engagement through our products,” she said.
