Marissa Mayer's Yahoo Still Searching for Revenue Growth a Year Later

By Michelle Maisto  |  Posted 2013-07-17 Print this article Print

During the first quarter, Yahoo redesigned its homepage across all form factors; it found that updates to Mail and Flickr had increased use of its apps by 50 percent; and it saw mobile monthly users grow from 200 million during the previous quarter to more than 300 million. As in the 2013 second quarter, display ad income was down, causing revenue, at $1.07 billion, to come in shy of analyst estimates, though income was up 26 percent from a year earlier, at $420 million.

In addition to insisting that Yahoo is working to improve user experiences, Mayer said it also is working to make personalization a "key differentiator," not only in content but ads.

"We fundamentally believe that ads can and should be a great part of the user experience," said Mayer. "So for every improvement that we make to personalize our content, we're also looking at how we can innovate in the ad experience as well."

What Mayer Needs to Accomplish In Year Two

In discussing business overhauls, companies commonly reach for the analogy of a marathon. Mayer, however, speaks in terms of sprints.

A "series of sprints" will define Yahoo's long-term success, she said during the April earnings call.

Yahoo has just completed the first sprint, which was "all about getting people to believe in Yahoo, making Yahoo a really terrific place to work and contribute, and getting the organization fit.

"Now, our focus will shift to the next sprint," she said, "which is all about building beautiful products and executing well against our business strategy. This will lead to greater user engagement, increased revenue and, ultimately, growth."

Yahoo's first major success on this front may be its new Weather app, which pulls images from Flickr. It has proved for Yahoo—as another California company knows well—that having a seriously beautiful, highly functioning product can be the most effective way to stand out in a very crowded market.

In June, the Yahoo Weather app won an Apple Design Award.  The day it launched,  Twitter was filled with high praise. People tweeted to say they found it "spectacular," "freakin' gorgeous," "awesome," "the most beautiful app I have ever seen" and possibly "the best functionality on an app to date."

What will it take for users to feel about the rest of Yahoo the way they feel about its weather app? What finish lines does its high-achieving CEO need to reach for the industry to agree: Marissa Mayer did it?

"Revenues remain volatile at the moment (stronger in Q4, softer in Q1) and the core slowdown of online ads and search is not being fully offset by growth in new areas like mobile media," said Strategy Analytics' Mawston. "A sustained uptick in overall revenue growth during three or four quarters would be a clear sign that Yahoo is back on track."

On July 16, Yahoo announced second quarter results that it said marked a milestone, beyond Mayer's 364th day on the job.

During a live broadcast—a Yahoo first that Mayer said was in "the spirit of innovation" and part of "this period of making every day count"—Mayer explained that page-view traffic suffered a "clear downward trend" in 2012 and picking it up was a major focus.

"We achieved crossover in early June and are now experiencing year-over-year growth, effectively erasing the declines of the last year," she said. "Renewed traffic growth in the face of multiple years of decline is, to my knowledge, unprecedented among industry players that operate with billions of page views, and we've achieved just that."

Mayer also called the quarter "the most productive in the history of Yahoo," with a new product launching every week.

Income was up 46 percent, compared to a year ago, but display and search advertising had still sharply declined.

The profit report was slightly higher than analysts’ consensus expectations, while revenue was a shade under estimates. Net income for the quarter totaled $331 million, which was generated mainly from the company’s investments. Revenue fell 7 percent to $1.14 billion.

Mayer, while detailing the quarter's successes, acknowledged, "There is still a long way to go, and a lot to maintain, in a chain reaction leading to revenue growth."

Gartner's Weiner agrees. Ahead of the call he summed up Mayer's finish line in two words: record earnings.

"At the end of the day, money talks," said Weiner. "Whether she gets there by making an acquisition that they spin into gold or she can create a cohesive philosophy that resonates with advertisers and consumers, it's time to get there."

Follow Michelle Maisto on Twitter.


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