Yahoo Revenue Stable, But Q1 Profit Chilled by Q2 Loss

A major part of Yahoo's expense issues involve traffic acquisition costs, which soared to $200 million -- up from $44 million in Q2 2014.

Three years and five days after Marissa Mayer was named Yahoo CEO, stopping a revolving-door in the chief's office at the pioneering Web services company, Yahoo has stabilized its revenue streams but is still having issues making the business profitable.

Following a profitable quarter in Q1 2015, the Sunnyvale, Calif.-based company on July 21 reported adjusted revenue for the quarter of $1.04 billion, which was fundamentally no change from the previous quarter or the year-ago quarter -- and barely beating analyst forecasts of $1.03 billion.

However, Yahoo filed a net loss of $22 million -- a surprising drop from a profit of $270 million it posted a year ago.

Analysts will say that the first thing a new CEO has to do to improve the fortunes of a slipping company is to stabilize and maintain current revenue before it can grow. This Mayer has done. But CEO Job No. 2, getting the company back into the black on a consistent basis, has been elusive.

Traffic Acquisition a High Cost

A major factor in Yahoo's expense issues involve traffic acquisition costs, which soared to $200 million -- up from $44 million in Q2 2014.

Yahoo CFO Ken Goldman said on the conference call to analysts and journalists that Yahoo expects to continue to pay partners more heavily for search traffic.

On the positive side, Yahoo -- like Facebook, Google and others -- has made good strides in gaining revenue from mobile advertising. The company tallied a total of $252 million, a notable 54 percent increase year-over-year. In fact, mobile made up a record 22 percent of the company's ad-supported revenue in this most recent financial period.

Mavens, which is what the company calls its mobile, video, native, and social set of businesses, grew to nearly $400 million in revenue this quarter, a solid rise from $363 million reported last quarter.

Income from its search and display ads businesses continues to be a problem area, however. Revenue from those two core business amounted to $725 million, down from $742 million a year ago.

Not Exactly a Rosy Outlook for Q3

The stock was down about 2 percent at $39.73 in after-hours trading. The company didn't exactly present a rosy revenue guidance picture for next quarter, forecasting revenue of between $1 and $1.04 billion against analyst expectations of $1.07 billion.

Mayer said the lower revenue expectation was based on the fact that Yahoo plans to increase traffic to its "Gemini" search engine on mobile. Increased traffic will put pressure on prices, Mayer said, which will temporarily reduce search revenue.

In the big picture, Mayer said, the Gemini search engine for mobile traffic is one of the keys to the company's future.

Yahoo has been trimming its work force, reporting a headcount of about 11,000 full-time employees, a decrease of 11 percent year-over-year and 32 percent since Mayer moved from Google to become CEO on July 16, 2012.

Chris Preimesberger

Chris J. Preimesberger

Chris J. Preimesberger is Editor-in-Chief of eWEEK and responsible for all the publication's coverage. In his 15 years and more than 4,000 articles at eWEEK, he has distinguished himself in reporting...