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Yahoo's Ad Slump Rages On, And CEO Marissa Mayer Unable to Stop it Soon

Jan 28 2014, 6:20pm CST | by , in News | Technology News

Yahoo's Ad Slump Rages On, And CEO Marissa Mayer Unable to Stop it Soon
 
 

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Yahoo's Ad Slump Rages On, And CEO Marissa Mayer Unable to Stop it Soon

Another quarter, another drop in ad sales at Yahoo. When’s it going to end?

That was the gist of virtually every question asked by analysts today at Yahoo’s fourth-quarter earnings webcast. Unfortunately, they didn’t get a firm answer from CEO Marissa Mayer.

After a seemingly unending string of quarters with declining display-ad revenues, they fell again, by almost 6%, to $491 million before the costs of acquiring traffic from website partners. As a result, Yahoo’s shares were down almost 6% in extended trading initially, after a 4% rise, to $38.22, in an up market. Later as the webcast continued, the recovered a bit but still down more than 3%.

Mayer provided little firm guidance on when display ads, which make up 41% of its overall revenues, would finally follow steady increases in traffic at the venerable Internet portal, up 20% over last year to 800 million users a month. In her initial comments on the webcast, Mayer did draw something of a line in the blowing sands, promising that its work on improving its services and increasing traffic will result in revenue growth this year, but probably not until the second half. Yet the company declined to offer a forecast for 2014 overall because, as Chief Financial Officer Ken Goldman put it, it’s still tough to “identify an inflection point” for growth.

Yahoo is seeing improving trends in the display business, with 3% more ads sold. But price per ad fell 7% because fewer premium ads were sold. The new “stream ads,” he said, could be significant especially in mobile. But none of this is apparent in the numbers yet.

In particular, Mayer added, mobile ad revenue is still “not material” despite revenues doubling. That’s at a time when Facebook, Twitter, and even Google are seeing big jumps in mobile ad revenues. Tumblr? Despite increases in traffic and some revenue in the second half, still–wait for it–”not material.” Not least, video ads remain “nascent,” she said. And while few companies besides Google with its YouTube site have significant video ad revenues yet, others such as Facebook and Twitter are clearly focused on this area as well.

This year will mark one potentially important change, however. Not only has Yahoo vowed that revenue growth is its No. 1 priority, but Mayer herself said–twice–that she would be focusing her efforts much more directly on the ads and media side of the business. That would be a big change from the past, when ad agencies and marketers have said they’ve felt ignored by the former Google executive.

Skeptics would say she had better get more involved, since she recently fired her chief operating officer and de facto sales chief, Henrique De Castro, whom she said today was simply “not a fit.” She also repeated that she won’t be replacing him. “This gives me an opportunity to be much more involved with revenue opportunities,” she said.

That’s encouraging to some observers. Forrester analyst Susan Bidel said in an interview that it’s clear Mayer intends to focus her fix-it engineering mentality to the media business, evident so far in her hiring New York Times stars David Pogue and Matt Bai and onetime Today star Katie Couric, as well as creating digital magazines intended to draw more lucrative image advertising from traditional magazines and television. “It’s very hard to turn around a big ship, but they’ve made a lot of good moves in that direction,” says Bidel.

Bidel notes that the display ad business “isn’t brain surgery” and should be eminently fixable with the right products and services to provide a better context for ads, whether they be the native self-service “stream ads” that appear in the central news feed or more flashy display and video ads Yahoo is clearly working on. Still, she says, it’s not yet apparent what’s going to get advertisers to return to Yahoo. “The whole display business is a little up in the air,” she says.

More than a little, actually. And unless Mayer can stabilize it, let alone grow it, she will face more investor scrutiny and impatience with every passing month.

Source: Forbes

 

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<a href="/latest_stories/all/all/31" rel="author">Forbes</a>
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