Yahoo Fights Back Doubters with Strong Third-Quarter Earnings

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Facing criticism from an activist investor Starboard Value LP, Yahoo CEO Marissa Mayer struck back on yesterday with a strong third-quarter earnings report. According to the Wall Street Journal, much of the increased profits are thanks in large part to the Alibaba IPO.

Revenue increased, in part because of a 6% leap in search advertising, while display ad revenue dropped 6% to $396 million. Moreover, Yahoo revealed that mobile ads amounted to more than $200 million in sales, about 17% of the company’s total revenue.

The youth-centric blogging site Tumblr, which it bought for an unprecedented $1.1 billion, is expected to generate more than $100 million in revenue in 2015 thanks to a growing user base and a successful introduction of sponsored advertising. An interesting aside as Yahoo had largely been silent on Tumblr’s financials even as critics repeatedly suggested that the deal was an expensive flop.

Yahoo acquired the microblogging site Tumblr (above) for $1.1 billion last year.

Now, the question is what else is Yahoo looking to buy with that Alibaba cash? Besides the AOL rumors, suspicions have arose that Brightroll, the video ad tech company, is on the table for an estimated $700 million. In a statement, Mayer defended the company’s acquisitions strategy has “not been a choice for Yahoo in my view, but rather a necessity.”

Other Business Highlights from Yahoo are listed below:

  • Yahoo completed the acquisition of Flurry, a mobile data analytics company that optimizes mobile experiences for developers, marketers, and consumers. Yahoo and Flurry’s combined scale is expected to create more personalized and inspiring app experiences for users, and enable more effective mobile advertising solutions for brands seeking to reach audiences and gain unique cross-device insights.
  • Yahoo continued to launch new products and improve on existing ones in the third quarter, innovating for the daily habits of users around the world. The Company launched the new Yahoo Finance app, Yahoo News Digest app and Yahoo Mail app for iPad, support for Digital Magazines for Android and iOS, and new navigation for Yahoo Answers, and also made Aviate available in eight languages on Android devices.
  • As football season kicked off this quarter, Yahoo announced a partnership with Samsung Smart TV to provide viewers with the Yahoo Fantasy Football TV experience, and launched NFL Now on Yahoo across devices including desktop, iPhone and iPad.
  • Top names in music, fashion, entertainment and finance continued to partner withYahoo in the third quarter of 2014. Taylor Swift and Prince both provided exclusive content to Yahoo in advance of their album releases. Yahoo Digital Magazines launched Yahoo Style with editor-in-chief Joe Zee, previously from ELLE Magazine. The Company also announced four additional new well-known editors-in-chief:Michelle Promaulayko for Yahoo Health, Kerry Diamond for Yahoo Food, Kristen Baldwin for Yahoo TV and Katie Brown for the recently launched Yahoo DIY. Yahoo Finance also launched Yahoo Finance Contributors with a roster of new high-profile industry experts including the Najarian brothers.
  • Yahoo launched new ways for the Company to work with publishing partners. Yahooannounced Yahoo Recommends which brings Yahoo’s content personalization technology and native ads to publishers across the web, launching on high-quality publisher sites CBSi, VOX Media and Hearst.
  • Yahoo added important technical talent to the team with Mike Kail joining as CIO and SVP, Infrastructure to lead IT and data center operations for the Company.

“We had a good, solid third quarter. We delivered $1.094 billion in revenue ex-TAC and$1.148 billion in GAAP revenue. This represents 1% growth in revenue ex-TAC and 1% growth in GAAP revenue. We achieved this revenue growth through strong growth in our new areas of investment – mobile, social, native and video – despite industry headwinds in some of our large, legacy businesses,” said  Mayer in  Yahoo’s release. “I am also pleased to report today that our revenue in mobile is now material. In Q3, we saw mobile revenues in excess of $200 million on a GAAP basis. Further, we estimate that our gross revenues in mobile will exceed $1.2 billion in revenue this year. We have invested deeply in mobile and we are seeing those investments pay off. Not only are our mobile products attracting praise and engagement from users and industry awards, they are generating meaningful revenue for Yahoo.”

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