A Few Reasons Why Yahoo! Inc. (YHOO) Is Getting Better

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In a few days, Marissa Mayer will mark her first anniversary as the president and CEO of Yahoo! Inc. (NASDAQ:YHOO). The former Google Inc (NASDAQ:GOOG) vice president for location and search was appointed CEO of Yahoo! on July 16, 2012, at a time when the company was experiencing some of its toughest times since inception.

Yahoo icon

Just before Mayer’s appointment, Yahoo! Inc. (NASDAQ:YHOO) had hired and fired two CEOs in less than four years, along with other top executives. Since Marissa Mayer’s appointment, Yahoo! is up around 56%, and seems likely to build on that momentum going forward. During her time, the company has acquired 12 companies in a bid to turn things around.

Yahoo! Inc. (NASDAQ:YHOO), which some people thought would follow AOL, Inc. (NYSE:AOL) to the list of struggling internet-based companies, seems set to pull out a surprise turnaround under the new CEO. However, only time will determined how sustainable the company’s current rally is. Media critics, and even some analysts, believe that Yahoo!’s current rally is driven by the anticipated sale of half of its stake in the Chinese e-commerce giant, Alibaba. However, there are tremendous changes to Yahoo!’s platform and associated sites that must not be ignored. These, along with the acquisitions, could determine the success of Yahoo!’s turnaround.

Yahoo!’s platform and associated sites doing well

Mayer stated categorically that building new products remains a priority for the company as the turnaround campaign gears up. This strategy is already beginning to pay-off, based on recent statistics from Yahoo! Inc. (NASDAQ:YHOO)’s home page and associated sites.

For instance, Mayer recently revealed that home page interaction is up 25% since overhaul, while the revamped Flickr reported 400% increase in uploads. The company’s $1.1 billion acquisition of Tumblr is also another major boost to the turnaround plan, and should play a huge part in traffic generation going forward.

Yahoo! Inc. (NASDAQ:YHOO) is looking to boost all its major sites including Yahoo! Mail, by making them more user-friendly to encourage user interaction. It is this interaction that will lead to increased engagement levels, which could result in sustainable revenue growth rates if monetized effectively.

Currently, Yahoo!’s most interactive sites are Yahoo! Sports (mainly due to fantasy football), Yahoo! Weather, and Yahoo! Finance. Its search business continues to trail that of Google Inc (NASDAQ:GOOG) while Microsoft Corporation (NASDAQ:MSFT)’s Bing and Baidu.com, Inc. (ADR) (NASDAQ:BIDU) of China are also making inroads.

The company stresses the need to make people’s daily habits more enjoyable, as a pillar that could help improve email, and weather among other platforms. In general, all this seems to be pointing to one thing, user engagement, which should boost ad revenue.

The re-branding campaign and acquisitions seem to be getting less credit than they deserve with regard to Yahoo!’s rally over the last twelve months. Analysts are pinning the company’s current price to the success of Yahoo! Japan and the prospective sale of half of its stake in Alibaba.com.

A struggle to catch Google

While Yahoo! is plotting a turnaround, Google, the search engine giant is already advancing its plans to maintain the position of being the largest in the world. The company has already integrated its social platform with search in a bid to customize search results depending on a person’s activity on the internet. This is also the strategy used by Facebook Inc (NASDAQ:FB) Ad exchange, which seeks to redefine the search business by tracking user activity on the internet.

On the other hand, AOL, Inc. (NYSE:AOL) search continues to falter against Google, with Facebook Inc (NASDAQ:FB) even becoming a more serious threat to the search engine giant. However, AOL seeks to increase its revenue from Web Video as evidenced in its deal with Taboola.

According to the agreement, publishers will add a box at the bottom of their pages that serves up videos from AOL as well as links to other sites picked by Taboola. This will help AOL push more video to other publisher sites. If readers click on a Taboola-recommneded off-site link, Taboola will share some of the revenue it gets from directing that click with the publisher, too.

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