AOL, Inc. (NYSE:AOL) of late
The better bet
Yahoo! reported first-quarter EPS that was up 11.6% sequentially and 48.7% year-over-year. Some of the future growth for Yahoo! should be in the display market. Yahoo! has plans to continue improving ad quality, better user experience and add new ad products to help drive click-through rates. The number of paid clicks jumped 16% sequentially last quarter, the fourth straight quarter that growth has accelerated.
The big news of late for Yahoo! is its $1.1 billion purchase of Tumblr, which has more than 100 million users, but little revenue. The deal has been compared to some of the other major tech deals that have allowed large-tech companies a chance to reinvent and re-innovate. Such deals include Google’s purchase of YouTube for $1.6 billion some seven years ago and AOL’s acquisition of Huffington Post for $315 million in 2011.
In 2012, the company generated 38% of revenue from display advertisements on its own sites, and the balance from search and other activities. What’s impressive is that Yahoo! currently gets no material revenue from mobile ads, leaving a huge market for the company to tap into.