Can Yahoo! Inc. (YHOO) Comeback?

Marissa Mayer’s arrival at Yahoo! Inc. (NASDAQ:YHOO) nearly a year ago put the company back into the spotlight. Investors are showing their vote of confidence in the company as Yahoo!’s shares spiked by almost 35% (year-to-date). The company still faces many challenges. For instance, the ongoing collaboration between Yahoo! and Microsoft Corporation (NASDAQ:MSFT) has yet to put a dent in the dominance of Google Inc (NASDAQ:GOOG) in the search-engine market; meanwhile, Yahoo! Inc. (NASDAQ:YHOO) is also trying to accelerate its hold in the mobile market. Is this the right direction for Yahoo! Inc. (NASDAQ:YHOO)? Will the company be able to recover in 2013? Let’s take a close look at these issues.

Mobile search

Yahoo! Inc. (NASDAQ:YHOO) is trying to augment its revenue by tapping into the sharply growing mobile market. The company introduced new apps, launched a new Yahoo.com (NASDAQ:YHOO) mobile site, and acquired new companies to accelerate its mobile presence. But the main issue I have with jumping on the mobile bandwagon is the lower profit margins mobile advertising offers compared with PC advertising.

Furthermore, Google Inc (NASDAQ:GOOG)’s stronghold via its mobile-operating system will keep Yahoo! Inc. (NASDAQ:YHOO) behind in the mobile market. According to one report, Google is projected to augment its revenue by more than 80% in 2013 (year-over-year). Google’s competitors will also sharply increase their revenue in 2013, but they will maintain less than 10% of the total market share in the mobile-search advertising sector.

Advertising

Yahoo! Inc. (NASDAQ:YHOO)’s revenue continues to dwindle, and fell by 6.6% in the first quarter of 2013 (y-o-y). The company’s paid clicks rose by 16% during the quarter, while the price-per-click fell by 7%. In comparison, Google’s revenue from advertising in its own sites sharply rose by more than 18%. Its sales from network members’ websites also rose, increasing by nearly 12%.

Microsoft, much like Google Inc (NASDAQ:GOOG), managed to increase revenue from its online services, which include its Bing search engine, by nearly 18% in the recent quarter (y-o-y). But unlike Google, Microsoft Corporation (NASDAQ:MSFT)’s online division continues to lose money. In terms of market share, Google is maintaining its dominance in the U.S search-engine market at more than 67%. Bing and Yahoo! slightly raised their market shares – perhaps on the back of Google Inc (NASDAQ:GOOG). Bing and Yahoo! Inc. (NASDAQ:YHOO)’s shares accounts for less than 17% and 12% of the market, respectively, of the U.S search-engine market.

Perhaps if Yahoo! tries to expand its network members market – a market that served Google well in recent years and accounts for a quarter of its advertising revenue – this could give Yahoo! Inc. (NASDAQ:YHOO) a chance to augment its revenue in advertising in the U.S.