This May Just Save Yahoo! Inc. (YHOO)

Page 2 of 2

Revenue in the right place
It’s crucial that Mayer keeps her priorities in order, and it’s nice to see that she has revenue in the right place. The first three links in this chain reaction make the fourth link possible — not the other way around. It’s a strategy very much like LinkedIn Corp (NYSE:LNKD)‘s, where talent, technology and product result in monetization. But with just one year in, Mayer is still very early in this game. The results are not going to be immediate; it will take some time and she needs to address the fast-changing search landscape. While the number of paid clicks is rising, the amount Yahoo! is generating per click is falling. This quarter alone the number of global search paid clicks rose 21%, however the price-per-click (what Yahoo! makes) fell 8%. Global display also saw some challenges, with the number of ads sold down 2% and price-per-ad down 12%.

At the end of the day, Yahoo! Inc. (NASDAQ:YHOO)’s business model is based on advertising. In fact, in 2012 81% of the company’s total revenue came from search and display ads. This no doubt is playing into Mayer’s strategy of acquiring additional businesses to get more eyeballs and more clicks. In all, since she joined the company she’s spearheaded 17 acquisitions, with Tumblr being the biggest of them all. The strategy is simple: Build out Yahoo’s world of offerings. The more people in Yahoo’s world, the more reasons advertisers have to give Yahoo! their money.

Searching for a bottom line
Only time will tell whether Marissa Mayer truly has turned Yahoo!’s ship turned around. But it was one heck of a freshman year, and I like the way she’s thinking. Yahoo! was a company in dire need of a cultural shift (among other things), and she has certainly done that. When it’s all said and done, the numbers will tell the story. Here’s to a prosperous sophomore campaign for Mayer and the entire Yahoo! team.

The article The Chain Reaction That May Just Save Yahoo! originally appeared on Fool.com and is written by Jason Moser.

Jason Moser owns shares of LinkedIn. The Motley Fool recommends Facebook, Google, and LinkedIn. The Motley Fool owns shares of Facebook, Google, and LinkedIn.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Page 2 of 2