Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Yahoo! Inc. (YHOO): How Should You Play It?

Yahoo! Inc. (NASDAQ:YHOO)Yahoo! Inc. (NASDAQ:YHOO has been under close watch by investors. The company brought on a new CEO and is focused on growing profitability. With recent earnings and new strategies, what should investors think of Yahoo?

Earnings report

Yahoo! Inc. (NASDAQ:YHOO) recently reported its quarterly earnings, and results were mixed. On the positive side, earnings per share were $0.35, which was almost 50% higher than analysts expected.

Revenue was flat, though. Total revenue after what Yahoo! Inc. (NASDAQ:YHOO) pays other websites for carrying ads was $1 billion–this was just below than Wall Street expectations of $1.1 billion.

Yahoo! Inc. (NASDAQ:YHOO) makes the majority of its revenue in two different segments: advertising displays and search. In the most recent quarter, advertising revenue fell by 11%, while search revenue grew by 6%.

The stock price dipped on this news, but has increased by nearly 50% in the last nine months. Yahoo!’s CEO, Marissa Mayer, has initiated new offerings in its email platform to integrate with Google Inc (NASDAQ:GOOG) and Apple Inc. (NASDAQ:AAPL) mobile-operating systems. This has caused the user base to grow by 50% quarter-over-quarter.

Yahoo! Inc. (NASDAQ:YHOO)’s earnings were boosted by its holdings in Alibaba, a Chinese marketplace website. Still, 40% of total earnings come from ad revenue, which have been declining.


Online-ad revenue is important to more companies than just Yahoo!. Two other companies that rely heavily on ad revenue are Google Inc (NASDAQ:GOOG) and Facebook Inc (NASDAQ:FB) .

Facebook reported advertising revenue of $1.3 billion in its fourth quarter. Advertising comprises 84% of its total revenue. While Yahoo! Inc. (NASDAQ:YHOO) hasn’t been growing its ad revenue, Facebook has and delivered an increase of more than 40% in the last year. The company also focuses on mobile platforms, and mobile advertisements make up roughly 21% of revenue.

The company has been faced with growing operating costs, though. It will have to grow its revenue at a higher rate this year to offset rising expenses. Operating expenses are already 74% of revenue, up from just 63% the same time last year.

Facebook Inc (NASDAQ:FB) has been developing a new way for businesses to track conversions with advertisements. Having this easy-to-use platform could bring more advertisers to Facebook.

Total mobile advertising spend will reach $12 billion this year. More companies are choosing mobile advertising, so it’s up to Internet companies to offer strong incentives; Facebook Inc (NASDAQ:FB)’s advertising tracking is a good start for the company.

Google Inc (NASDAQ:GOOG) has a much stronger revenue growth rate than Yahoo! Inc. (NASDAQ:YHOO). It has grown its top line by 36% in the last year. Google is Yahoo!’s major competitor for online searches and subsequent ad revenue; 96% of all revenue come from advertisements, with the majority coming from Google websites.