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New Media Deals Part of a Solid Start for Mayer

Posted on Friday, Nov 2nd 2012

Many analysts were skeptical about the hiring of Marissa Mayer as Yahoo CEO, wondering if she had what was needed to let Yahoo shine again. For now, Mayer seems to be focused on turning around Yahoo and if recent results are an indicator, she seems to have found some success.

Yahoo’s Financials
Yahoo’s (Nasdaq:YHOO) Q3 performance surprised the market. Revenues grew 2% over the year to $1.09 billion, ahead of the Street’s target of $1.08 billion. EPS of $0.35 was also significantly ahead the market’s projected earnings of $0.26.

By segment, search revenues grew 11% over the year to $414.1 million. Display advertising revenues remained flat at $451.6 million. eMarketer estimates that Yahoo will end the year with 9.3% share of display ads in the U.S. Last year, its share stood at 11%. But while Yahoo’s display ad share may be shrinking, analysts believe that its search volumes will grow to compensate for the loss.

Yahoo Expands Content Ties
Many were worried that by appointing Mayer, Yahoo’s board had antagonized interim CEO Ross Levinsohn, an important catalyst for Yahoo’s content deals, and Levinsohn indeed left the company in July. But Mayer’s content focus has put many of those concerns about getting new deals to rest. Recently, Yahoo announced a tie-up with content provider, Wenner Media. As part of the agreement, both companies will swap permanent branded pages on their websites, and Yahoo will get placement in the print versions of Us Weekly and Rolling Stone magazines.

Earlier last month, the company also announced a tie-up with CBS Television Distribution that will help it leverage the broadcasting ability of The Insider in exchange for access to Yahoo’s subscriber base.

Yahoo has already entered into several similar agreements with other players, including Zillow for Yahoo Homes, Getty Images for its image and video search offering, and Spotify and Clear Channel to strengthen its entertainment and music segment. Market rumors suggest that Yahoo is also looking for similar tie-ups with Comcast’s NBC Sports.

Yahoo Eyes Small Acquisitions
Under Mayer’s guidance, Yahoo is focusing extensively on expanding its presence in the mobile segment. It recently announced the acquisition of iPhone app developer start-up Stamped. This was the first acquisition Yahoo announced under the new leadership. New York City–based Stamped was founded by former Google employees Robby Stein, Bart Stein, and Kevin Palms. Stamped’s mobile apps let users share and exchange recommendations on books, food, music, and other interests with friends. Yahoo is expected to leverage the acquisition to help build their own mobile apps.

Yahoo is looking for several other acquisitions within the $10 million-$200 million range for talent acquisition and to help them grow within the mobile space. It also believes that smaller acquisitions are easier to integrate. According to market reports, other potential targets on Yahoo’s shopping list include OpenTable, PubMatic, Turn, and Millennial Media.

The market has reacted positively to Mayer’s efforts. Earlier this week, the stock touched a 52-week high of $16.89. It is trading at $17.05 with a market capitalization of $20.20 billion.

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