eMarketer’s latest report projects the U.S. display advertising market to be worth $23.87 billion by 2015. Display advertising in the country was estimated at $14.98 billion last year and is projected to grow to $17.70 billion during the current year. The market should see strong growth in display ad revenues by Twitter, Google, and Facebook. Google will likely remain the leader in the segment, with an estimated 38% growth this year to account for $3.11 billion in display ad revenues. Facebook will be the second biggest player in the market, with growth of 26% over the year and $2.75 billion in display ad revenues. Meanwhile, Yahoo is projected to continue to flounder and will see just 1% growth in display ad revenues as it grows to $1.37 billion.
Yahoo’s (Nasdaq:YHOO) Q1 revenues fell 15% over the quarter and 7% over the year to $1.14 billion. The revenue decline was driven by the continuing weak performance of display ad revenues, which fell 23% over the quarter and 11% over the year owing to declining customer engagement. Revenues excluding traffic acquisition costs remained flat at $1.07 billion, compared with market projections of $1.1 billion. EPS for the quarter of $0.38 was significantly ahead of the Street’s target of $0.25. The significant increase in margins for the quarter was on account of the strong performance by the company’s Asian assets. Earnings from these entities grew 26% over the year.
By segment, search revenues fell 10% to $425 million, and display revenues slipped 11% over the year to $455 million. Yahoo attributed the comparatively weaker performance of display revenues to the recent revamp of their home page and email, from which they removed some of the advertising inventory. They are hopeful that the segment will pick up during the year.
For the current quarter, Yahoo projects revenues of $1.06 billion-$1.09 billion. They estimate to end the year with revenues of $4.5 billion-$4.6 billion. The Street projects revenues of $1.11 billion for the current quarter and $4.58 billion for the year.
Yahoo’s Talent Focus
Over the last quarter, Yahoo has been focusing on building both product offerings and their talent pool through acquisitions. Last month, they announced a $30 million acquisition of start-up Summly. Summly summarizes long stories into smaller and a faster to read format. The acquisition has raised controversy as prior to the acquisition, the app neither had many users nor a monetization strategy. But Yahoo is convinced that the acquisition will hold them in good stead as it will help enhance their mobile offering and also expand into the “summarization technology” space, which is seeing strong growth. Yahoo plans to improve the user experience by adding personalized news feeds for mobile devices for their Finance and Sports verticals.
As part of their personalization focus, Yahoo also acquired a social recommendation site, Jybe, for an undisclosed sum. The five-employee startup was founded by Yahoo alumni and boasted of an app that recommended books, movies, and restaurants based on the user’s preferences posted on social networking accounts like Facebook. Yahoo has shut down the app since the acquisition and will leverage the talent it has acquired from Jybe to build additional mobile-oriented products. Earlier during the quarter, Yahoo acquired a similar service, Propeld. Seattle-based Propeld is known for their mobile app, Alike, which also recommends nearby venues based on the user’s posts on social media sites like Facebook. Yahoo plans to use the acquisition to strengthen their talent pool.
Yahoo’s stock is trading at $23.76, with a market capitalization of $26.07 billion. It touched a 52-week high of $24.99 earlier this week. Clearly, the market likes both these talent acquisitions and Marissa Meyer’s leadership thus far. How that translates into actual revenue growth remains to be seen.