Yahoo, A Year After Marissa Mayer

According to eMarketer’s report on Internet ad revenues, digital ad spending worldwide is projected to grow from $104.04 billion last year to $116.82 billion for the current year. Google will remain the dominant leader in the market with 33.2% market share. Facebook is a distant second with 5% market share, followed by Yahoo (Nasdaq:YHOO), which is projected to command 3.1% of the market. Yahoo’s share has been declining over the past two years. In 2011, they had 3.95% of the market, which fell to 3.4% last year.
Yahoo’s Financials
A year ago, Yahoo’s leadership was handed over to Marissa Mayer amid a lot of speculation. At the completion of her first year on the job, Yahoo reported mixed second quarter results. Q2 revenues fell 1% over the year to $1.07 billion, missing the market’s projected revenues of $1.08 billion. EPS grew an impressive 17% over the year to $0.35 and surpassed market expectations of $0.30 for the quarter. Earnings improved due to the extensive cost control measures that Yahoo has taken. Yahoo reported end-of-the-quarter headcount at 11,500, which was 9% lower than the previous year’s headcount.

By segment, display ad revenues fell 11% over the year to $423 million. Search ad revenues fell 5% to $403 million.

For the current quarter, Yahoo projects revenues of $1.06 billion-$1.10 billion, compared with market estimates of $1.12 billion.

Yahoo’s Acquisitions
Under Mayer’s command, Yahoo has been on an active acquisition spree. Earlier this quarter, it announced the $1.1 billion acquisition of tumblr.com. While that was one of the big purchases they made, Yahoo has been adding several other smaller firms to its portfolio to expand reach in focus areas of mobile, search, display and video. Including Tumblr, in the past quarter alone Yahoo has acquired nine organizations.

A report by eMarketer released earlier last month pegs the mobile advertising market to grow from $8.8 billion last year to $15.82 billion during the current year. Yahoo, unfortunately, does not even figure in the top 5 advertising vendors. Google is projected to continue to dominate the market with a 56% share, followed by Facebook’s 13% share. Pandora comes in a distant third with 3% share, followed by Twitter’s 2%.

To change its position, Yahoo has been building its mobile portfolio. This week, it announced the acquisition of the ten-employee team at mobile ad platform, Admovate. Admovate is focused on creating personalized ads that are delivered based on the right time and place. Yahoo plans to leverage the acquisition to improve their standing within the high growth mobile advertising market.

Earlier this month, Yahoo acquired Xobni, a startup that is known for tools that help take the clutter out of a user’s address book and mail box.  Xobni’s tools have helped Gmail, iCloud and Yahoo. Last year, they launched an iOS and Android app, Smartr Contacts, that helped sort contacts based on the level of importance that the algorithm perceived. Terms of the deal were not disclosed, but analysts expect that Xobni would have cost Yahoo more than $30 million.

During the quarter, Yahoo also acquired advanced iOS photography app maker, GhostBird Software for an undisclosed sum. GhostBird’s apps include KitCam, PhotoForge, and PhotoForge 2 that helped mobile photographers shoot with different lenses and filters and modify photos through resizing, cropping, metadata editing, and other advanced adjustments. Yahoo should be able to offer an improved Flickr app following the acquisition.

Some of Yahoo’s acquisitions are for their talent. They include one-man shop, Bignoggins Production. Bignoggins had created two mobile apps, Fantasy Monster and Draft Monster, which let users create and manage fantasy sports teams across several networks. Yahoo shut down the apps and plans to integrate them into its own Fantasy Products lineup instead. It also acquired enterprise conference call startup, Rondee, for an undisclosed sum. Within travel segment, they acquired MileWise, a travel search engine that helps search for flights after accounting for frequent flyer mile discounts.

Yahoo also bought Qwiki, an iOS app that uses photos and videos in a user’s camera roll to make movies. Analysts estimate the purchase to have cost Yahoo $50 million. Yahoo will leverage Qwiki’s talent for their video offerings. It are building on its mobile talent with the acquisition of mobile location–based gaming company, Loki Studios and polling service, GoPollGo.

Yahoo’s stock is trading at year high levels of $29.66, with a market capitalization of $32.11 billion.