Yahoo Needs To Show Financial Performance Now

According to an eMarketer report released late last year, US digital ad revenues are projected to grow from $42.58 billion in 2013 to $48.09 billion in 2014 and $53.36 billion by 2015. Google is expected to remain the market leader with its 39.9% share last year growing to 40.8% in 2014. Facebook is also building its share from 7.4% to 8.2% this year. But Yahoo (Nasdaq: YHOO), continues to slip and is expected to see its market share fall from 5.8% in 2013 to 5.4% in 2014 and 5.0% in 2015.

Yahoo Financials
While Yahoo’s recently announced first quarter results surpassed market expectations, their outlook was still bleak. First quarter revenues grew 1% over the year to $1.09 billion with earnings remaining flat at $0.38 per share. The market was looking for revenues of $1.08 billion with an EPS of $0.37.

During the quarter, display ad revenues fell 2% to $409 million with the number of ads sold growing 7% while price per ad fell 5% over the year. Search ad revenues grew 9% to $444 million with the number of paid clicks growing 6% and cost per click rising 8% over the year. Yahoo reported a 30% growth in mobile user base to 430 million.

Yahoo continues to derive solace from Alibaba’s rising stars. During the quarter, Alibaba’s revenues grew 66% to $3.058 billion with earnings growing 110% to $1.36 billion. They are about to file to go public in one of the largest IPOs in history.

For the current quarter, Yahoo projected revenues of $1.06 billion-$1.10 billion with non-GAAP operating income of $130 million-$170 million. The Street was forecasting revenues of $1.08 billion for the quarter.

Yahoo Continues Acqui-hiring
Yahoo has been trying to build their talent team through acquisitions. Recently, they acquired New York-based startup Wander for an estimated $10 million. Wander is best known for their diary app Days, which lets users share photos and animated graphic files in a single page to describe their activities for the day. Thus instead of sharing a single photograph or moment, users are able to share their day’s experiences with their friends.

As part of their acqui-hire move, earlier this quarter, they acquired Distill, a technical recruiting company for an undisclosed sum. San Francisco-based Distill has developed a talent recruiting solution that helps the HR team recruit talent by integrating video interview capabilities with programming challenges.

Yahoo’s Improved Offerings
The market’s outlook for Yahoo’s advertising market share may be gloomy. But Yahoo is still focusing on adding content and updated ad formats to their site to help turn that outlook around. They are experimenting with new ad formats and some of those have been successful. Some of their recent ad formats include the home-page takeover ads which have been received well by their advertisers. Recently, Yahoo also introduced Yahoo Gemini, a unified marketplace for mobile search and native advertising. Within content development, they tied up with Yelp to display user reviews, business information, and star ratings on their search results.

Yahoo’s stock is trading at $35.31 with a market capitalization of $35.8 billion. It touched a 52-week high of $41.72 earlier this month.

I would like to see financial performance, though, at this point. Marissa Mayer has got the market’s attention with gimmicks such as the Tumblr acquisition. But operationally, monetization-wise, Yahoo continues to disappoint. How long is the market going to tolerate that?