Yahoo! Profit Falls, Revenues Miss Street

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The FINANCIAL — Yahoo! Inc. on October 20 reported results for the quarter ended September 30, 2015.

“Our Q3 results were largely within our forecasted expectations — our GAAP revenue grew 7% year-over-year and our Mavens revenue grew 43%.  As we move into 2016, we will work to narrow our strategy, focusing on fewer products with higher quality to achieve improved growth and profitability,” said Marissa Mayer, CEO of Yahoo. “In addition to sharpening focus within core business growth, our top priority is the planned spinoff of Aabaco Holdings. This is an important moment for the Company, and we continue to strive to complete the spin as quickly as we can.”

Business Highlights

In October, Yahoo announced the new, fully redesigned, more powerful Yahoo Mail app. In addition to snappy responses and quick transitions, the app can now manage outside email accounts and also features Yahoo Account Key, the Company’s password-free sign-in experience that takes user convenience and security to the next level.

In Q3, Yahoo introduced a new custom audience feature for Yahoo Gemini, allowing advertisers to leverage their own data alongside Yahoo data for more efficient retargeting across devices.

In September, Yahoo acquired Polyvore, a leading social shopping site, to accelerate the Company’s Mavens growth strategy (mobile, video, native, and social).

In October, the Company reached an agreement with Google that provides Yahoo with additional flexibility to choose among suppliers of search results and ads. Google’s offerings complement the search services provided by Microsoft, which remains a strong partner, as well as Yahoo’s own search technologies and ad products.

At Advertising Week, Yahoo announced the unification of all programmatic advertising technology under the BrightRoll brand and introduced BrightRoll Demand-Side Platform (“DSP”) for programmatic buying of video, display and native advertising that leverages exclusive access to Yahoo data, and the BrightRoll Exchange, which connects buyers and sellers of high-quality video and display inventory through integration with 100 DSPs and thousands of sites and mobile apps via Real-Time Bidding, private marketplaces and programmatic direct.

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Lisa Utzschneider was appointed Chief Revenue Officer to lead Yahoo’s global sales organization and serve the needs of advertisers worldwide.

At Yahoo’s second Mobile Developer Conference, the Company hosted more than 500 developers in New York City to share the latest updates to the analytics, advertising, monetization, and engagement products in the Yahoo Mobile Developer Suite. Updates included Tumblr In-App Sharing, Real-Time Metrics and Native Video Ads for Publishers.

Yahoo launched two new lifestyle-focused digital magazines, Yahoo Real Estate and Yahoo Celebrity.

In Q3, the Company introduced Yahoo News Live with Katie Couric and the Yahoo News Team, a daily live stream bringing consumers the latest on the biggest stories and people in the news.

In September, Yahoo’s award-winning fantasy broadcast series, Fantasy Football Live, celebrated its 10th season premier with industry leading expert analysis and up-to-the-minute injury reports helping fantasy players set rosters and win their leagues.

Mavens revenue represented 29 percent of traffic-driven revenue in the third quarter of 2014, and increased to 38 percent in the third quarter of 2015.

Mobile revenue represented 20 percent of traffic-driven revenue in the third quarter of 2014, and increased to 24 percent in the third quarter of 2015.

Gross mobile revenue for the third quarter of 2014 and 2015 was approximately $345 million and $424 million, respectively.

Search Revenue:

Gross search revenue was $870 million for the third quarter of 2015, an increase of 2 percent compared to the third quarter of 2014.

GAAP search revenue was $509 million for the third quarter of 2015, an increase of 13 percent compared to the third quarter of 2014.

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Cost of revenue – TAC paid to search partners was $119 million for the third quarter of 2015, which includes TAC from the Mozilla agreement, compared to $3 million in the third quarter of 2014.

The number of Paid Clicks increased approximately 5 percent compared to the third quarter of 2014.

Price-per-Click decreased approximately 2 percent compared to the third quarter of 2014.

Display Revenue:

GAAP display revenue was $509 million for the third quarter of 2015, a 14 percent increase compared to the third quarter of 2014.

Cost of revenue – TAC paid to display partners was $104 million for the third quarter of 2015 compared to $51 million in the third quarter of 2014.

The number of Ads Sold increased approximately 8 percent compared to the third quarter of 2014.

Price-per-Ad increased approximately 8 percent compared to the third quarter of 2014.

Cash, Cash Equivalents, and Marketable Securities:

Cash, cash equivalents, and marketable securities were $6.8 billion as of September 30, 2015 compared to $10.2 billion as of December 31, 2014, a decrease of $3.4 billion. In the first quarter of 2015, the Company satisfied the $3.3 billion income tax liability related to the sale of Alibaba Group ADSs in September 2014.

“We are pleased with our financial flexibility and strong balance sheet, with a cash and marketable securities position of $6.8 billion at the end of Q3,” said Ken Goldman, CFO of Yahoo. “This quarter we’ve reduced spending in areas such as workforce, facilities and discretionary expenses, and in our ongoing efforts to control expenses, we’ll continue to focus our headcount on growth initiatives.”

 

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