By Douglas MacMillan
Marissa Mayer is finally seeing some growth at Yahoo Inc., but
it is coming at a cost.
The company on Tuesday reported its revenue--minus commissions
paid to partners for Web traffic--edged higher in the second
quarter, only the second time sales have grown in the past five
periods. Revenue from display ads, excluding the traffic costs,
rose 3.3%, to $406.7 million.
But the company posted a loss for its most recent quarter, as
the cost of acquiring traffic jumped sharply to $200.2 million from
$43.8 million in the year-earlier period.
Those costs are adding up as Ms. Mayer, three years into her
tenure as chief executive of the aging Internet portal, bets
heavily on emerging areas including mobile and video ads. The
growing portion of revenue Yahoo is paying its partners "isn't a
healthy sign," said Mark Mahaney, analyst at RBC Capital
Markets.
Revenue growth from "Mavens"--a financial metric the company
introduced earlier this year to track mobile, video, native and
social ads--is growing. Mavens revenue makes up about 32% of the
company's total, growing 60% to $399 million in the second quarter.
That was up from 58% growth in the previous quarter.
Yahoo shares fell 1.3% in after-hours trading, to $39.20.
Total revenue rose 15%. Yahoo reported its highest quarterly
revenue increase in almost nine years and display advertising saw
the "most substantial" revenue increase since 2010, Ms. Mayer
said.
Ms. Mayer has made some of her boldest bets on new mobile and
video offerings this year. In May, Yahoo announced it had won the
exclusive rights to the National Football League's first
streaming-only broadcast of a football game, a deal costing the
company more than $20 million, a person familiar with the matter
said at the time.
Earlier this month, Yahoo unveiled a new foray into legal online
gambling with a retooled version of its fantasy-sports mobile app
that lets users wager real money daily and weekly against their
friends and in bigger online tournaments.
Yet search remains a priority for Ms. Mayer, who in June
unveiled a new version of Yahoo's search engine for mobile phones.
The company earlier this year renegotiated its partnership with
Microsoft Corp., a deal that gave Yahoo more control over the
search results and ads it shows on desktops and mobile phones.
Search revenue, after commissions paid to partners, fell 3% in
the second quarter, to $415 million.
Yahoo continues to lose ground to Internet ad rivals Google Inc.
and Facebook Inc. This year, Yahoo will claim 4.6% of the $27
billion market for online ads in the U.S., down from a 5.5% share
last year, estimates eMarketer Inc. Facebook will grow its share to
25.2%, up from 23.8% last year. Google will drop slightly to 13%
this year, down from 13.7% in 2014.
Yahoo posted a loss of $21.6 million, or 2 cents a share, from a
year-earlier profit of $269.7 million, or 26 cents a share. On an
adjusted basis, earnings were 16 cents, falling just below analyst
estimates of 18 cents a share.
Investors continue to look for signs that Yahoo's planned
tax-free spinoff of its shares in Alibaba Group Holding Ltd. will
happen later this year as planned. Ms. Mayer and finance chief Ken
Goldman will likely face questions about the status of that deal on
a call with analysts Tuesday.
Write to Douglas MacMillan at douglas.macmillan@wsj.com
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