Publications
Partners
San Francisco - Marissa Mayer's quest to revive Yahoo stumbled on Tuesday with word that revenue from display ads at the heart of its business shrank in the first three months of this year.
Yahoo profit soared to $390.9m, a 36% rise from the same period last year on the back of returns from stakes in Chinese Internet giant Alibaba and Yahoo Japan. But money from its own online ads sagged.
Yahoo shares fell more than four percent to $22.80 in after-hours trade after the company reported that revenue fell 6.6% to $1.14bn in the quarter that ended March 31.
Display ad revenue dropped 11% from the same period last year.
In contrast, the overall US digital ad market grew 14.8% to $9.64bn in the first three months of this year, according to industry tracker eMarketer.
"To get the company growing at the rate we would like will take several years," Mayer said during an earnings call with financial analysts.
Google and Facebook are expected to account for 41.6% and 6.5% of US digital ad revenue this year, respectively, according to eMarketer.
"It's a similar story in the display advertising market," eMarketer said in a release.
Mayer took over in July at Yahoo after 13 years at Google, having been hired as the 20th employee and first woman engineer at the company that went on to be the new king of internet searches.
She joined Yahoo as the fifth chief executive there in as many years as the struggling internet search pioneer tried to reinvent itself as a "premier digital media" company after withering in Google's shadow.
Mayer has echoed the mantra of predecessors who maintained that the company could find prosperity by mining information about users to insightfully tailor online content and target money-making advertising.
On Tuesday, she likened her plan to get Yahoo back up to speed to a series of sprints, with the first leg comprised of bulking up the pool of talent at the company.
"We are nearing the end of the first sprint," Mayer said. "Now, our focus will shift to building beautiful products and executing well against our strategy."
Mayer said that tailoring products for mobile gadgets is a priority at Yahoo as lifestyles shift to smartphones and tablet computers.
The Sunnyvale, California-based company also planned to capitalise on multi-year partnerships with Google, Facebook, Apple and Microsoft.
Mayer praised what Facebook did with its Home software for smartphones powered by Google-backed Android software, calling the social network's creation a "great product."
Yahoo executives expected to make more strategic acquisitions, particularly of companies with teams adept at designing products for mobile devices.
Revenue from internet search ads continued to fall short of expectations when Yahoo sealed a deal to power the service using Microsoft's Bing engine, according to chief financial officer Ken Goldman.
"We talk to Microsoft every day to essentially optimise what we are doing together," Goldman said, noting that an extension of the revenue guarantee was not expected.
Yahoo in 2009 began letting Bing handle the labour-intensive job of finding and indexing content on the Internet, freeing itself to concentrate on interesting or personalised ways to present results.
Yahoo in February rolled out a make-over tailored by style savvy and engineering smart Mayer.
Web pages long cluttered with low-brow ads were redesigned to highlight news of interest to visitors along with feeds of what is getting attention online.
"I think she is doing fine," Silicon Valley analyst Rob Enderle said of Mayer's work so far at the Yahoo helm. "Typically, you are looking at about five years to turn a company around."
