Yahoo Q3 still seems sluggish

Yahoo’s mediocre third quarter seems to have pleased Wall Street. Profits came from an asset sale, and its most important business – online display advertising – was flat at $452 million after paying out revenue-sharing (ex-TAC). Search was up 11 percent to $414 million, but only because Yahoo continues to get guaranteed revenue from Microsoft. Its search business is not growing organically, despite its “upside” potential.

Google’s quarter was “disappointing,” but it grew advertising (search and display) 15 percent on its own sites and 21 percent on partner sites. Google partners use both its search and display ad network, but that growth was probably driven by display. Yahoo’s woes come not from losing money but from stagnant growth. But critically, Google continues to gain share against Yahoo in display ad sales. Facebook is set to report its results later today, and will almost certainly gain share versus Yahoo, and probably against Google. Facebook may even be growing mobile ad sales.

So why did investors react so positively? They’re probably happy to see new CEO Marissa Mayer looking comfortably in charge, and saying she’s going to shift resources into mobile development. I dunno. Mobile advertising is barely getting started. I’d rather hear more about ad targeting, brand advertiser products, and what Yahoo intends to do about ad networks.

 

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David Card

VP Research Gigaom Research

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