Yahoo CEO Marissa Mayer said during the company’s last earnings call in October that “there’s potentially more upside in search [than display advertising].” Yahoo’s fourth-quarter earnings report—her first full period at the helm—seems to show she was right, though that may not be a great thing. While display advertising out-earned search advertising in terms of quarterly revenue—$591 million to $482 million—the banner business saw its revenue fall 3 percent from the previous year whereas search gained 4 percent year-over-year. Yahoo’s overall fourth-quarter revenue ticked up by 2 percent year-over-year to $1.35 billion.
However, big picture-wise, neither business seems to be doing all that well. EMarketer estimated that Yahoo’s share of the U.S. display ad business fell from 11 percent in 2011 to 9.3 percent last year. Its search business has had an even steeper drop, plummeting from 17.8 percent of search ad revenues in 2008 to 6.2 percent last year, per the market research firm. Yahoo’s
It’s unclear how soon Yahoo’s display business could rebound. While the number of ads sold on Yahoo properties decreased by 10 percent year-over-year, the price per ad increased by 7 percent. Comparing those metrics with the previous quarter, number of ads sold actually grew by 3 percent and price-per-ad by 15 percent. The latter quarter-over-quarter gain is to be expected, given the ad-frenzied holiday shopping quarter when advertisers are likely more willing to outbid each other to get in front of Yahoo visitors.
But the former slight increase in ads sold follows five previous periods where Yahoo sold fewer ads than the prior year, with Q4 marking the sixth straight period of year-over-year declines. That suggests that Yahoo is having a harder time selling a good chunk of its inventory and offsetting that decline by charging more for in-demand inventory.
Of course, Yahoo could be intentionally selling fewer ads. That would be in line with the industry’s fight against the flood of display ads thought to devalue each individual banner. During Monday’s earnings call, Mayer even said that when Yahoo relaunched Mail last month, it eliminated the “What’s New” page “which is essentially a page of advertising” in order to improve the quality of the user experience. As a result, that product now features fewer ads but “the ads that remain increased in clickthrough rate and delivering more value to advertisers,” she said.
Then again, Mayer seemed to contradict any possible intention to run fewer ads later in the call. “One of the things that will allow us to sell more ads is more page views, impressions to sell,” The CEO added.
Yahoo’s Q3-to-Q4 display pricing comparisons bear some scrutiny, given that Q3 display revenue was bolstered by premium buys during the Olympics, meaning the margin between the periods could have been wider in a non-Olympic year. Though Mayer also said the consumers' shift to mobile did have some affect. Yahoo attracts more than 200 million unique mobile users each month, but the channel is "still a nascent source of revenue," she said.
The picture isn’t much rosier for Yahoo’s search business. The number of paid search clicks rose by 11 percent year-over-year with the price-per-click inching up by 1 percent. Even though Yahoo saw 8 percent more clicks on paid search listings in Q4 than in Q3, the price-per-click fell by 2 percent. That contrasts with Google. the search giant reported last week that average cost-per-click was down 6 percent year-over-year but up 2 percent quarter-over-quarter, which again, makes sense, given the typical strong Q4 demand. Thus, the contrast between Google and Yahoo suggests a diminishing interest among advertisers in Yahoo’s paid search inventory, despite its positive paid click numbers.
Overall Yahoo’s 2012 revenue figures closely mirror its 2011 ones, which could be a good sign considering the company had three different chief executives during the one year. The portal’s total revenue stagnated at $4.99 billion, still beating analysts’ estimates, while display revenue dipped down 1 percent year-over-year to $2.14 billion and search revenue popped up 2 percent year-over-year to $1.89 billion.