Despite Falling Display Ad Sales, Yahoo’s Marissa Mayer Maintains a ‘Startup’ Mentality

Mobile, video, native and social start making money

During a call with analysts today announcing quarterly results, Yahoo chief Marissa Mayer remarked that if her company—founded in the mid-1990s—were a startup, it would be one of the best in the world. Mayer was injecting a little optimism into the conversation surrounding whether the Internet player will find its way back to growth, and she laid out an intriguing ads plan along the way. 

But first and foremost, Yahoo disclosed a deal to return $40 billion to investors in a tax-free transaction to divest of its stake in Chinese e-commerce giant Alibaba. To do that, Yahoo is creating a spin-off company that will distribute all those billions back to investors.

Without Alibaba on the books, all the focus will be on Yahoo's core ad business, and while the trajectory is still down for display ads, Mayer had encouraging words about a new category entailing mobile, video, social and native. It includes Tumblr, BrightRoll video ad platform, and native ads served in its Gemini network.

Mayer said those key digital categories will offset declines in display, which she still predicted will return to growth this year. She said mobile, video, social and native will account for $1.5 billion in revenue in 2015, basically new money.

She said these properties, including Tumblr, "would undoubtedly be one of the fastest-growing startups in the world" if they constituted a standalone company. It's a message Mayer has attempted to get across ever since taking the CEO position at Yahoo two and a half years ago, trying to capture the startup spirit.

She bought Tumblr for more than $1 billion in 2012, and now predicts it will do more than $100 million in revenue this year. She also claimed Tumblr, with 460 million users, was growing faster than Instagram and its 300 million users.

In all, Yahoo claimed 575 million monthly mobile users, and $254 million in mobile revenue last quarter. Yahoo is expected to become the No. 3 company in mobile ad sales behind Facebook and Google next year.

Yahoo also bought BrightRoll last quarter, which serves the most video ads online, according to comScore, and generated $100 million last year.

As for quarterly results, Yahoo's display ad business was still declining while search continued to be a bright spot. Display revenue in the fourth quarter was $532 million, down 4 percent from the same time last year. Search revenue was up 1 percent from last year's fourth quarter to $467 million.

Yahoo now makes about as much money from search as it does from display ads, $1.79 billion and $1.87 billion, respectively, for the full year in 2014.