SAN FRANCISCO: The future of Yahoo and the fate of Marissa Mayer has become a popular parlour game in Silicon Valley.
To some, Mayer inherited a confounding company akin to the Mona Lisa. Few know how to define it or come up with solutions to its deep-rooted problems.
One matter beyond dispute, however, is Yahoo’s continued success in the mobile game. No matter how you slice it, the Internet Company has been killing it.
The latest numbers are encouraging: $1.26 billion in gross revenue via mobile in the last quarter, and 575 million monthly mobile users, up 18 percent year-over-year.
At the first Yahoo Mobile Developer Conference here on Thursday, Mayer and other Yahoo executives intend to show how four key areas – mobile, video, native advertising (in-stream ads designed to mimic content) and social are making up for erosion in Yahoo’s traditional business in online display advertising.
The so-called MVNAS grew 100 percent in the last quarter and are forecast to contribute $1.5 billion to revenue this year. “We’ve built these businesses from the ground up, which is pretty extraordinary,” says Adam Cahan, senior vice president of mobile and emerging products at Yahoo. “Yahoo feels like the world’s largest start-up.”
“She set up a bold vision of mobile first,” Cahan says. “In so doing, she created a revolution within Yahoo in building product, acquiring talent and going to market.”
“I’m encouraged by (Yahoo’s) performance,” says Joe Prusz, head of mobile for Rubicon Project, an online advertising firm that has gone heavily into mobile technology. “It was a drastic transition that put some revenue at risk, but it has worked so far.”
Mayer has dragged Yahoo back to its technology roots with a series of moves to recruit developer talent, a shift in developer focus to mobile, redesigned apps and the outlay of $1.6 billion on acquisitions that include Tumbler. The micro-blogging site, now up to 460 million users, added $100 million in revenue this year.
The acquisition of mobile-app network Flurry has also been crucial: It gives developers the chance to earn advertising revenue from their apps. Speculation is that Yahoo will combine Flurry with Gemini, its mobile ad buying platform.
Yahoo has gained momentum in the search business. In December, its share of searches in the USA jumped above 10 percent its highest level since 2009 after it replaced Google as the default search in the Firefox browser.
Another opportunity to inflate income could come soon, when Yahoo has the opportunity to renegotiate a deal struck with Microsoft five years ago. The software giant supplies technology and advertising sales for Yahoo’s search service a business that accounted for 39 percent of revenue last year.
The arrangement has been a disappointment to Yahoo because Microsoft has proven less effective at selling search advertising than Google. Microsoft CEO Satya Nadella could be forced to offer juicier concessions to extend the relationship rather than risk losing Yahoo to Google.
“Before Marissa, Yahoo was predominantly internally focused,” Cahan says. “It was a rules-based culture of thou shall not. Today, it is a much more technical organization.”
The contours of Yahoo’s comeback are complicated by shedding its stake in Alibaba, the Chinese e-commerce behemoth. Yahoo’s $40 billion stake in Alibaba comprises most of its market value.
The first developer conference underscores the delicate balancing act Mayer faces, says Brian Blau, an analyst at Gartner.
“It’s good to see them go after developers building a real platform could help Yahoo compete better against the incumbent platforms by offering unique services like Flurry,” he says.