Yahoo! & Google Team Up For Search & Ads

21 Oct 2015 | Author: | No comments yet »

Yahoo signs ad pact with Google; earnings and revenue miss.

SAN FRANCISCO (AP) – Unable to revive Yahoo!’s revenue growth on her own, CEO Marissa Mayer is hoping for a little help from her old friends at Google. San Francisco – Yahoo Chief Executive Officer Marissa Mayer, well into her fourth year at the helm, is still stumbling in her efforts to turn around the ailing Web portal. Mayer, a top Google executive until defecting to Yahoo! in 2012, announced the two companies had reached a three-year deal to work together in internet search and advertising.

The company on Tuesday reported its biggest quarterly sales drop since 2009 and gave a fourth-quarter revenue forecast that missed analysts’ estimates. The deal with Google, a unit of Alphabet Inc (GOOGL.O), builds on an existing search partnership Microsoft Corp (MSFT.O) under which Yahoo gets a percentage of revenue from ads displayed on its sites. Yahoo also said the planned spinoff of its stake in Chinese e-commerce company Alibaba Group may not be completed until January, later than a prior target of year’s end.

Yahoo, whose shares were down 1.6 percent in after-hours trading, said the companies have agreed to delay implementation of the deal in the United States to allow the antitrust division of the Department of Justice to review it. Mayer has been chasing sales growth by adding services for smartphones and tablets, new tools for advertisers and premium content to attract audiences and marketers. Yahoo said it expected fourth-quarter revenue of $1.16 billion–$1.20 billion, well below the average analyst estimate of $1.33 billion, according to Thomson Reuters I/B/E/S. “We are also experiencing continued revenue headwinds in our core (advertising) business, especially in the legacy portions,” Mayer said on a call with analysts. The ongoing erosion has magnified worries that the internet company will be stuck in a financial sinkhole after spinning off its lucrative stake in China’s Alibaba Group. Yahoo earlier this year sought a private letter ruling from the Internal Revenue Service to confirm whether the transaction, worth about $27 billion currently, would result in a tax obligation.

Google’s offerings on desktops and smartphones will complement the search services provided by Microsoft, which remains a strong partner, as well as Yahoo’s own search technologies and ad products, the company said. Many analysts attribute little value to Yahoo’s core business without its Asian assets, which also include a 35 percent stake in Yahoo Japan Corp (4689.T). On Tuesday, Yahoo projected fourth-quarter sales, excluding revenue shared with partner websites, of $920 million to $960 million, short of analysts’ average prediction of $1.08 billion. Apart from the Google deal, the only other good news came results came from Yahoo’s emerging businesses, which Mayer calls Mavens – mobile, video, native and social advertising.

It may be easier to gain the government’s approval this time because Yahoo!’s share of the internet search market has shrunk during the past seven years. Revenue after deducting fees paid to partner websites fell to $1.0 billion from $1.09 billion, and the company forecast a drop to $920 million-$960 million in the current quarter.

Google’s search engine, though, still processes about two out of every three search requests in the U.S., roughly the same volume as it did when the Justice Department originally objected to a Yahoo! partnership. While awaiting clearance to team up with Yahoo!, Mayer is pledging to trim the company’s expenses as revenue declines, and concentrate the remaining workforce on fewer products. “We see a unique moment and opportunity for Yahoo! as we move into 2016 to narrow our strategy and focus on fewer products with higher quality to achieve better growth and better results,” Mayer said during a review of the third-quarter results. Mayer also has lost several executives, including Jacqueline Reses, Yahoo’s chief development officer, who had shifted her focus this year to the Alibaba share sale. Investors are now focused on the fate of Yahoo!’s plan to place its remaining Alibaba holdings — 384 million shares currently worth about $28 billion — into a new company called Aabaco Holdings. In addition, the Web portal is letting people turn off the requirement to enter a password, and instead giving them the option to verify their identity via the application.

Still, some analysts doubt these initiatives will be enough to reverse the company’s trajectory. “She’s focused on product, but nothing material has come of it,” said Sameet Sinha, an analyst at B.

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