On hearing that Yahoo revenue fell in Q4 2013, the company’s fourth consecutive quarterly decline, shares in after-hours trading today were down 5.8% at $36.
Revenue fell to $1.266 billion in Q4 2013, from $1.346 billion in Q4 2012.
According to Yahoo, income from display ads declined 6% in the fourth quarter of last year compared to the same quarter a year before, while prices per ad fell 7% (excluding Korea).
Net income in Q4 2013 rose to $348.2 million, compared to $272.4 million in Q3 2012. The company earned 46 cents a share (excluding traffic acquisition cost). Analysts had expected lower earnings per share.
Alibaba growth strong but less than before
Revenue in Alibaba, a large Chinese e-commerce business in which Yahoo owns a 24% stake, reported a slowdown in revenue growth. In the third quarter of 2013, Alibaba’s revenue increased year-to-year by 51% to $1.776 billion, compared to a 61% rise the year before.
Alibaba is of interest to investors, who say the company is on its way to a highly anticipated IPO.
Yahoo CEO, Marissa Mayer, said:
“I’m encouraged by Yahoo’s performance in Q4 and 2013 overall. We saw continued stability in the business, and our investments allowed us to bring beautiful products to our users and establish a strong foundation for revenue growth.”
“In Q4, we launched the new Yahoo Mail, Yahoo Finance, and our new Flickr photo books, while quickening our pace of experimentation. We are extremely heartened by the year-over-year traffic increase we experienced in 2013, an early sign of return on our investments and the acquisitions we’ve made.”
Yahoo revenue falling in Q4 is worrying
Most online income from display ads increases during the last quarter of the year. Any Internet business that sees that type of income fall during this period is probably losing its core business.
On January 16th, Mayer announced that she had fired Henrique de Castro, Yahoo’s Chief Operating Officer, i.e. head of online display ad income, after just one year at the job. He had been poached from Google in the hope of transforming the company’s advertising business.
De Castro’s departure was seen by analysts as a sign of Yahoo failing to revive dwindling advertising revenue, while rivals, such as Google and Facebook managed to increase theirs.
A few days later, Yahoo’s Editor-in-Chief, Jai Singh, left the company. Singh was said to be extremely unhappy that the marketing division was put in charge of editorial, an extremely bizarre move. For a professional journalist, marketing and editorial are the equivalent of church and state.
It is extremely difficult to have objective journalism if the person who is in charge of dealing with clients (those who place ads) is also in charge of editorial content. He or she will be naturally biased towards the client.
Mayer has spent a fortune trying to kick-start Yahoo, with big media hires, including the celebrity newsperson Katie Couric, product makeovers and acquisitions. She has also focused the operation on mobile apps. Most of the measures so far appear to have had no effect in boosting the ad sales business.
Last year, Yahoo lost its Number 2 position as a digital ad seller in the US behind Google, when Facebook took its position. According to eMarketer, Yahoo had a share of approximately $1.27 billion (7.2%) of US display ad revenues in 2013. This has fallen by 6% during the last quarter.
Rivals Yahoo, Google and Facebook mixed results
While Yahoo struggles with its fourth successive quarter of falling sales, Facebook and Google are surging ahead.
Google reported a 17% increase in Q4 2013 profits, which reached $3.38 billion, due to stronger advertising sales. The company’s reported revenues of $16.86 billion for that quarter.
Facebook’s profits surged to $523 million in the fourth quarter of 2013, compared to $64 million in Q4 2012.
Webcast – Yahoo Q4 and Full 2013 Earnings
On Yahoo’s earnings webcast below, Mayer provided scarce firm guidance on when display ads would finally follow increases in traffic, which has risen. The company now has 800 million users a month, an increase of 20% over the last year.
On the webcast Mayer said that revenue growth will come through this year, but most likely not until the second half. The webcast does not offer a forecast for 2014 overall.