Even yesterday’s sweetheart deal from the Alibaba Group — allowing Yahoo to sell many fewer lucrative shares of the Chinese Internet juggernaut in its upcoming IPO — could not stop investors from smacking the Silicon Valley Internet giant down today.

Yahoo shares dropped 5.1 percent, largely due to the poor performance of its core display advertising business in the second quarter. Revenue for the area dropped seven percent in the quarter, unusual across the sector, with CEO Marissa Mayer blaming the downturn on a range of things.

Except revenue declines have been happening for many quarters now, and it suddenly occurred to Wall Street that perhaps her turnaround promises are a little harder to deliver on and would take more than frantic buying up of startups and a lot of talk about Yahoo being mobile first.

To be fair, Mayer said Q2 mobile revenues were up strongly, although the company once again did not disclose the size of that business, again, as rivals do. Meaning: Small.

Yahoo tried to sweeten all the sour by unveiling the Alibaba stock news, as well as saying it would return half of the after-tax profits that the company will glean on that public offering.

In other words, the proverbial spoonful of sugar.

But Wall Street analysts, who love to suck up whatever gruel companies dole out, were finally awakened from their diabetic coma.

“YHOO remains a work in progress,” wrote Cowen’s John Blackledge.

“Given that we don’t see any real catalysts for the core business for the balance of the year, we are stepping to the side until monetization improves,” wrote CRT Capital’s Neil Doshi, who downgraded Yahoo stock and dropped his target price to $38 from the $41 he had on it the day before.

There were a plethora of similar sentiments, which — luckily for Mayer — got drowned out today with the noisier effort by 21st Century Fox’s head fox Rupert Murdoch to grab Time Warner.

Still, Mayer was cheery and a little defiant on the conference call after the results yesterday, pointing out how much better her Yahoo changes across its business, such as a series of flashy content efforts, were compared to other leaders.

Not in the financials, though, which is why she acknowledged the very obvious in her statement with yesterday’s press release.

“Our top priority is revenue growth, and by that measure, we are not satisfied with our Q2 results,” she said. “While several areas showed strength, their growth was offset by declines.”

Let’s be clear: This is not a secular decline — it is a Yahoo one. The company used to be the top seller of display advertising in the U.S. But a new report by eMarketer said Yahoo’s share is projected to drop to six percent from 7.1 percent last year. That’s despite the total display ad market growing nearly 24 percent this year. Facebook’s display business is bigger, Google is bigger and, now, even Microsoft is bigger.

That’s why sources inside the company said that Americas head and sales chief Ned Brody is under a lot more pressure from Mayer of late. She already tossed out COO Henrique De Castro, whom she hired from Google and touted endlessly as the ad savior until she did not. Rumors about the eventual fate of Brody, who was poached cloddishly from AOL by Mayer, and the search for a new sales leader to replace him, have rocketed around the company and the larger advertising community recently.

Also someone that has to be feeling the heat is ad tech head Scott Burke. Mayer blamed the revenue decline in the quarter partially on company’s borking of the transition to its new Yahoo Ad Manager Plus, as well as marketers preferring to buy cheaper ads.

Burke and Mayer had given the big sell to the new self-serve ad platform in a rah-rah debut at the Consumer Electronics Show in Las Vegas in January. At the time, Burke said the new offering would provide a “next generation of tools” to “simplify a highly complex and fragmented market.”

Not so much yet, Scott.



4 comments
ftl
ftl

The problem with Mayer's Yahoo is that there's nothing that differentiates it from Google. In fact, most of Mayer's moves seem to be to make it look like another Google. Where's her new vision for Yahoo?


On top of that, it appears that the only way she can get top talent at Yahoo is by purchasing small startups. The bench at Yahoo must have been so depleted in previous years by top talent leaving the company for greener pastures that she had no other choice. It must have been quite a shock for Mayer when she arrived from Google.

NoNonsense
NoNonsense

It's been obvious that acquiring a bunch of companies was only adding to the complexity of a very complex company. What Yahoo needs is focus and not "talent" from a bunch of failed startups. 


Ned is doing fine, as per my information. He is under pressure as the head of the largest market but if Marissa can get 2 years with no results, he shouldn't start sweating in 2 quarters. The one to really sweat is the Asia head who has been consistently under-performing. 23% decline last year and 8% decline now. Take a look at Taiwan homepage and you will understand what will happen if you plaster ads all over your homepage and ***ew up the consumer experience.

****yahoo
****yahoo

they tried to fix things that was not broke to begin with. I was with yahoo for ten years, then they screwed the pooch and made their Email unusable. I changed all my accounts to another service. I will not be going back.

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