Kara Swisher

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A Year of Mayer: An Ever-Rising Stock and Chinese Riches, but Core Results Less Impressive as Q2 Arrives


Yahoo will announce its second-quarter earnings today, with a lot of big questions for Yahoo CEO Marissa Mayer, who is set to deliver a live video stream of the event.

A poll of Wall Street analysts is expecting the Silicon Valley Internet giant to report earnings of 30 cents a share, up from 27 cents a year ago. But revenue is expected to decline slightly in the period, from $1.082 billion a year ago to $1.081 billion.

Longtime lack of robust revenue growth — especially compared to competitors — seems not to bother investors one bit, given that Yahoo’s stock has risen about 74 percent in the year since Mayer took over at Yahoo. That rise has largely been based on the very real prospect of a gigantic windfall from the company’s remaining 24 percent stake in China’s Alibaba Group as it prepares to go public, and the still dreamy idea that Yahoo’s management can somehow craft a new product-innovation renaissance that will mint money.

Of course, that hope remains decidedly TBD, with Yahoo buying up 16 Internet startups of varying size, mostly in the mobile space, to turbocharge the talent deficit at Yahoo. It’s still not clear how all the acquisitions fit together, or if they can actually create a breakthrough, but investors seem happy at the energetic and PR-heavy effort, at least.

It’s a great narrative, to be sure, but some on Wall Street have started to sound the alarm about trends in the company’s core business of advertising and search. You know, its real business.

“We expect an in-line quarter as improving engagement and Search trends are likely to be offset by ongoing Display challenges and lower monetization,” wrote Doug Anmuth of J.P. Morgan. “We expect Display to remain soft as Yahoo!’s sales restructuring could take time to ramp, competition is increasing, and the company has reduced some inventory on the homepage and in email.”

Stifel analyst Jordan Rohan fretted about the core, too, sounding frustrated at “the perpetual search for signs of improving fundamentals, which has proven so far proven unproductive.”

And BGC Partners analyst Colin Gillis said flatly that the main business of Yahoo — leaving out the Alibaba treasure chest — “continues to struggle significantly.”

Actually, core performance under Mayer has been more of a very mixed bag, according to data from comScore that I pulled last week showing year-to-year comparisons for key Yahoo properties in terms of total unique visitors, percentage of reach and average usage in minutes per day.

As you can see in these three charts below, which lacks good mobile usage stats, there are some bright spots, but also some very poor results in key areas that Yahoo has touted as fixed under Mayer.




The homepage — which is perhaps the most important element of Yahoo’s monetization — is a good example of the choppy trends. While monthly unique visitors and reach have risen an impressive 10 percent and eight percent in the year (presumably courtesy of a refurbished homepage Mayer ordered up), average usage has declined 13.3 percent.

(Note: At the recent shareholders meeting, Mayer used an unusual statistic she called “user interactions,” claiming that Yahoo’s redesigned homepage had upped that mystery figure 25 percent, without giving any details on what a user interaction actually is.)

According to more commonly used comScore stats, the powerful Yahoo News content site showed some of the same trends — a more modest five percent and four percent rise in uniques and reach, but a 4.8 percent decline in average usage. Interestingly, Yahoo Finance flips that, with a big 10 percent decline in uniques and a 10.9 percent decline in reach, but a 12.4 percent rise in average usage.

Another key property, Yahoo Mail, is also mixed — uniques are down one percent and reach is down 2.1 percent, while average usage is up 9.4 percent.

What’s most troubling is Yahoo Search, the other major revenue driver, which is down across the board year over year, declining 10 percent in uniques, 10.9 percent in reach and a whopping 18.1 percent in average usage. This is certainly an area of concern, even though it is an arena Mayer knows well, and it could be assuaged by improvements in revenue per search. Also of interest will be any information revealed about how the advertising search partnership is going with Microsoft, and whether its performance has improved or if there will be a rejiggering of the relationship due to longtime problems.

Perhaps the most perplexing comScore stat is related to Yahoo’s Flickr photo-sharing site. It is also on the decline — despite a major redo by Mayer — down 12 percent in uniques, 12.9 percent in reach, but up 5.5 percent in average usage. This could be due to an aggressive shift of Flickr to mobile of late, which does not seem to be reflected in comScore results as yet.

Mayer has put out only broad stats about mobile growth, all showing rising users, but has not been even slightly specific about Yahoo’s mobile monetization results, where the gains are coming from or what’s actually doing well.

Mobile is important, of course, but comScore’s annual comparisons continue to depict a core business that is not exactly growing like gangbusters, and one that shows much weaker growth than has been shown by rivals.

So it will be important to see how Mayer characterizes these core results, which have been largely ignored for the more flashy acquisitions news she has energetically been providing, the repetition of mobile victory before the results are in, and the endless pile of money coming in from China that is clearly an impressive asset.

While all those efforts are important elements of her success so far, it’ll be the core that I will be looking at when the Q2 results are in, starting at 1 pm PT.

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— Kara Swisher and Walt Mossberg, in their farewell D post