Yahoo!’s revenue drops, plans to keep more of its share in Alibaba

16 Oct 2013

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Yahoo! CEO Marissa Mayer

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Yahoo! financial results from the third quarter of 2013 reveal that revenue dropped 1pc year-on-year to US$1.081bn, and net income is down 91pc from US$3.16bn in Q3 2012 to US$297m in Q3 2013.

This significant drop has been attributed to the net gain of US$2.8bn seen in this period last year following the sale of some of its stake in Alibaba Group.

Yahoo! also announced it has amended its share repurchase and preference sale agreement with Alibaba to reduce the number of shares it will sell after the Chinese e-commerce giant’s planned IPO.

According to Reuters, Alibaba is expected to file for an IPO worth US$15bn next year. Yahoo! currently holds a 24pc stake in Alibaba and the more it holds on to, the more it will benefit if its stock rises.

Period of change

The quarter ending 30 September 2013 involved plenty of change at Yahoo! This period saw the introduction of Yahoo Screen, Fantasy Sports, Movies, Music, TV, omgl, Games, Weather and My Yahoo, which allows users to personalise their home page with an updated design.

The brand also unveiled a new logo, its first major redesign in 18 years; expanded Yahoo Stream Ads across Mail and mobile media properties; and forged partnerships with ABC News and NBC Sports to offer more premium content.

Yahoo! also acquired eight companies during this period – Bignoggins, Qwiki, Xobni, Admovate, Ztelic, Lexity, Rockmelt and IQ Engines – enhancing its presence in the mobile, social web and apps spaces.

Staying optimistic, but lowering expectations

CEO Marissa Mayer revealed that Yahoo!’s monthly users figure has risen 20pc since she took the helm in July 2012 to more than 800m. Users of mobile products are up 15pc from the previous quarter to 390m and Mayer claims, “We’re achieving meaningful increases in user engagement and traffic.”

Yahoo!’s core business of selling advertising has suffered, though, with display ad prices dropping 7pc year-on-year. But Mayer is encouraged by new ad formats the firm has been trying out, which could boost revenue on mobile.

Yahoo!’s forecast for the full year has been pulled back to US$4.425bn from US$4.5bn, and its adjusted operating income is also expected to be lower than previously projected.

“As we exit Q3, we are extremely pleased with the strength of our balance sheet, with nearly US$3.2bn in cash and securities, and we are well positioned with ample liquidity to fund our future investments for growth,” said Yahoo! CFO Ken Goldman.

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Elaine Burke is managing editor of Siliconrepublic.com

editorial@siliconrepublic.com