Yahoo profits drop but keeps share of Alibaba ahead of IPO


Yahoo has posted disappointing quarterly earnings, with quarterly profit $272.6 m, down from $335m a year earlier, as the web giant keeps a slice of Chinese ecommerce giant Alibaba ahead of its IPO.


The disappointing news comes after Yahoo chief executive Marissa Mayer has been on a buying spree, hoping to turn the fortunes of one of the first generation of internet giants as it has struggled to keep up with Facebook and Google.

Total revenues for the second quarter were just over $1bn, down from $1.1bn for the same quarter last year. Revenue from display advertising, excluding traffic costs, fell 7% to $394m.

Marissa Mayer, Yahoo chief executive, said: “Our top priority is revenue growth and by that measure, we are not satisfied with our Q2 results. While several areas showed strength, their growth was offset by declines. Yahoo Search, for example, had a strong quarter…. Our social, mobile, video and native areas also grew with significant momentum, collectively gaining nearly 90 per cent year-over-year.

“However, display remains an area of investment and transition. In Q2, we saw display revenue decline, further highlighting the fact that we need to work faster to ameliorate the negative trends.”
Yahoo's share of the $140bn digital ad market will fall from 2.86% in 2013 to 2.52% this year, according to eMarketer. Google dominates the market, with 31.45%.

Under Mayer, Yahoo has been trying to reverse that trend by concentrating on content, buying the blogging platform Tumblr for $1.1bn last May, hiring high-profile talent including former CBS Evening News anchor Katie Couric and broadcasting TV shows, including NBC's canceled Community.

Alibaba sale

Alibaba, which has valued itself at roughly $130 billion, could be the biggest technology IPO this year when it goes public, and Yahoo owns roughly 23% of the Chinese internet retailer.

Yahoo said Alibaba agreed to allow Yahoo to reduce the maximum number of shares it is required to sell in the IPO from 208 million shares to 140 million.

Yahoo also said it would return at least half of the expected billions of dollars of proceeds from the Alibaba sale to shareholders from the shares it sells in the IPO.

Ken Goldman, chief financial officer of Yahoo, said: “We would like to take this opportunity to let our investors know that we are committed to return at least half of the after-tax IPO proceeds to shareholders.”

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