Marissa Mayer is sitting atop a cash mountain of over $US12 billion at Yahoo, in part fueled by the recent sales of a big chunk of its Alibaba holding. What she does with the loot will determine if the optimism and sense of renewal (and, frankly, the fawning and sycophancy) that attended her arrival in 2012 was justified.

The release of Yahoo’s Q3 results today revealed just how important the company’s Alibaba investment was. The $US6.7 billion profit was driven almost entirely by the divestment. The underlying result was more of the same: a tepid performance at the headline and signs of encouragement amongst the tea leaves if you look long and hard enough. (Mobile, for instance, returned $US200 million in revenue.)

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And, unlike rivals Google and Facebook, Yahoo is not reliant on a single overwhelming idea to make money — its revenues are split roughly between search and display. That is important, particularly as display takes on more of the intent and discovery characteristics of traditional search thanks to advances in technology from companies like Criteo and Adroll.

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For the time being, though, the markets remain unimpressed. A sum of the parts analysis recently valued the business at less than its remaining holding in Alibaba — in other words it valued the core business at less than zero.

As to the numbers, the company posted revenues of $US1.15 billion, up one per cent on last year and comfortably beating expectations. Excluding the Alibaba sale, net income was $US297 million, or 52 cents a share. (The profits balloon to $US6.78 billion when one-off factors are included.)

In terms of financial highlights, the company reported the following points

Display

  • GAAP display revenue was $US447 million for the third quarter of 2014, a five per cent decrease compared to $US470 million for the third quarter of 2013;
  • Display revenue ex-TAC was $US396 million for the third quarter of 2014, a six per cent decrease compared to $US421 million for the third quarter of 2013;
  • The number of Ads Sold increased approximately 24 per cent compared to the third quarter of 2013;
  • Price-per-Ad decreased approximately 24 per cent compared to the third quarter of 2013.

Search

  • GAAP search revenue was $US452 million for the third quarter of 2014, a four per cent increase compared to $US435 million for the third quarter of 2013;
  • Search revenue ex-TAC was $US450 million for the third quarter of 2014, a six per cent increase compared to $US426 million for the third quarter of 2013;
  • The number of Paid Clicks was flat compared to the third quarter of 2013;
  • Price-per-Click increased approximately 17 per cent compared to the third quarter of 2013.

In a statement accompanying the results, Mayer highlighted the growing strength of the company’s mobile business. “I am also pleased to report today that our revenue in mobile is now material. In Q3, we saw mobile revenues in excess of $US200 million on a GAAP basis. Further, we estimate that our gross revenues in mobile will exceed $US1.2 billion in revenue this year. We have invested deeply in mobile and we are seeing those investments pay off. Not only are our mobile products attracting praise and engagement from users and industry awards, they are generating meaningful revenue for Yahoo.

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