The oft-critiqued and Silicon Valley's favorite punching bag is no longer that. At least, not as much as it was. Heck, unlike Jeff Bezos or Ginni Romitty who are nowhere to be found on earnings calls, CEO Marissa Mayer actually showed up, with CFO Ken Goldman sitting right beside her. From $15/share at the time Mayer the company took over to over $40/share, Yahoo! is moving fast and they're giving shareholders something to be excited about. That something was a third quarter that saw $1.9 billion in sales and $6.70 of profit per share. Mobile revenue reached just over $200 million for the quarter and search revenue is up 6% from the same time a year ago, now at $450 million. 1% quarterly profit growth is certainly nothing to roister over, but Wall Street seems engrossed. Maybe because tech has lacked sexiness or because further shrewd moves like the Alibaba and Snapchat investments await for Yahoo!
Jim Cramer made an interesting point this morning on CNBC in saying that per dollar spent on acquisitions, Yahoo! has done a better job this year than Google. Nest, for instance, how is Google looking to return that $3.2 billion it cost to buy them with their hand-waving temperature technology? Yahoo! has spent close to $1.6 billion on acquisitions with the largest deal coming at the hands of Tumblr at roughly $1 billion. Mayer estimates that Tumblr will produce in excess of $100 million in revenue in 2015 due in large part to the 40% user growth rate (420 million new users, 1 billion users total, and 206 million new registered blogs) Tumblr is currently experiencing. Apparently, Tumblr is now finally profitable. At least if you're looking at the EBITDA numbers which take out taxes, depreciation, and amortization. Finding more efficient ways to monetize Tumblr, possibly through an increase in targeted ads since users are staying on the site longer now, could be a nice cash generator for Yahoo!.
Another positive from the earnings call was the rising percentage of mobile ad revenue (17%) in relation to their total revenue. Mobile, unlike PC, is not only the wave of the present but the future. Mayer's plan to institute share buybacks to shareholders is also an interesting plan as Yahoo! made $6 billion from the Alibaba IPO that took place a couple weeks ago and will look to buyback close to $3 billion of that sum. During Mayer's tenure as CEO, Yahoo! has given $7 billion in buybacks. To further satisfy Wall Street pundits Mayer will need to increase that 1% quarterly revenue growth in a sector that manages somewhere between 13-15% revenue growth per quarter. Yahoo! has the content and then the search advertising business in play. Is she banking on content driving user growth which in turn stimulates ad dollars to their bottom line? Possibly. But more astute acquisitions like Tumblr need to be made, especially now that they have some Alibaba cash to play with.
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