Yahoo generated $200M in mobile ad revenue in Q3, aims for growth

Yahoo is starting to generate money from its mobile business after years of lagging behind larger competitors like Google (NASDAQ: GOOG) and Facebook (NASDAQ: FB). However, the company still has a ways to go before it can claim significant success in mobile advertising and apps.

In reporting its third-quarter results the Internet company disclosed for the first time how large its mobile business actually is. Yahoo said ads on mobile devices generated more than $200 million in revenue in the third quarter, or about 17 percent of the company's total revenue. Yahoo said gross revenue from mobile will be above $1.2 billion this year.

In contrast, in the second quarter Facebook said 62 percent of its advertising revenue came from mobile ads, translating into $1.66 billion in sales.

Overall, Yahoo said revenue for the third quarter--after taking out commissions paid to partners for Web traffic--increased 1 percent year-over-year to $1.09 billion, beating the company's own estimate of up to $1.06 billion. The revenue jump, however modest, was only Yahoo's second such increase in the past six quarters.

The company's net profit was $6.77 billion, up from $296.7 million in the year-ago period, which was boosted by a $6.3 billion gain from Alibaba's initial public offering last month and the sale of part of Yahoo's stake in the e-commerce giant.

"It wasn't a train wreck, but there was nothing in the core business that made me say, 'Wow, look at this,'" BGC analyst Colin Gillis told Bloomberg.

Over the past two years Yahoo CEO Marissa Mayer has tried to make the company into more of a mobile player, since computing and advertising are migrating to smartphones, tablets and other devices. The company purchased mobile application analytics firm Flurry earlier this year for more than $300 million and, according to a Bloomberg report citing an unnamed source, is also nearing an investment in mobile messaging app Snapchat.

"We are starting to see some of the fruits of some of our investments. We made the mobile investment pretty much two years ago almost to the day," Mayer told the Wall Street Journal. "We have gone from having no people, no products, no strategy and no revenue in mobile to actually getting it to material in two years."

"When I look at the broader picture, Yahoo's core is really around search and display. And mobile cuts across both," she added. "Search is a growth story for us; mobile is really a growth story for us. Our revenue has more than doubled year over year. We basically have been seeing nearly triple-digit growth there."

Mayer noted that while half of Yahoo's users are on mobile devices, mobile is still a minority of the company's traffic today. She did not say when she though half of Yahoo's revenue could come from mobile, but said that is the goal.

"We think that traffic continues to grow and given the success we have seen on mobile native ads, we think that that only means our mobile revenue will grow commensurately with traffic, as opposed to users," she added. "We think that there is a strong possibility of growth there and we also think that as we get additional advertising demand, experiment with more ad formats, etc., there will be also opportunities to drive up the price per ad."

For more:
- see this Yahoo release
- see this Bloomberg article
- see this NYT article
- see this WSJ article (sub. req.)
- see these two other WSJ articles (sub. req.)

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