Yahoo was founded by Jerry Yang and David Filo in January 1994 and was an early pioneer in the dotcom boom, but was quickly overhauled by Google and others. In 2008, it rejected a US$44.6 billion bid from Microsoft, and subsequently Yahoo’s market capitalisation slipped to just US$22.24 billion just three years later.
Yahoo earnings rise despite shrinking display revenue
Firm loses ground to rivals in online advertising market, as CEO celebrates first year in charge
Yahoo remained stuck in a revenue rut during the second quarter, muting the celebration of chief executive Marissa Mayer's first year running the internet company.
The numbers released on Tuesday showed Yahoo's earnings are still rising, but they also highlighted the challenges facing the firm as it loses ground to rivals Google and Facebook in the online advertising market that generates most of their revenue.
Yahoo sold slightly fewer display ads than it did at the same time last year, and the prices that marketers were willing to pay for the space fell by 12 per cent, too. The company made some small strides in the internet ad market dominated by Google, but it still wasn't enough to prevent Yahoo's revenue from slipping in a quarter when the digital ad market in the US increased by 15 per cent, based on estimates by the research firm eMarketer.
Google's second quarter earnings, due out today, are expected to show even more robust growth.
Yahoo's nagging ad headaches initially dragged down the company's stock by more than 2 per cent in extended trading, but the selling reversed after management assured investors that it intends to keep buying back the company's stock. The commitment comes after Yahoo had already spent US$3.6 billion buying back about 190 million of its shares since last year, fulfilling a pledge that Mayer made shortly after the company realised a US$7.6 billion windfall from selling nearly half of its stake in Chinese internet company Alibaba.
The extension of the share repurchases pleased Wall Street because it should help support Yahoo's stock price in the months ahead. Besides helping to fuel demand for the stock, the repurchases help increase earnings per share by reducing the volume of outstanding stock. Yahoo now has 10 per cent fewer shares outstanding than a year ago. The company indicated it may spend another US$1.9 billion buying back its stock, which would be enough to take about 70 million more shares off the market at current prices.
The Yahoo stock has gained more than 70 per cent under Mayer's leadership.
In an unusual live video presentation streamed on Yahoo's website, Mayer focused on other things besides finances while reviewing the company's progress since she defected from a top job at Google a year ago to try to rejuvenate one of the internet's best-known brands.
Mayer said Yahoo's employee attrition rate is down by 59 per cent and innovation in mobile is way up, thanks largely to the 17 acquisitions that she has completed, including a US$1.1 billion deal for internet blogging service Tumblr. Traffic to Yahoo's website is also rising for the first time in more than a year, she said.