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Yahoo Should Acquire Airpush

Posted on Monday, Feb 3rd 2014

Yahoo’s Merissa Mayer may have failed to deliver strong results for Yahoo, but she managed to drive improved user metrics at least on desktop visits. A recent comScore report on desktop web properties revealed that within the U.S., Yahoo received 195.16 million unique desktop visitors in December. Surprisingly, Yahoo outranked Google which came in second with 192.3 million unique U.S. desktop visitors and Microsoft which received 175.3 million unique visitors.

Yahoo Financials

However, Yahoo’s (Nasdaq: YHOO) fourth quarter revenues fell 2% over the year to $1.2 billion, but were in line with market projections. Earnings of $0.46 per share were also better than the market’s projected earnings of $0.38 per share for the quarter.

During the quarter, display ad revenues fell 6% to $491 million with the number of ads sold growing 3% but price per ad falling 7% over the year. Search ad revenues grew 8% to $461 million as the number of paid clicks improved 17% and cost per click fell 3% over the year. The declining pricing for both display and search ad revenues was disappointing as most analysts expected fourth quarter pricing to improve instead. As BCG Partners noted, Yahoo’s “core business is shrinking.

Another concern was the slowing growth rate of Alibaba’s revenues which grew 51% to $1.78 billion against the 61% reported a year ago. Analysts were counting on Alibaba to earn $1.82 billion in revenues for the quarter.

Yahoo ended the year with revenues falling 1% to $4.43 billion while adjusted earnings per share improved 16% to $1.52.

For the current quarter, Yahoo projected revenues of $1.06 billion-$1.10 billion, compared with market estimates of $1.08 billion. EBITDA projections of $290 million-$330 million were short of the Street’s forecast of $364 million.

Yahoo’s Acquisition Spree Continues

Yahoo, meanwhile, continued to acquire organizations to add to their growing offerings. Last week, they announced plans to acquire startup Incredible Labs for an undisclosed sum. Incredible Labs is best known for their personal assistant app, Donna. The app is said to be a good competitor to the Google Now offering as it keeps track of their user’s appointment while providing additional information such as weather and traffic updates. The app is also capable of sending out emails to contacts in case they are getting late. The acquisition is expected to help Yahoo strengthen their mobile offerings.

Last week, they also acquired social networking startup Tomfoolery for an estimated $16 million. Tomfoolery’s Anchor provides networking tools that enables group chats, file sharing, email, and voice calling within the organization. While the offering is focused on iOS and Android based devices, it can also be accessed over the web. Yahoo plans to leverage their strength to build additional social products.

During the recent quarter, Yahoo has made several such small acquisitions. They recently bought virtual world gaming company Cloud Party, which is known for their browser-based game creation engine. They also acquired Seattle-based mobile marketing startup Sparq. Sparq is an app discovery tool that also helps with building user engagement within the app. Yahoo plans to leverage their services to improve monetization efforts of their mobile offerings.

At the last Consumer Electronics Show, Yahoo also announced the $80 million acquisition of homescreen startup Aviate. Yahoo will be able to leverage Aviate’s Android-focused technology to deliver content that is more customized to the user. As part of their content strategy, they had also announced the acquisition of content delivery network, PeerCDN. PeerCDN began as a project based on real-time communication technology that lets visitors to a site communicate through text or video chat with other visitors while continuing to browse the site.

While Yahoo goes about making these acquisitions that have questionable monetization models, I would have liked it to make some more serious acquisitions instead. One company that I think Yahoo needs to evaluate as the next opportunity is Asher Delug’s Airpush. Airpush is a mobile ad company that connects app developers with inventory in their app to mobile advertisers who want to place ads. They were named the “Best Mobile Ad Network” at the 2012 Mobile Excellence Awards. A move like that would help Yahoo strengthen their mobile ad capabilities substantially, as well as show the market that they understand how to make revenues grow again.

Yahoo’s stock is trading at $36.01 with a market capitalization of $36.5 billion. It touched a 52-week high of $41.72 earlier this month.


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