Yahoo's Monetization Plan Goes Full Speed

Jacob is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Yahoo! (NASDAQ: YHOO) is taking a major step towards reshaping the company for the future. Through restructuring efforts, Yahoo seeks to grow and respond quickly to customer needs. The capital reallocation by Yahoo is driving the stocks of the company for the revaluation. Yahoo, who has been beaten down over the years by Wall Street and institutional investors, appears to be back on track. It is true that Yahoo missed many of the trends over the past decade: social, mobile, local, etc., but the company’s current high profile management team is working hard to make up for the loss.

Mixed Earnings

Yahoo reported mixed results for the third quarter. The profit of $3.16 billion, $2.8 billion of which came from the sale of its stake in Alibaba, beat analysts’ estimates. Excluding the stake sale operating income has actually increased by just 1%. However, quarterly revenues increased by 2% over last year, a third consecutive increase.

During the latest quarter, the Yahoo search revenue increased by 11%, which is the best in the past several years. Management saw improvement in RPS (revenue per search) as one of the reason for the out-performance of the company. The company plans to continue to reform search by making distribution deals and making investments to grow market share. This is predominantly important keeping in view the Revenue per search guarantee, which the company gets from Microsoft. The guarantee is worth probably $120 million annually.

 Key Developments

Yahoo! strengthened its executive team by appointing Henrique de Castro as chief operating officer, Ken Goldman as Chief financial officer, Ron Bell as general counsel, and Kathy Savitt as chief marketing officer. 

In June, Clear Channel Media and Entertainment, a media company in America, and Yahoo declared a contract that will augment the way music, as well as entertainment news and information is delivered across digital platforms in the U.S. Early in July, Yahoo and Facebook (NASDAQ: FB) entered into strategic alliance to initiate a new advertising partnership, broaden and develop distribution arrangements, and to settle all awaiting patent claims between the two companies. Yahoo also announced a strategic pact with CNBC that will expand CNBC online reach and will provide a broadcast dais for Yahoo. Together, CNBC and Yahoo brought depth and breadth of content to the combined online audience of more than 400 million people in the U.S. each month and share Yahoo Finance content with approximately 100 million households that CNBC reaches in the U.S.

Transition to Mobile/TV Platform

Yahoo launched IntoNow 3.0, an innovative way to connect with friends and get better from the T.V. experience. The search engine major continues to innovate on mobile and connected devices. The number of TV shows tagged on IntoNow has increased by approximately 80 percent year over year.

Yahoo! launched altogether a new, interactive and interesting experience for users across PCs,tablets and connected TVs. For the 2012 London Olympic Games, Yahoo had over 3 billion page reviews. Yahoo had 45 percent more page views and 35 percent more time spent on its election related experience, when compared to 2008 during the first two weeks of Political conventions.

Yahoo expanded its connected TV experience by launching the Yahoo connected TV experience in Brazil, with AOC and Philco brand devices. Yahoo launched a new multi screen Football experience, including a new iOS App for iPad, iPhone, or iPod touch.  Yahoo acquired OnTheAir, a video chat company, in December. The deal marked a second small step towards mobile facility expansion this year. The former Google Executive and now CEO of the company has aimed at developing an articulate mobile strategy for Yahoo.

Yahoo’s financials are solid, with low debt and lots of cash. The company’s senior management focused on growing future revenues, which will drive Yahoo’s stock price even higher. The company lacks in offering the Mobile applications, which is growing to be a major setback for the company. On the other hand, rivals, particularly Google, are investing billions in aggressively diversifying their portfolios. The company’s executives have acknowledged this lately, and can see that there is a need of rapid investment in the Mobile applications. Mobile strategy could be the key factor in the turnaround strategy of the company, as the company can develop advanced applications for various features like messaging, mails, sports, and photos, which people use in theirSmartphones. The Internet company has around 167 million monthly unique visitors, but it has come up with a strategy to transfer its existing user base to the mobile Internet quickly. And more importantly, Yahoo’s, investor expectations are modest, so Mayer is not expected to work miracles, but only has to put Yahoo back on the path to growth.

 


 valuewalk has no positions in the stocks mentioned above. The Motley Fool owns shares of Facebook, Google, and Microsoft and has the following options: long JAN 2014 $20.00 calls on Facebook. Motley Fool newsletter services recommend Facebook, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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