Yahoo! Has Trouble with Display Advertising Despite an Increase in Stock Price

Yahoo!’s stock price has bounced back since Marissa Mayer was hired last year, but analysts say that it’s not a sign of a turnaround yet.

The company had a 36% jump in profits for the first quarter of 2013. But quarterly revenue was still 7% lower than a year ago. Yahoo! owns 24% of the thriving Alibaba Group Holding Ltd, which accounts for some of the increase, but its core business – online-advertising – is declining steadily. Media buyers and advertising agencies are growing more impatient with the lack of leadership in this area.

Yahoo!’s display-ad revenue is about 40% of the company’s sales and the sales of ads are declining. The revenue dropped 11% to $455 million from a year ago, and search ad revenue dropped 10% to $425 million.

Madison Avenue advertising companies are skeptical about spending more with Yahoo! advertising companies. Investing their media buying dollars into Yahoo! isn’t top priority because they aren’t sure how the search engine provides any specific benefit compared to other options.

Mayer, who was hired from Google in July to turn the company around, has been trying to quell complaints by emphasizing the commitment that Yahoo! has to advertisers. In a recent conference call with advertisers, Mayer noted that it would “take several years” for Yahoo! to see the growth rate she would like.

She also noted that display advertising on mobile devices is part of their long-term strategy. Although it will take time for mobile ads to reach the rates of standard online ads, she is confident that the mobile sales will help offset some of their overall losses in time. Mayer promised that mobile advertising details would be released in the coming months – and reported that 300 million monthly users access the service from mobile devices.

Overall, Yahoo! reported earnings of $390.3 million up from $286.3 million last year, and revenue decreased to $1.14 billion from $1.22 billion.

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