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For the first time Tuesday, Yahoo released numbers on how much of its revenue comes from mobile advertising. In the third quarter of 2014, mobile GAAP revenue was $200 million, 17 percent of the company’s total revenue. It’s a sizable number for Yahoo and one that suggests, but doesn’t prove, that Yahoo’s mobile strategy is working.
During the quarter three earnings call, CEO Marissa Mayer released the numbers before launching into a lengthy defense of her M&A approach. Mayer has come under much criticism for a seemingly random buy-all-the-things acquisition approach, one that hasn’t markedly improved Yahoo’s revenue in the two+ years since Mayer joined the company. But she plans to stay the course, despite the wishes of activist investor firm Starboard Value.
“Acquisitions have not been a choice but a necessity,” Mayer said on the call. She went on to outline her three pronged approach to acquisitions: Talent, building block, and strategic. The first brings in fresh talent to the company, which has “legacy technology” that needs to be rebuilt for the mobile era. “When I first arrived, attracting talent in July of 2012 was challenging to say the least,” Mayer said. “The people we gained [through acquisitions] now helm our efforts in mobile, video, native ads, and more.”
The second type of acquisition — the likes of Summly, Aviate, and RavY among others — is for both talent and technology, bringing in fresh hires and new infrastructure that helps Yahoo with its core principles of search, communications, digital magazine, and video. “Yahoo’s legacy tech is aged,” Mayer said. “We need to bring more cost effective and updatable technology into the mix.”
Lastly are strategic acquisitions, of which there have been two: Tumblr and Flurry. These acquisitions made for 80 percent of Yahoo’s entire spending on acquisitions in Mayer’s tenure, and she stands by her position that they’re invaluable for increasing eyeballs and revenue. “They’re almost always immediately accretive in terms of revenue and traffic,” Mayer said.
It was a good quarter for Yahoo, with the company beating analyst expectations of $0.32 earning per share with an EPS number of $0.53 a share (non-GAAP). Revenue rose to $1.09 billion compared to the expected $1.05 billion. But some of that windfall was bolstered by the Alibaba IPO this quarter and doesn’t necessarily portend company growth.
As others have noted, the results buy Mayer a little more time … but not much.