Yahoo trims sales outlook as Mayer’s effort falters

SAN FRANCISCO - Reuters

Yahoo has said its profit in the second quarter rose sharply, but revenues lagged, offering a mixed picture for CEO Marissa Mayer’s recovery efforts. AP photo

Yahoo Inc trimmed its outlook for 2013 revenue after revealing a sharp 12 percent slide in ad prices in the second quarter, signs that CEO Marissa Mayer’s attempts to revive the struggling Internet giant may not produce quick results.

The company is now forecasting revenue of $4.45 billion to $4.55 billion this year, down from $4.5 billion to $4.6 billion previously. Yahoo also reported that second-quarter net revenue was down slightly at $1.071 billion, though it posted adjusted profit that was ahead of Wall Street targets.

Yahoo, in a novel post-results livestream akin to a TV newscast with Mayer and CFO Ken Goldman playing news anchors, acknowledged the pressure on prices but stressed that Yahoo was developing new ad formats and technology that would reverse the trend.

“We can do better in display, and this is going to be a clear focus for the business,” a relaxed Mayer said onscreen, referring to Yahoo’s display advertising business.

On July 16, the company reported a 12 percent slide in price-per-ad in the second quarter from a year earlier, outstripping the first quarter’s 2 percent decline.

Analysts said advertising exchanges, which help get ads on spots on various Internet websites, are putting pressure on prices, especially for premium advertising.

“If there is some kind of genius happening here, it needs to start materializing later this year, and taking your guidance down is not a step in that direction,” BGC analyst Colin Gillis said. “We have had eight quarters of decline for the number of display ads sold. And the price per ad dropped significantly this quarter - that’s huge.”

“This is just the beginning of the trend, of the drop in the price per ad. You still have a pretty big gap between what you can get direct and what you can get selling on an exchange,” Gillis said.

The stock rebounded after an initial 2 percent to 3 percent slide, trading 1.1 percent higher at $27.19 after the company disclosed better-than-expected results from China’s Alibaba, the Internet giant of which Yahoo owns 24 percent.