Yahoo's sales bump shows inklings of revival

The turnaround tale at Yahoo is showing signs of gaining momentum, as the internet veteran posted its first increase in annual sales for four years. Is this a sign that the appointment of Marissa Mayer has provided the shot in the arm that the tailspinning firm needed?

For its year ending 31 December, Yahoo posted sales of $4.98bn, up a fraction on the previous year; but its quarterly results were more positive, up nearly two percent year-on-year with sales of $1.36bn. It might only be a slight increase, but it's the first time in years that the firm has posted an upturn in sales.

“Although these are very early days, the buzz certainly has returned,” said Richard Holway, chief executive of analyst firm TechMarketView.

The chief reason for Yahoo's moderate gains were the strong performance of its search unit. Quarterly revenues were up four percent year-on-year, to $465m. If you take away the costs of traffic acquisition, Yahoo's search business grew its sales by 14 percent, driven largely by double-digit increases from clicks on sponsored listings.

Such results may have elicited a wry smile from Mayer, given she joined Yahoo from search giant Google. But growing Yahoo's search business has not been central to Mayer's grand plan for bringing the glory days back to Yahoo.

Instead, Mayer has emphasised the need for Yahoo to once again become a must-visit portal on the internet and to ensure it doesn't get left behind as the online world shifts towards mobile. To that end, Mayer has instigated initiatives such as doling out smartphones to all Yahoo staff, ensuring its developers are using the same devices as its users.

Mayer has also been the driving force behind the revitalisation of Flickr and the Yahoo webmail offering, both of which had previously started to look dilapidated and unloved. It brought out a redesigned app for iPhone and iPad users, making it easier to share photos, and its Mail app got spruced up for iOS, Android and Windows Phone users.

As a result, Yahoo boasted a 10 percent increase in activity on its Mail, and the number of photos being viewed on Flickr rose 25 percent.

Mayer told analysts listening into its earning call that Yahoo had identified six core products that would kickstart a “chain reaction of growth”.

But not everything at Yahoo is rosy. Sales in its display business tumbled – down to $591m in Q412, compared to $612m a year earlier. The number of ads on its core properties dropped by 10 percent compared to the year ago quarter, with price-per-ad also slipping seven percent.

“Display advertising – which constitutes [roughly] 40 percent of Yahoo revenues – was disappointing,” noted Holway.

Mayer believes that Yahoo's focus on delivering page impressions would help it grow its display business in the coming year.

So while it may be too early to claim the internet stalwart has made a complete turnaround, Mayer has reinvigorated the company and dispelled the gloom that had engulfed Yahoo for the past few years.