After a few troubled years, Yahoo seems to have seen light in turning around. It is now making more money from search ads than display banners.
Yahoo reported on Tuesday that its overall revenue grew by 1% to $1.15 billion in the third quarter to beat analysts' estimates. That marks the first time Yahoo's overall quarterly revenue increased over the previous year's mark since the fourth quarter of 2012. Revenue from search advertising grew for the third straight quarter, this time by 4% year-over-year to $452 million. While Yahoo didn't get people to click on any more search ads than they did a year ago, it was able to get advertisers to pay 17% more on average for each of those clicks.
But the search revenue growth wasn't enough to improve Yahoo's overall ad revenue. Yahoo's combined search-and-display advertising revenue hit $899 million in the third quarter, a 1% drop compared to a year ago. Yahoo's long-struggling display advertising business is to blame for that.
Over the past few years, Yahoo had trouble getting advertisers to spend on banner ads, leading to a consistent decline in display ad revenue for the company. The average ad pricing has also been declining. Yahoo's display-ad revenue fell by 5% year-over-year to $447 million in the third quarter, as ad price declines failed to offset volume growth. The average price advertisers paid for a display ad dropped by 24% even though Yahoo sold 24% more banners than it did a year ago.
The news article pointed out that Yahoo's problem is: Yahoo is getting advertisers to buy more ads, but for Yahoo's business, they're buying the wrong ads. For the past year, Yahoo's quarterly sales of pricey premium ads like home-page takeovers has declined, while advertisers flocked to the cheaper native Stream Ads that appear within the portal's content feeds.Yahoo has spent 2014 trying to reverse the display-advertising slide. Unfortunately none has yet to result in an improved display ad business.
Yahoo's CEO Marissa Mayer said Yahoo expects its display business to return to growth in the next year. She said that if she had to choose between seeing growth in the number of display ads sold or in the average price-per-ad, she would choose the former. "In my view it's better to have more things to sell," she said.
Source: adage.com
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