Yahoo! wants to spread some cheer to Internet users around the world. Its network of websites offers news, entertainment, and shopping, as well as search results powered by Microsoft's Bing. Yahoo! generates most of its revenue through providing search and display advertising to Web operations in three categories: Communications & Communities (including Yahoo! Mail, Yahoo! Groups, and Flickr), Search and Marketplaces (Yahoo! Search), and Media (Yahoo! Homepage, Yahoo! Finance). Other revenues come from fee-based services such as premium e-mail; royalties, licenses, and mobile products; and broadband Internet access.
Yahoo! publishes content in about 45 languages and in 60 countries, regions, and territories.
Business outside the Americas accounts for about 30% of revenue, but much of the company's total value comes from its Asian assets, worth around $17 billion. This includes Yahoo!'s 35% stake in Yahoo! Japan.
Yahoo! received about 38% of its revenues from search services in fiscal 2012, which it provides through an arrangement with Microsoft. The company is three years into the 10-year partnership with the software giant, which teamed up with Yahoo! in 2010. As part of the agreement, Microsoft's Bing search engine is the search provider on Yahoo!'s websites. In addition, Yahoo! handles sales of search ads for both companies, and the two firms share search revenue.
Sales and Marketing
The company maintains three primary channels for selling its advertising services: field, mid-market, and reseller/small business. Its field advertising sales team sells display advertising in all markets and search advertising services in non-transitioned markets to leading advertisers and agencies. Its field advertising team also sells search advertising to premium advertisers in transitioned markets. Its mid-market channel sells services to medium-sized businesses, while its reseller/small business channel enables it to sell advertising services to additional regional and small business advertisers. In 2013 Yahoo! reorganized its US sales force.
Yahoo! spent about $103 million on advertising during fiscal 2012. That figure was down sharply from the $148 million it spent in fiscal 2011 and the $237 million it spent on advertising back in fiscal 2010.
The company's revenue was flat in fiscal 2012 compared to fiscal 2011. During fiscal 2012 paid clicks and price-per-click increased 7% and 1%, respectively, compared to 2011. However, display revenue decreased by 1%, driven by declines in display revenue on Yahoo! properties in the EMEA region. The total number of ads sold decreased by 13% in fiscal 2012 compared to 2011.
Although its gross revenue was flat in fiscal 2012, the company’s profits spiked from $1.05 billion in fiscal 2011 to $3.95 billion in fiscal 2012. The profits were largely the result of lower operating and administrative expenses.
Yahoo! struggles to remain relevant in the face of fierce competition from its rivals. A pioneer in Web search and navigation, Yahoo!'s collection of content and services made it an early leader in the Internet world, but Internet giant Google has since eclipsed Yahoo!, having gained nearly 65% of the US search market. (By comparison, Yahoo! has some 15% of global traffic.) In addition, Yahoo! faces competition from younger social network stars Facebook and Twitter, which have become the dominant services for online communication and information sharing.
For future growth, Yahoo! is pushing for original video content, as well as technology that will drive more ad revenues. The company has been busy making a series of video content deals with well-known Hollywood producer talent, including Tom Hanks, Robert Redford, Bill Maher, and Ben Stiller. In addition, in 2012 it signed a development deal with Vuguru (the online video production company of former Disney chief Michael Eisner) to create scripted series for its Yahoo! Screen video portal.
The company’s strategy also focuses on mobile devices and tablets to generate and grow its revenue. In 2012 Yahoo! launched a new and improved version of Yahoo! Mail, making it faster and easier to use on smartphones and other mobile devices. The company also redesigned its Flickr application for iPhone and iPod touch, making it easier to capture, share, and discover photos. The new Flickr application allows users to share photos through Facebook, Twitter, or Tumblr.
Mergers and Acquisitions
In 2013 Yahoo! agreed to pay $1.1 billion for the Tumblr blogging site with more than 100 million users. Yahoo! is using the deal to fill a social networking hole and to avoid getting left behind as people’s online habits change. Among other 2013 acquisitions, Yahoo! also acquired mobile app maker Qwiki. Qwiki allows users to create videos in Apple's iPhone. The company paid about $50 million for Qwiki.
In 2011 the company made one key technology acquisition when it purchased ad network interclick, a provider of software that helps advertisers optimize and fine-tune their campaigns, in a deal valued at $270 million.