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. In 2016 Yahoo! agreed sell its core internet business to Verizon for about $4.8 billion.
Yahoo! received about 42% of its revenues from search services in 2015, which it provides through an arrangement with Microsoft. The company is halfway through the 10-year partnership with the software giant. 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.
The company is focused on informing, connecting, and entertaining its users with its search (Yahoo Search), communications (including Yahoo Mail and Yahoo Messenger), and digital content products (including Tumblr, and its 4 core verticals: Yahoo News, Yahoo Sports, Yahoo Finance, and Yahoo Lifestyle).
Business outside the Americas accounts for 22% of revenue, but much of the company's total value comes from its Asian assets, worth around $17 billion.
The company continues to manage its business geographically. The Americas contributed 80% of the total revenue in 2015; Asia Pacific (13%); and EMEA (Europe, Middle East, and Africa), 7%.
Yahoo! owns a majority or 100% of all of its international operations (except in Australia, New Zealand, and Japan where the company has joint ventures and/or non-controlling interests). The company supports these businesses through a network of offices worldwide. In international markets, the company either has its own internal sales professionals or relies on its established sales agency relationships in 35 countries.
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 $184 million in 2015 on advertising, up from $142 million and $128 million in fiscal 2014 and 2013, respectively.
The company’s net revenue had been decreasing since 2012, followed by 8% growth in 2015. In 2015, Yahoo!’s net revenue increased by 8% to $4.97 billion due to an increase in the Americas segment.
The Americas revenue grew thanks to increases in search and display revenue driven by mobile devices as well as $390 million attributable to the Mozilla Agreement. Americas display revenue also grew thanks to an increase in video and native advertising, including incremental revenue following the BrightRoll acquisition and higher revenue from mobile devices driven by native advertising.
In 2015 Yahoo! posted a net loss of $4.36 billion (compared to net income of $7.52 billion in fiscal 2014), mainly due to increase in goodwill impairment charge, related to the US and Canada, Europe, Tumblr, and Latin America reporting units, and changes in other income (expense), related to changes in the estimated fair value of the Hortonworks warrants (recorded in the previous year as a gain upon Hortonworks' IPO and a gain related to the mark-to-market of the warrants).
The company posted an operating cash outflow of $2.38 billion (compared to operating cash inflow of $0.92 billion in fiscal 2014), mainly due to net loss and changes in working capital (which included the reduction of the income tax liability related to the sale of Alibaba shares in 2014) and earnings in equity interests.
Yahoo! is in the midst of a campaign to re-establish its relevancy in the face of fierce competition. 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.
The company’s strategic plan includes improving user and advertiser product quality and growing daily active users, driving continued growth in revenue realized through its Mavens (mobile, video, native and social) and explore asset divestitures. In this context, in 2016 Yahoo! agreed sell its core internet business to Verizon for about $4.8 billion. However, the deal was put in peril when it was revealed that at least 500 million Yahoo user accounts had been stolen by a hacker in 2014.
(In 2015 Yahoo! had considered spinning off its remaining stake in Alibaba to create a new company which would have included some Yahoo! businesses such as its Internet access business as well as the shares of Alibaba).
In early 2016 Yahoo! announced plans to cut 15% of its workforce (about 1,700 jobs) amid a restructuring to narrow its focus.
Mergers and Acquisitions
In 2015, the company acquired Polyvore, Inc., (a social commerce website that lets users across the globe discover and shop for their favorite products in fashion, beauty and home décor) for $161 million.
In 2014, the company completed the acquisition of Flurry, Inc., (a mobile data analytics company that optimizes mobile experiences for developers, marketers, and users) for $270 million. The combined scale of Yahoo and Flurry created more personalized app experiences for users and enabled more effective mobile advertising solutions for brands seeking to reach their audiences and gain cross-device insights.
Among its 2014 moves was Yahoo!'s acquisition of BrightRoll, a programmatic video advertising platform in the US. The acquisition makes Yahoo! the largest video advertising platform in the US.