Yahoo Core Business Turnaround Well On Track

  • Yahoo has seen a decreasing price per ad leading to a decline in its display ad revenue, which is a major contributor to topline.
  • Yahoo is building a portfolio of digital magazines in order to boost its premium content, which will help attract premium advertisers.
  • Focus on premium content and native advertising has aligned Yahoo to benefit from the current mobile revolution, and will also help to revive growth in core operations over the long term.
Yahoo turnaround

Investment firm Starboard Value recently claimed that the current turnaround plan of Yahoo (NASDAQ:YHOO) wasn't effectively utilizing the company’s shareholder capital and suggested a halt to the company’s acquisition spree. However, the recent launch of digital magazines and the current trend in the company’s operating metrics suggest Yahoo stock could well be on a turnaround.

Yahoo Financial Performance

Yahoo’s core business has been stagnant over the last few quarters, putting CEO Marissa Meyer’s turnaround plan under the scanner.

Yahoo core business performance

It is clearly evident that Yahoo’s revenues from its core business of online advertising have lacked any promise over the last two years. However, recent trends in operating metrics and Yahoo’s focus on digital magazines suggest a turnaround is on the cards.

In an earlier post on Amigobulls, we highlighted two interesting trends in Yahoo’s display advertising operating metrics; the increase in the number of ads sold and decrease in the price per ad.

Yahoo Global ad display trends
Source: Yahoo

These two trends have offset each other resulting in Yahoo’s display revenues essentially remaining flat. As mentioned in our earlier post, this is a result of Yahoo’s acquisitions leading to larger number of places to display ads, though these ads have been sold at a lower price. This trend of falling ad prices is a result of advertisers viewing Yahoo content as inferior to content available with competing advertising platforms. This can be solved by creating new premium content which will attract premium advertisers.

Digital Magazines Will Drive Yahoo Topline

Of late, Yahoo has focused on building a portfolio of digital magazines in order to increase its premium content. The company has launched various digital magazines like Yahoo beauty, Yahoo technology, Yahoo movies, Yahoo food, Yahoo health and Yahoo travel, to boost the quality of content available on the platform. According to a post on, Yahoo’s strategy seems to be working with a number of premium advertisers signing up publishing ads to Yahoo’s digital magazines. This strategy of digital magazines also fits in well with native advertising, something Yahoo has been actively pursuing in its turnaround efforts.

According to a recent post on the Wall street Journal, Yahoo’s portfolio of digital magazines is seeing increased traction with readers with Yahoo tech recently having its first 3 million reader day, according to Yahoo tech columnist David Pogue.

The creation of premium content could help stabilize the falling trend in prices of display ads, which will help to revive growth in Yahoo’s display ads segment. The segment is a significant contributor to Yahoo revenues, making up 41% of Yahoo’s last twelve month (LTM) revenues. A growth in this segment would kick start Yahoo’s stagnant topline.


In conclusion, we believe Yahoo’s strategy of creating unique content and focus on native advertising will help align the company’s future to the mobile platform and revive growth in the company’s core operations. Hence, there is a considerable value in Yahoo core operations which we will discuss in greater detail in our upcoming Yahoo sum of the parts valuation. We continue to remain bullish on Yahoo, which is also reflected in our Yahoo stock analysis.

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Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice. Buying and selling of securities carries the risk of monetary losses. Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions. Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

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