- Yahoo has announced the launch of sponsored Tumblr ad posts across Yahoo’s web properties.
- The launch follows the February launch of Yahoo Gemini ad exchange for mobile and stream ads, and the recent rumored launch of Yahoo’s video sharing platform.
- The recent moves are aimed at improving ad monetization across Yahoo properties in an attempt to jumpstart Yahoo’s stalled core revenue segment.
A lot has been said of Yahoo’s (NASDAQ:YHOO) Asian investments over the last few days with special focus trained on Alibaba’s upcoming IPO. The result has been a chance for Yahoo’s management to work away from the spotlight in their efforts to kickstart the core ad revenue business of the Sunnyvale based internet giant. In what has been a work-in-progress for close to two years, Yahoo seems to be taking steps to infuse growth into its stalled advertising revenue.
Tumblr ads to improve monetization across Yahoo properties
Yahoo announced that Tumblr’s sponsored ad posts will begin to feature across a number of Yahoo’s web properties. This is yet another move by the internet giant to improve monetization across its properties and follows our earlier post on Yahoo’s attempt to launch a video sharing platform which will help it compete with YouTube. The management is now focused on translating the various acquisitions and work over the last two years into financial metrics like revenue growth and profitability. This is definitely a good news and confirms our earlier views about the company being well on the course for a turnaround.
We had earlier stated that following the upcoming IPO of Alibaba, Yahoo will have a limited upside in the post IPO success of Alibaba due to a mandatory stake sale. Yahoo Inc.’s core operations will therefore be under greater focus and claims of a turnaround in the core business will need to be supported by financial indications sooner or later. Hence the decision to use sponsored Tumblr ad posts is a step in the right direction, and it could go a long way in justifying the hefty $1.1 billion price tag paid for the Tumblr acquisition.
According to a post on adage.com, Tumblr’s sponsored ad posts will now appear on various Yahoo properties and take its native ads strategy a step forward in an attempt to increase the distribution of higher value display ads. This will help the company overcome the problem of cannibalization of display ads by cheaper search ads, which had been reported in the firm’s Q1 2014 earnings call. Increase in sales of display ads means higher ad revenue to the higher pricing structure of display ads, in comparison to search ads.
The ads will appear as image heavy sponsored content entries alongside editorial posts on Yahoo’s digital magazines, whereas on Yahoo's regular sites like Yahoo Sports, the Tumblr ads will show up as stream ads. The move is a great move as Yahoo expands Tumblr reach to boost monetization.
The Tumblr post ads will be sold through Yahoo’s Gemini ad exchange, which was launched in February, and serves as the primary channel to buy Yahoo’s mobile search and stream ads.
Advertisers pay for engagement
Another incentive to drive advertisers to Yahoo’s native Tumblr ads is the fact these ads are sold on a cost-per-engagement basis, which means that advertisers only pay if someone clicks on the ad, shares, likes or follows the brand on Tumblr. In other words they do not pay for an impression which does not lead to an engagement of any kind.
It is no wonder that Yahoo has managed to rope in a number of top brands like Unilever's Lipton, Procter & Gamble's Tide, Lionsgate's "The Hunger Games: Mockingjay -- Part 1" and Toyota's Lexus as the pilot brands in the new endeavour.
In conclusion, it will be interesting to see if the recent measures at Yahoo can move the needle on Yahoo’s advertising revenue over the coming quarters. We continue to reiterate our long term positive outlook on Yahoo stock in view of the recent steps taken by the management to resurrect the core operations. In the short term, following the recent drop in Yahoo stock price over concerns of slowdown at Alibaba, we reiterate an acquire and hold strategy for Yahoo investors heading into the Alibaba IPO.
To see the current stock price of Yahoo click here: (NASDAQ:YHOO).