Yahoo Third Quarter Earnings Beat Expectations But Keeps Losing Its Digital Ads Market Share

Maybe Yahoo’s earnings were the most watched probably because of rumours that Verizon may be backing down on the deal or even quietly demanding a $1b discount.

So the earnings report is in and the good news here for Yahoo is that it beat expectations. They posted earnings of 20 cents per share on a $1.31 revenue and this is exceeds their $1.275b they projected for the third quarter back in July. This result is also up from 15 cents per share on a $1.27 revenue in the same quarter last year.

A further breakdown by CNBC says Search revenue was $703 million for the third quarter, up from $516 million on a GAAP basis from this time last year, and beating FactSet consensus estimates of $682.2 million. But the number of paid clicks decreased 22 percent year over year.

Display revenue was $476 million for the third quarter a 7 percent year-over-year decline and below the $496.2 million expected by analysts surveyed by FactSet, as fewer ads were sold.

Looking ahead to the fourth quarter, the company expects revenue of $1.36 billion to $1.4 billion on a GAAP basis.

Yahoo Finance and Sports are still one of the most visited sites in the world and this means the challenge with the company has not been traffic even though it had tried to push into the social media space through its $1.1b acquisition Tumblr but that did little to change the fortunes of a company that should ordinarily be at the top of the digital ads revenue. At the moment, Alphabet (Google’s parent company) controls 31 percent of the digital ads market followed by Facebook which controls 12 percent of that market and then there is Yahoo which has billions of visits monthly but controls a mere 1.5 percent of the digital ads space and even that figure is down from 2.1 percent last year.

Yahoo CEO though is not perturbed by news of the Verizon deal derailing but rather said earlier today that “In addition to our continued efforts to strengthen our business, we are busy preparing for integration with Verizon,”

Yahoo suffered a massive breach two years ago where about 500 million user accounts may have been compromised. They allegedly built a software to help government agencies also spy on users which has promoted a worldwide backlash with many threatening to shut down their accounts. As it all unfolded, there were reports of Verizon threatening to pull out or demand a discount eventually.

In the end though, Yahoo seems to be looking ahead to the fourth quarter as they expect revenue of $1.36 billion to $1.4 billion on a GAAP basis.