Yahoo clings to small gains as core business remains sluggish

While Alibaba prepares for an IPO and continues to boost Yahoo stock, Yahoo sees a bright spot in its key revenue generator -- display advertising.

Richard Nieva Former senior reporter
Richard Nieva was a senior reporter for CNET News, focusing on Google and Yahoo. He previously worked for PandoDaily and Fortune Magazine, and his writing has appeared in The New York Times, on CNNMoney.com and on CJR.org.
Richard Nieva
2 min read

Richard Nieva/CNET

If you were looking for a jump either way on Yahoo's performance this quarter, it didn't come on Tuesday. There were some bright spots in the company's earnings announcement, but Yahoo's core business remains sluggish.

Yahoo on Tuesday reported revenue of $1.1 billion for the first quarter of 2014, a 1 percent bump from the year before. Excluding traffic acquisition costs, which are spent to drive traffic to Yahoo's properties, revenue was $1.087 billion. Earnings per share were 38 cents.

Yahoo narrowly beat Wall Street's expectations of $1.08 billion in revenue and per-share earnings of 37 cents. But the telling number to look at is the company's performance in display advertising, a key revenue generator for Yahoo. That metric remained flat at $453 million, down from $455 million the year before. However, excluding traffic acquisition costs, display revenue rose 2 percent -- a small gain, but still a gain.

According to the research firm eMarketer, Yahoo claimed a little over 7 percent of all display ad revenue in the US in 2013, with $1.27 billion. For comparison, Facebook, the leader in that category, grabbed over 18 percent of US display ad revenues last year.

While Yahoo's stock has been goosed recently by the company's 24 percent stake in the successful Chinese e-commerce giant Alibaba, that company is prepping for an initial public offering in the US in the fall. That means that investors will get their payday, and Yahoo, must do something else with its core business to appease shareholders.

Alibaba saw good news; the company's revenue rose 66 percent. That certainly made investors happy. Yahoo's stock surged almost 8 percent to almost $37 in after-hours trading.

Currently, Yahoo's stake in Alibaba accounts for half of the company's market value, according to an estimate by Bernstein analyst Carlos Kirjner.

Meanwhile, Yahoo CEO Marissa Mayer has been investing in several areas, including mobile and online video. Since taking the top job at the company in July 2012, Mayer has made several mobile-focused acquisitions and overhauled key Yahoo properties, like Flickr and email. Still, as of last quarter, we hadn't seen any of her major moves on the mobile front bear real monetary fruit. Last quarter, on a call with analysts, she described mobile revenue as "not material."