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Yahoo throws investors a bone in third-quarter revenue

Now that Yahoo has claimed its cash windfall from the Alibaba IPO, Marissa Mayer and company unveil Yahoo's mobile revenue for the first time.

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Yahoo

Yahoo is throwing investors a bone. The problem: They won't really know if there's any marrow left until next year.

As part of the company's third-quarter financial results announced Tuesday, Yahoo began releasing information about its advertising business for mobile devices, a key metric that has been driving growth at rivals like Facebook and Google.

Yahoo's mobile ad sales topped $200 million in the third quarter, the company said. Marissa Mayer, Yahoo's CEO, said mobile ad revenue this year should total $1.2 billion, before subtracting payments to partner websites. But Yahoo didn't reveal mobile sales for previous quarters, leaving investors without the context necessary to tell if the business is growing or shrinking.

But by even releasing this information at all, Yahoo has given investors another way to judge it against the competition. One example is Facebook, the world's largest social network that Yahoo once tried to buy, which said sales tied to mobile devices represented 62 percent of the company's overall revenue in the quarter ended June 30, up from 41 percent a year earlier. Yahoo, for its part, said mobile device sales represented 17 percent of its overall revenue, but didn't offer any historical figures.

Mayer was upbeat about the company's prospects and assured investors that Yahoo's turnaround was still in motion. "We had a good, solid third quarter," she said on a conference call.

The company faces intensified pressure since Alibaba, the Chinese e-commerce giant, went public last month. Mayer arrived in 2012 in an attempt to turnaround the lumbering company, but the bright spot in her effort thus far has been the company's stake in Alibaba -- a deal made almost a decade ago. Investors overlooked Yahoo's flagging core business because it gave them a chance to buy into Alibaba before its shares were available on the public markets.

Now, Yahoo must stand on its own.

The results, and the company's newfound decision to release mobile revenue information, may help to decrease investors' anxiety about the Web giant. But investors still wonder whether Mayer, once a top executive at Google, can turn Yahoo around.

For the three months ended September 30, Yahoo said sales, excluding payments to partner sites, rose a little more than 1 percent to $1.09 billion. Profit, after adjustments for stock-based acquisition and other items, was 52 cents a share. Analysts were expecting sales of $1.04 billion and profit of 30 cents a share, down slightly year over year.

Yahoo shares were up around 3 percent in early after-hours trading. The company shares closed the day roughly flat so far this year.

"We see strength in search and mobile," Mayer said. "We are gaining momentum in the four key areas of our strategy: Search, communications, digital magazines and video."

The company said sales of image-based ads continued its slip, falling 6 percent from a year ago. Google has an undisputed lead in global advertising share, with 32.4 percent of the market, according to eMarketer. Facebook comes in at No. 2 with 8 percent, followed by Yahoo with 2.4 percent.

Facebook is unusual in this regard, as mobile makes up more than 60 percent of its revenue stream, while Google and Yahoo still rely on desktops to thrive.

Mayer also faces an attack from activist investor group Starboard Value, a firm that last month said it owns a "significant stake" in Yahoo and wrote an open letter to Mayer urging her to consider a merger with AOL. The group criticized Mayer's acquisition strategy. The company has bought more than 40 small companies in the last two years, largely in an attempt to bring together mobile engineering talent.

In a conference call, Mayer addressed concerns about development, cost-cutting and acquisition strategy. She said that while the company has focused on growth through buying other tech firms categorized as talent acquisitions, building block acquisitions, and strategic acquisitions, Yahoo also has toughened employment standards -- apparently, with great success.

"To date we have had nearly 2,000 performance-related departures," she said, but added that "retention of our top performing talent has been at the highest level in years." The company laid off more than 400 employees in India and Jordan last month.

Yahoo is expected to get a $6.2 billion windfall before taxes from selling off a large portion of its stake in Alibaba in the offering, though Yahoo still retains 16 percent stake in the company. Yahoo expects it will have to pay $3.3 billion in taxes related to the Alibaba sale in the first quarter of 2015.

Yahoo made a splash last year when it bought the popular blogging service Tumblr. The company said that it expects more than $100 million in revenue from Tumblr in 2015, and positive earnings before taxes growth as well.