Yahoo’s comeback falters with less money, more problems

Coming off a second quarter that was at once “disappointing” and quite healthy, Yahoo announced $1.13 billion in revenue for the third quarter, down 5 percent year-over-year.

GAAP income from operations is down a saddening 39 percent year-over-year from $152 million to $93 million, and GAAP net earnings for Q3 were $297 million, a 91 percent decrease from $3.16 billion in Q3 2012.

What’s more, the company warchest was nearly cut in half to $3.2 billion as of Sept. 30 from $6 billion as of Dec. 31, 2012, a decrease of $2.8 billion.

During its lengthy turnaround, the company’s stock price has risen dramatically [see chart below], but the earnings just aren’t there. While at least some of this is due to Yahoo’s focus on finding new ways to connect with modern audiences (not to mention spending big on acquisitions), we do wonder when the company’s finances will match the success of its PR makeover.

The bottom line: Yahoo is investing in products and reinventing its lineup of offerings for advertisers to use. In this way, the company has reverted to a less profitable startup mode. Only now, it’s working at a global scale. We have confidence in Mayer & co.’s capability to turn this ship around, but it’s going to take more than time.

“I’m very pleased with our execution, especially as we’ve continued to invest in and strengthen our core business,” said Yahoo CEO Marissa Mayer in a perky, optimistic statement on the earnings report.

“In Q3, we launched new user experiences across many of our digital daily habits — Yahoo Screen, My Yahoo, Fantasy Sports, and more. Now with more than 800 million monthly users on Yahoo — up 20 percent over the past 15 months — we’re achieving meaningful increases in user engagement and traffic.”

Analysts fully expected Yahoo to lose market share when it comes to digital advertising revenue. Spokespersons for digital analysis firm eMarketer forecast a drop in global market share of around half a percent and a larger 1 percent slump for U.S. ad revenues. The firm also predicted a 2 percent decline in display ad market share and a .4 percent drop in search ad market share.

These amounts seem small, but they represent a $118 billion market — the majority of which is being claimed by Google and Facebook right now.

Yahoo’s own report shows a 7 percent decline for display ad revenue and an 8 percent slump for search ad revenue.

EMarketer did tell VentureBeat that despite Yahoo’s promised focus on mobile, mobile advertising revenues still make up such a negligible part of Yahoo’s bottom line that no breakout information exists for this metric.

In an era where mobile-centric and mobile-first companies are claiming a majority of revenue coming from mobile, Yahoo’s on dangerous footing. But with a string of mobile acquisitions and mobile rollouts, Yahoo is clearly aware that this is a challenge it needs to meet head-on.

Year to date, the company’s stock is up an astounding 67 percent. Movement for today shows a decline of around 2 percent.

YHOO data by YCharts