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Poor Results Could Signal A Bleak Future For Yahoo

Yahoo announced its fourth quarter earnings yesterday, and things are not looking good for the struggling search engine. While it has successfully broadened its range of services, pleasing users and modernizing its image, it remains weak where it really matters and is just not pulling in that all-important ad revenue.

$1.2bn in overall revenue might not sound too bad, but this represents a 2% year-on-year decline for Yahoo in an industry where slowing down can be lethal – taken in isolation, ad revenue fell by 6%. Yahoo’s weakening position could make it difficult for it to invest at a point when Google is pouring hundreds of millions into investments, buying up patents and talent. Not only is there a danger that not much will be left on the table but also Google’s position grows stronger with every new purchase, and Bing also appears to be doing well. This means that, as Yahoo struggles to gain ground, this battle is getting increasingly hard.

As every company owner knows, one of the key qualities a business needs is confidence. Loss of confidence among Yahoo shareholders could make investment – and innovation – still more difficult, and could be bad news for CEO Marissa Mayer, whose initial plaudits are increasingly being replaced by complaints. This puts the former Google executive in a tough position, as she is playing a losing game. It is notoriously difficult to turn around a big company, especially when it comes to customer confidence, and making drastic changes can be scary. By aiming for steady growth, Mayer hopes to boost ad revenues by just enough to catch up and get back ahead of the curve. “In 2014, we will continue our efforts around people, products and traffic, while concentrating our efforts on revenue,” she reassured investors.

Despite the poor year-on-year results, Yahoo actually did fairly well in the fourth quarter, suggesting that there is still room for optimism. It has done particularly well in the mobile market, with its interface design allowing for a comparatively smooth transition that bodes well for 2014, when mobile is expected to dominate the search market. Yahoo's acquisition of Tumblr gives it a further platform to develop, even if it has done little with it so far. What Yahoo needs now is a fresh strategy for drawing in potential advertisers, which could be good news for small business owners on the lookout for good deals this year.

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