Home Mobile Why Yahoo Needs To Solve Its Mobile Ad Problem Quickly

Why Yahoo Needs To Solve Its Mobile Ad Problem Quickly

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YahooAlthough Yahoo CEO Marissa Mayer emphasized the importance of mobile advertising to the company’s growth during Tuesday’s earnings call, she acknowledged that Yahoo’s mobile ad revenue has yet to become a significant portion of the company’s total revenue, which could greatly hamper the company’s future profits.

The company’s mobile revenue “is still not material,” Mayer said in the fourth-quarter earnings call, despite its mobile ad offerings nearly doubling year-over-year in 2013.

This is bad news for Yahoo. Global mobile ad spending is expected to reach $18 billion in 2014, up from $13.1 billion in 2013, according to Gartner. As marketers ramp up their mobile ad budgets, Yahoo needs to become a greater contender to capture those ad dollars.

During Q4 2013, Yahoo surpassed 400 million monthly mobile users. That’s good news for the Sunnyvale, Calif., company, but it has a long way to go in catching up with mobile-focused companies like Facebook and Twitter.

For instance, in Q3 2013 Facebook reached 874 million monthly mobile users and said 49% of its revenue came from mobile, up from 41% in Q2. Industry insiders expect it to post additional gains in mobile for Q4.

Twitter has 230 million monthly users, of which 76% are on mobile, and 70% of its revenue comes from mobile advertising, according to its Form S-1 IPO filing. Even though it trails Yahoo in the number of mobile users, it has been more aggressive in monetizing its user base.

In fact, Twitter’s mobile ad products are the reason eMarketer revised its earlier projections for Twitter upward in March. The research firm expects Twitter’s global ad revenue to hit $950 million in 2014, up from $582.8 million in 2013.

Twitter and Facebook have both actively developed their mobile ad offerings in recent months via Twitter’s MoPub acquisition and Facebook’s mobile app install ads and video ads, among other developments.

In addition to acquiring a slew of consumer-facing mobile apps and startups, Tumblr was supposed to be Yahoo’s big play for mobile users. “Tumblr is an important part of our long-term strategy for growth and user diversification and we see exciting opportunities ahead as we continue to grow,” Mayer said.

Mayer also revealed that the company had boosted the number of employees working on mobile products from less than 100 people to approximately 500 in 2013.

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One problem is that Tumblr’s traffic might be slowing down. Yahoo has notably removed its traffic reports from Quantcast and Forbes writer Jeff Bercovici pointed out that only once in six months has Tumblr exceeded the traffic level it enjoyed before being acquired by Yahoo last May, according to comScore.

On the other hand, Mayer said that time spent on Tumblr has grown nearly 50% year-over-year and the number of mobile posts on Tumblr has grown more than 200% over the same period. It is still unclear, however, exactly how many active users are on Tumblr  or what percentage of Yahoo’s traffic Tumblr is responsible for. A request for comments on Tumblr’s usage rates was not immediately returned.

“Yahoo’s inability to monetize mobile quickly does seem troubling given that mobile has been a major focus from a product standpoint since [Marissa] Mayer took over,” said Marcus Pratt, director of insights and technology at the ad agency Mediasmith. “Especially compared to Facebook, where mobile revenues went from 0% at the time of their IPO to 53% today, Yahoo seems to be moving slowly.”

In addition, while Facebook and Twitter are succeeding with native, in-stream ad units, Yahoo’s mobile offerings mainly consist of banner ads, according to Pratt. Even though Yahoo has rolled out native ad formats, such as its Stream Ads and sponsored Tumblr posts, it remains to be seen how much of an impact the ad units will have on Yahoo’s overall revenue.

Yahoo is aware that it needs to improve its mobile ad offerings, according to Scott Burke, SVP of display advertising and advertising technology at Yahoo.

“2014 will be the cross-over year for Yahoo, when over 50% of our traffic will be coming from mobile,” Burke told AdExchanger. “The challenge is building the right set of mobile experiences and then monetizing that.”

Yahoo made a few “acqui-hires” on the mobile ad-tech side, such as the four employees of AdMovate, which developed personalized, hyperlocal ads. It also recently bought (and shuttered) the mobile ad firm Sparq and mobile app developer Tomfoolery.

Yahoo also kicked off 2014 by announcing a huge overhaul of its advertising offerings, including new products such as sponsored posts on Tumblr.  Mayer’s announcement that she will be playing a more active role in driving Yahoo’s ad revenue is the latest sign that Yahoo is taking its advertising efforts more seriously.

Mayer has warned though that getting the company’s overall growth “to a pace we are happy with will take multiple years.” In an industry where consumers are fickle and advertising technology is changing rapidly, Mayer may need to move faster than that.

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