Display revenue was $473 million (excluding traffic acquisition costs), representing a 1 percent increase over Q2 2011. To put that number in context, in Q2 2011, Yahoo posted a 5 percent decline in display, despite the double-digit growth in the wider display market.
In the meantime, search revenue, not a major driver of Yahoo's business for years, came in at $385 million, for a 4 percent increase. The Q2 results suggest that Yahoo's board felt that still more change at the top was needed in terms of ending Ross Levinsohn's short, yet productive interim tenure as CEO after Scott Thompson was pushed out. At the same time, the lackluster display performance will likely raise concerns that Mayer, a generally respected engineering and marketing maven, may not be the sales and content turnaround genius that Yahoo appears to need.
During the call, Yahoo CFO Tim Morse provided the overview -- it was deemed too soon to bring out Mayer -- of the company's Q2 2012 performance, noting that the prior two consecutive quarters saw display declines, hence Q2 2011 represents something of an improvement. He also noted that display was given something of a boost -- though a softer one than expected -- from the integration of interclick, which was recently integrated with Yahoo's data stack into the Genome offering.
Morse attempted to make the case that Yahoo's partnerships with the likes of ABC News, digital music service Spotify, radio network Clear Channel and Facebook would help increase its already enormous audience reach and help power improved display results."
Looking at the wider online advertising landscape, spending in the U.S. grew 23.8 percent to $9.51 billion in Q2 2012 over the same period in 2011, according to eMarketer. On an annual basis, Yahoo's share of overall U.S. online ad revenues, which peaked at 15.7 percent in 2009, sank to just 9.5 percent last year. With the online advertising market projected by eMarketer to grow 23.3 percent to $39.5 billion this year, Yahoo's share of revenues will fall further to 7.4 percent.
As to display in particular, Yahoo is a victim of the swiftly changing path of ad dollars. In 2008, Yahoo's share of overall U.S. display ad revenues rose as high at 18.4 percent and Facebook earned just a 2.9 percent share. That's reversed these days, as Yahoo's share of U.S. display ad dollars has dropped to 9.1 percent, down from an 11.5 percent share in 2011. Facebook and Google's shares of U.S. display revenues are expected to grow to 16.8 percent and 16.5 percent, respectively, this year.
So where does that leave Mayer? With interclick failing to provide the shot in the arm designed to demonstrate Yahoo's ability to play in an increasingly programmatic buying and selling ad universe, the expectation is that she will focus on areas that were strong ones for her at Google: mobile and local. Although those space are still pretty open, Yahoo will find little upside there, eMarketer says.
"Should Yahoo turn its focus toward mobile advertising, it will face a market already dominated by Mayer's former employer, Google," eMarketer pointed out in a note. Mobile ad spending in the U.S. reached $1.45 billion in 2011 -- of which Google's share of revenues reached 51.7 percent, or about $750 million. Apple and Millennial Media, which do not sell mobile search ads, earned 6.4 percent and 6.3 percent shares, respectively, of overall US mobile ad revenues in 2011, according to the online researcher. This year, overall U.S. mobile ad spending will grow 80 percent to $2.61 billion, eMarketer predicts, meaning that there's still not enough spending to go around and still be meaningful, despite the space's impressive gains.
Asked about the current mobile strategy, Morse talked a bit about Search Access, which is available on the iPad. "We also just promoted two fantastic leaders to the post of leading our mobile strategy," Morse said. "Our product strategy is to have a seamless experience across all screens."
Morse also pleaded for a bit more patience on Mayer's first public appearance as Yahoo's newest chief. "We haven't had time to brief her on guidance, we've had our heads down on the earnings. But just give her some time," he said.
By David Kaplan