Yahoo! Inc. (Nasdaq: YHOO) is a global internet services company that operates the Yahoo! Internet portal. It provides varied products and content, from email and search to media streaming and downloads. Its main revenue sources come from advertising and marketing services. In fiscal year 2010, Yahoo reported revenues of $6.3 billion and net income of $1.2 billion. While Yahoo's main presence is in the United States, its well-established name and solid partnerships in Asia make international expansion a promising opportunity for the company. In response to the fast growing mobile advertising market, Yahoo has been actively pursuing partnerships with carriers and original equipment manufacturers in the mobile industry, as well as tailoring their existing marketing services to mobile users.
Founded as a web directory by two Stanford graduates in 1994, Yahoo! had become a dominant player in the field of Internet services although its competitive position has since become eclipsed by Google and others. The company had experienced healthy growth in top-line revenue year over year for the last four years, but net income has fallen year-over-year due to increased costs of doing business in the increasingly competitive sphere of internet advertising. Specifically, Yahoo!'s year over year cost of revenue is increasing faster than their revenue growth.
Advertising spending continues to show a disproportionate skew in favor of newspaper, TV and direct mail. However, the Internet channel has grown at approximately 18% per year--faster than any other channel--taking share from stagnant channels such as newspaper, which has been flat over the same time period. Continued growth in quality and availability of Internet access means that the Internet services sector--particularly Internet advertising--will remain lucrative for some time to come. An increasingly pronounced trend of replacing print directories and classifieds with virtual alternatives will also create a push for online search use as well as increase demand for online classifieds.
Online Video Advertising Growth
Video advertising promises to be a particularly lucrative area of rapid growth in the online advertising sector as online video viewership continues to rise. In research released by comScore, data shows that 175 million U.S. Internet users watched online video content in October for an average of 15.1 hours per viewer.. In terms of video property and viewership, Yahoo ranked second with 53.8 million viewers, behind Google Sites's 146.3 million unique viewers and ahead of Viacom Digital, VEVO, and Facebook.
Branded advertising is often image-based and usually priced on an "impressions" basis--the more times it shows up, the more the advertiser pays. Search advertisements are primarily text-based and usually rely on click-through; the more times a particular link is clicked, the more Yahoo! is paid. Together, the two constitute a good balance of different kinds of online advertising. However, branded advertising tends to depend very heavily on the economic situation of the brands in question.
Mobile advertising is in its nascent stages and is currently growing at more than 20% per year, making it a powerful source of potential growth for Yahoo! On its end, the company has been actively pursuing partnerships with carriers and original equipment manufacturers in the mobile industry, as well as tailoring their existing marketing services to mobile users.