Yahoo signs deal with Google as revenue drop

Yahoo Inc (YHOO.O) said on Tuesday it had signed a search advertising deal with Google Inc, supplying a possible boost to Marissa Mayer’s efforts to turn around the company, which also reported revenue and profit that fell short of market approximations.

The deal with Google, a component of Alphabet Inc (GOOGL.O), builds on a current search partnership Microsoft Corp (MSFT.O) under which Yahoo gets a portion of revenue from ads shown on its websites.

Yahoo has been fighting to improve revenue from ad sales in the face of stiff competition from Google and Facebook (FB.O).

The Google deal was one of the few bright spots within the company’s third quarter results statement.

Yahoo said it expected fourth quarter revenue of $1.16 billion-$1.20 billion, well below the average analyst estimate of $1.33 billion, according to Thomson Reuters I/B/E/S.

Mayer, in her fourth year as chief executive, said the prognosis was “not indicative of the performance we would like.”

“The companies are also experiencing continued revenue headwinds in our core (advertising) company, especially in the legacy portions,” Mayer said on a call with analysts.

MAVENS PERFORM

Yahoo said the proposed spinoff of its 15 percent stake in Chinese e commerce giant Alibaba Group Holding Ltd (BABA.N) – a key issue for shareholders – may now close in January.

Yahoo earlier this year sought a private letter ruling from the Internal Revenue Service to verify if the trade, value currently, would lead to a tax obligation. The request was refused by the tax bureau, but Yahoo said it might proceed together with the spinoff by year end anyhow.

Many analysts attribute little worth to Yahoo’s core company without its Asian assets, which also include a 35 percent stake in Yahoo Japan Corp (4689.T).

Besides the Google deal, the only other good news came results came from Yahoo’s emerging companies, which Mayer calls Mavens – native, video, mobile and social advertising.

43 percent increased in the quarter to $422 million. Native marketing refers to ads that combine into style and the kind of the content being viewed.

Excluding items, the company made 15 cents per share, missing the average analyst estimate.

Revenue after deducting fees paid to associate sites dropped to $1.0 billion from $1.09 billion, and the business forecast a fall to $920 million-$960 million in the present quarter.

Traffic acquisition prices, the amount Yahoo spends to attract users to its websites, soared to $223 million in the quarter from $54 million a year.

Through Tuesday’s close of $32.83, Yahoo’s shares had lost 35 percent this year.