Erich Schur, 25, has been playing fantasy football since high school. For the first time, he and his friends chose to host their 2016 league on Yahoo because of the tech company’s updated fantasy sports app. Schur especially likes the improvements to the app layout and Yahoo’s sports news.
“It’s at the top of the list,” says Schur, about Yahoo’s Fantasy Sports app. “ESPN’s app has some good qualities, but isn’t as user friendly and doesn’t run as smooth as Yahoo. And the NFL’s app isn’t even in the same conversation.”
Schur is one of 600 million monthly users who access Yahoo through its various mobile apps and mobile sites, a benchmark the web company reached in 2015, according to company data. Now Yahoo is leaning on those mobile users to get its flagging business back on track.
Yahoo, which has struggled to compete in search, social, and video with tech juggernauts like Facebook and Google, began a three-year “turnaround” strategy in 2015 that centers on mobile.
There are signs that the moves made by CEO Marissa Mayer are beginning to take hold. The multinational technology company improved its mobile app catalog and now advertising revenue coming from its mobile division is on the rise.
In 2014, Yahoo’s mobile revenue accounted for 18 percent of the company’s total traffic-driven revenue. In 2015, that rose to 23 percent. Through the first three quarters of 2016, Yahoo generated $1.03 billion in mobile revenue, accounting for 29 percent of total advertising revenue.
Industry-wide, digital advertising spending is poised to surpass television as the number one advertising media in 2017, according to eMarketer projections. With mobile accounting for more than half of all digital ad dollars in 2016, Yahoo’s 600 million monthly mobile users present a unique opportunity for the web company to grow in one of the industry’s highest potential growth areas.
Yahoo’s net earnings were $163 million in the third quarter of 2016, compared to $76 million from the same period in 2015, meaning that increasing revenue is a top priority for the company. Desktop still generates substantial revenue for Yahoo, but as more consumers go mobile, so are the ad dollars and Mayer has positioned the company to jump on that trend.
When she took over the CEO role in 2012, the company’s mobile division — lacking the personnel to undertake a major retooling of its mobile platforms — was unprepared to make the transition from desktop to a mobile-focused strategy.
“We needed to rebuild some of the talent base. We had, at the time, about 50 engineers in a company of 14,000, working on mobile,” said Mayer in a March 2016 interview with “CBS This Morning.” “Today we have more than 500 engineers working on mobile. We are one of the biggest app development shops in the world.”
Mayer has since backed up that claim by rolling out several new or updated mobile applications.
In 2016’s third quarter alone, Yahoo launched Yahoo Newsroom for iOS and Android, and Yahoo View in partnership with Hulu to stream content on the iPhone. Yahoo hosted the first-ever live stream of Berkshire Hathaway’s annual shareholders meeting, updates were rolled out for the Yahoo Sports app, iOS and Android users of the Yahoo Messenger app now have the ability to send video in chats, the Tumblr app received a redesign, and Yahoo streamed NBA and MLB content as well as the first 2016 presidential debate.
To capitalize on its growing app library, Yahoo launched a new mobile ad format called Tiles in June 2016. Tiles — which mixes video and display ads in with Yahoo’s original content — is available to potential advertisers through Yahoo’s search and native advertising marketplace, Gemini.
In addition to adding the Tiles feature, Yahoo Gemini rolled out new “audience-targeting” capabilities in 2016. According to a Yahoo press release, this allows advertisers “to use their own data, in combination with Yahoo data, to effectively target their customers in search results across devices.”
But Yahoo still faces a steep uphill climb if it’s to sustain long-term mobile ad revenue growth and compete on the same levels as the major online advertisers, according to Colin Gillis Technology Analyst at BGC Financial.
“If Internet advertising, which is still a relatively new and constantly evolving market, encounters macroeconomic difficulties, Yahoo revenues could deteriorate,” says Gillis. “Yahoo competes against large and well-positioned companies.”
Google and Facebook are goliaths of the digital advertising world. In the second quarter of 2016, they combined to generate 68 percent of all digital advertising revenue — up from 61 percent only one year earlier — according to a report written by Pivotal Research Group Analyst Brian Weisler.
But Weiser also warns against complacency for Facebook, the leader in mobile advertising.
“The inherently open nature of the web increases the ease with which a competitor could approach and capture a portion or all of Facebook’s consumers or fee-payers,” writes Weiser. “Google and other companies will persistently nip at the heels of Facebook, looking for points of entry to capture a share of Facebook’s market opportunity.”
Verizon’s deal to acquire Yahoo for $4.8 billion, if completed, could create such an opportunity for the telecom provider—and establish another digital-advertising heavyweight.
Yahoo’s content and large application library could be paired with Verizon smartphones in the future. That type of partnership would be a boon for Yahoo’s mobile advertising revenue, according to Shar VanBoskirk, a Forrester analyst.
“The more access to customer data [Verizon] has (online through Yahoo and AOL, in home via cable boxes, on mobile via smart devices) the more targeted it can be with advertising and sponsored content or product placements across those same devices,” writes VanBoskirk on her Forrester blog.
This would allow Verizon to create improved advertising products tailored to a better user experiences and directly compete with Google, Facebook, and other telecom providers, according to VanBoskirk.
But all these potential benefits are predicated on the Verizon-Yahoo deal going through. Any concerns that the deal may stall were exacerbated this month when Yahoo announced that in addition to the data breach of 500 million Yahoo accounts in 2014, a seperate 2013 attack compromised more than one billion accounts.
Whether the Verizon deal goes through or not, Yahoo’s mobile division is now a priority within the company, meaning that Yahoo has positioned itself to once again be a leading innovator and major player in the tech world.