Here's The 'Ugly' Truth About What's Killing Revenue Growth At Yahoo

All Yahoo CEO Marissa Mayer wanted to talk about yesterday on her Q2 2013 earnings call was the company’s new product portfolio, Tumblr, and how it hoped to grow its audience.

But all the Wall Street analysts wanted to ask her about was the effect of “programmatic” advertising and RTB, which appear to be the culprit of falling ad prices at Yahoo.

Some called it Yahoo’s “ugly” problem.

Revenues declined 1% to $1.07 billion. She also lowered her year-end revenue guidance slightly. Display revenue (ex-traffic acquisition costs) was $423 million, an 11 per cent decrease.

“Programmatic” or “RTB” advertising are ads that are bought and sold in super-fast, automated online auctions. They’re designed to find the best ad inventory at the cheapest available price for buyers — and thus have a tendency to drive down prices for publishers like Yahoo.

In fact, some are pinning the blame for Yahoo’s yet-to-materialise turnaround on RTB.

Two analysts asked Mayer about the effect of RTB on Yahoo’s stagnant ad biz. She said, “We can do better in display and this will be a clear focus for the business,” and later added, “Our display business has felt some negative impact, particularly due to the shifts around programmatic buying. We need to do a much better job here in order to reverse these trends.”

Analysts appear to regard the RTB trend with horror:

Sameet Sinha of B. Riley & Co. told Bloomberg, “We could have another year of absolutely no growth.”

BGC analyst Colin Gillis told Reuters, “This core business is going to be ugly for quite some time before it gets better.”

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