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Executives

Joon Huh

Marissa A. Mayer - Chief Executive Officer, President and Director

Kenneth A. Goldman - Chief Financial Officer

Analysts

Anthony J. DiClemente - Barclays Capital, Research Division

Youssef H. Squali - Cantor Fitzgerald & Co., Research Division

Jason S. Helfstein - Oppenheimer & Co. Inc., Research Division

Benjamin A. Schachter - Macquarie Research

Heath P. Terry - Goldman Sachs Group Inc., Research Division

Mark S. Mahaney - RBC Capital Markets, LLC, Research Division

Carlos Kirjner - Sanford C. Bernstein & Co., LLC., Research Division

Douglas Anmuth - JP Morgan Chase & Co, Research Division

A. Justin Post - BofA Merrill Lynch, Research Division

Jordan Monahan - Morgan Stanley, Research Division

Kenneth Sena - Evercore Partners Inc., Research Division

John R. Blackledge - Cowen and Company, LLC, Research Division

Peter Stabler - Wells Fargo Securities, LLC, Research Division

Yahoo! (YHOO) Q4 2012 Earnings Call January 28, 2013 5:00 PM ET

Operator

Good afternoon, ladies and gentlemen, and welcome to the Yahoo! Fourth Quarter and Full Year 2012 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Joon Huh. Mr. Huh, you may begin.

Joon Huh

Thank you. Good afternoon, and welcome to Yahoo!'s Fourth Quarter 2012 Earnings Call. On the call today will be Marissa Mayer, Chief Executive Officer; and Ken Goldman, Chief Financial Officer.

Before we begin, I'd like to remind you that today's call may contain forward-looking statements concerning matters such as our strategy, product plans and our expected financial and operational performance, as well as our investment priorities, stock repurchases and expectations for growth, innovation and monetization. Actual results may differ materially from the results predicted in our statements and reported results should not be considered indicative of future performance. Potential risks and uncertainties that could cause our business and financial results to differ materially from our forward-looking statements are described in our Form 10-Q filed with the SEC on November 8, 2012, as well as in the earnings release included in Exhibit 99.1 to the Form 8-K we furnished today to the SEC.

All information discussed on this call is as of today, January 28, 2013, and Yahoo! does not intend and undertakes no duty to update this information to reflect subsequent events or circumstances.

On today's call, we'll also discuss non-GAAP financial measures as we talk about the company's performance. Reconciliations of these non-GAAP measures to the GAAP measures we consider most comparable can be found on our corporate website, info.yahoo.com, under Investor Relations.

We have prepared remarks that will last about 30 minutes, then we'll have a brief Q&A session. And now, I'd like to turn the call over to Marissa.

Marissa A. Mayer

Thank you, Joon. Good afternoon, everyone, and thank you for joining us today. I'm excited to speak with you about our Q4 and 2012 results. It's hard to believe that the fourth quarter was only my first full quarter here at Yahoo!. I'm pleased with our results and our progress. We saw a continued stability in our financials, increased our pace of execution and refocused our efforts around product excellence, user experience and growth. The quarter was solid, with fourth quarter revenue increasing 4% year-over-year. Additionally, and more importantly, 2012 was the first growth year for the company in 4 years. While it's a modest increase, revenue grew 2% year-over-year for the first time since 2008.

We've got a lot of work ahead of us, but we're seeing early positive trends, especially around our key focus areas: people and products. As I mentioned on our October call, talent is fundamental to our success. Attracting the best people to Yahoo! is critical, and we embarked on a number of initiatives to make Yahoo! the absolute best place to work.

To date, we introduced rigorous hiring protocols, quarterly performance reviews for all employees, aggressive quarterly and annual goals for the company, for teams and for individuals, and new product readiness process for launches, internal feedback tools for new products, smartphones and higher-performance laptops for all employees, free food worldwide, an employee-driven system for breaking down bureaucracy, as well as a weekly all-hands meeting to communicate transparently, accountably and efficiently on the most important issues facing the company.

It's been an incredibly busy 6 months. There's basically been a new major initiative every other week. These efforts have been executed with incredible speed and have achieved tremendous transformation within the company. Each initiative has a specific purpose and goal. To offer an illustration, Mobile is incredibly important to our strategy. Each employee having a smartphone helps them form the insights and understandings that they need to see innovative opportunities for our products. Here are a few more examples of progress achieved through these initiatives.

In Q4, with our process to break down process and bureaucracy, we resolved 385 of the highest priority obstacles that our employees identified to us, taking Yahoo! further down the path to becoming the absolute best place to work.

Our efforts to improve Yahoo!'s work environment are already generating response in the talent arena. We're seeing significantly lower attrition of Yahoo!s globally, especially among our highest-performing talent. We're also seeing a marked increase in the volume and quality of people applying to join Yahoo!.

In November, through our company-wide survey, 92% of employees provided feedback. While there were many signs of increasing momentum, the most notable is that employee confidence in the future of Yahoo!'s business rose 32%. Today, 95% [ph] of Yahoo!s are optimistic about the company's future. According to benchmark data across industries, this type of rising confidence in such a short period of time is unprecedented for any company.

Now more specifically on people, we've continued to round out our world-class leadership and advisory team. In December, we announced Max Levchin is joining our board, which is a big win for Yahoo!. Max is one of the most well-known entrepreneurs in our industry and someone I've admired throughout my career. He has a string of successes with the companies he's founded and invested in, including Slide, PayPal and Yelp. I've had the pleasure of working with Max in the past, and his sense for technical excellence and product design will be a tremendous asset to Yahoo!.

Recruiting expert Sandy Gould also recently joined Yahoo! as our Senior Vice President of talent acquisition. Sandy will amplify our efforts to attract and retain great employees and will also help us build our associate program for recent college graduates.

We've also promoted outstanding talent from within, elevating longtime Yahoo! Jay Rossiter to serve as Senior Vice President of Platform. Jay's deep knowledge of both Yahoo! and our industry will drive rigorous execution against our product roadmaps. With Jay at the helm, we centralized an entire organization that will ensure our products are built in a technically excellent way, thus utilizing our key platform.

And Adam Cahan now heads our Mobile and Emerging Products organization. As many of you know, Adam founded IntoNow, which Yahoo! acquired in 2011. He brings true entrepreneurial spirit to our management team in addition to his intuitive product sense. Adam's Mobile and Emerging Products organization will be an innovation engine for creating best-in-class user experiences and mobile monetization.

We're also seeing promising trends around our technical talent. In Q4, we hired Benoit Schillings, a distinguished engineer and Yahoo! fellow. Benoit was formally Chief Technologist at Nokia and more recently at Facebook.

We also made 3 very strong talent acquisitions, including Stamped, OnTheAir and our most recent acquisition last week, Snip.it. As I noted in October, our M&A effort, including talent acquisitions, will be conducted thoughtfully and tied to key growth opportunities.

In addition to great talent, we're also aligning our efforts for success. Led by our Chief Operating Officer, Henrique de Castro, we recently reconfigured our sales team to better serve our customers and make it easier for our employees to execute.

First, we solidified our client touch points. In the past, clients have had many different sales relationships with Yahoo! that were based on our internal product structure instead of their business objective. Customers felt it was sometimes confusing and cumbersome to do business with us. Looking at our sales organization through the eyes of our clients, we aligned into a solutions-focused team that offers a single point of contact for each customer.

Second, we moved to a full industry category alignment model across the entire North American sales organization. You can now better focus -- we can now better focus on the challenges of clients in key verticals and bring the best Yahoo! products and insights together to meet their needs. We've already seen cases where the sharing of industry best practices have increased advertiser spend. I'm particularly optimistic about what this new structure can do for our customers and our business.

And third, we've increased focus on the top 1,000 advertisers with the highest potential, ensuring we are fostering fruitful, long-term relationships with our most valued clients.

Overall, we made significant progress on establishing and enabling our team in Q4. Great talent and an environment that values and prioritizes our users, customers and execution velocity will drive terrific value for the company. This is a key area I will continue to focus on.

Another priority that I defined on our last earnings call was product excellence, and we're off to a very good start. Yahoo! is about making the world's daily habits more inspiring and entertaining, and this really showed in our recent product launches, especially those on Mobile.

E-mail is the ultimate daily habit. In December, we delivered a new Yahoo! Mail, which is faster, elegantly designed and easier to use. With Mobile top of mind, we launched our new Mail product across 4 platforms: Desktop, iOS, Android and Windows 8. I'm very proud of our team's execution here. This launch was a quantum leap forward for us. In fact, the number of our daily active users is up more than 10% year-over-year after the launch.

In December, we also announced a completely new Flickr iOS app. It was immediately featured in Apple's App Store and heralded as the best mobile photo app out there by Forbes Magazine. With billions of photos and an engaged community of photographers, this is a huge win for Yahoo! and our passionate users. Since the release of our new iOS app, we've seen 25% more photos uploaded, viewed and shared on a daily basis.

Looking at Search, we added volume and overall traffic through Affiliate-hosted Search and Mobile Search. Overall, our fourth quarter benefited from user interface improvements on Mobile, very strong sales execution, as well as favorable macroeconomic and seasonal trends. Combined with Microsoft's improvements to the Bing ad-serving system, these efforts drove strong user adoption, a lift in engagement and increased revenue as you can see in our results.

Turning to Yahoo! News, we launched the Election Control Room, a deeply immersive media experience built in partnership with ABC News. Our users spent 1.9 billion minutes watching our coverage of the U.S. elections, making it the most watched live stream event in Yahoo!'s history.

Yahoo! has always excelled at partnerships, and in Q4, we were excited to establish a partnership between Yahoo! Sports and NBC Sports. This strategic alliance brings together their broadcast expertise with our reach and best-in-class fantasy products.

And finally, we brought our entertainment site, omg!, together with CBS prime time TV show, The Insider, forming omg! Insider, an always-on experience for both TV and Web. Our partnership with CBS brings Yahoo! to millions of nightly viewers with 6 prime time airings each week. Early ratings show that viewership is up more than 20% in key demographics. And for me personally, while it's not yet a daily habit because I'm not able to watch every day, I would if I could.

Overall, I'm very proud of what our team accomplished in Q4. Yahoo! is committed to excellent execution. Focusing on people and products is how we will deliver growth and value to our shareholders over the long term. While we continue to make smart investments for growth, I want to stress that Yahoo! is also focused on profitability. We're making prudent changes to our discretionary spending and ensuring increased oversight by our management team.

And furthering our commitment to our shareholders, we've continued our capital return from our Alibaba ownership stake. In Q4, we repurchased $1.5 billion worth of stock or approximately 80 million shares. This marks significant progress towards the $3 billion of additional capital return that we announced in September.

With that, I'd like to pass the floor to Ken, who will speak in greater detail about our fourth quarter financial results. Afterward, I'll share more about the road to growth for Yahoo! in 2013 and beyond.

Kenneth A. Goldman

Great. Thank you, Marissa. Good afternoon. Thank you for joining us today. On the call today, I'll walk through the Q4 financial results and then provide some forward guidance for both Q1 and the full year of 2013.

For the purpose of today's discussion, I'll be referring mostly to non-GAAP results. Please see our earnings presentation located on our Investor Relation website for reconciliations. These numbers do exclude certain items, including cost associated with the closure of our Korean business in Q4 and other restructuring charges.

Before I do get into details, I want to highlight 4 key financial priorities for the company and our recent performance relative to those priorities: First, revenue growth. Q4 marks the fourth quarter in a row of revenue ex-TAC growth for the company and the first full year of revenue ex-TAC growth since 2008. While overall growth is still modest at this point, we do believe we can excel in this space [ph] over time and are confident we're well positioned to reach at or above market revenue growth rates for the company.

Search revenue growth continue to accelerate in Q4, and we have the right people and strategy in place to similarly execute on our Display business. The company is well positioned to regain growth over time.

Two, second, in cost control. While our total dollar costs were up slightly in Q4, we are able to reduce cost of several key line items on a year-over-year basis. We did this while still making meaningful investments in our people, products and the pace of innovation as we create a strong culture. This management team is more than ever committed to controlling our cost and expense structure, as I am personally committed, while we invest in strategic priorities.

Third, capital efficiency. The company performed well from an overall margin perspective in Q4, achieving a non-GAAP operating margin of 23 percentage points, up 100 basis points over the prior year driven by higher operating leverage. Our company continued to generate significant adjusted EBITDA of $1.7 billion for 2012. The adjustment of EBITDA primarily relates again to the cost of closing down our Korea business.

We have a strong balance sheet with over $6 billion of cash and securities and additional liquidity from the credit facility put in place in Q4. This provides us flexibility to make key investments to fuel growth and realize better returns on our capital and assets.

Finally, commitment to shareholders. We made a strong statement to our commitment to shareholders and repurchased 79.6 million shares of stock at an average price of $18.24 for $1.45 billion in the fourth quarter. This leaves a remainder of just over $1.5 billion to be returned of the additional $3 billion of capital from the Alibaba sale we committed to in September.

So let me now turn to Q4 highlights, and again, you can see these on some of the charts we provided. I think this is on Chart 5, if I can read it correctly here. Revenue ex-TAC grew 4% year-over-year. Looking at the components, Search revenue ex-TAC growth accelerated to 14% versus the prior year. Display revenue ex-TAC declined 5% year-over-year. Other revenue ex-TAC, which consists of our leads, listings and fees businesses, grew 10% primarily due to recognizing the TIPLA fee amortization from the Alibaba Group payment received in Q3. Adjusted EBITDA of $509 million in the quarter grew 8% year-over-year, in line with revenue ex-TAC. Non-GAAP operating income was $283 million, an increase of 9% over the prior year. This resulted in a non-GAAP operating margin of 23%, which again gained 100 basis points year-over-year. Non-GAAP net income was $370 million, up 20% from prior year and non-GAAP EPS came in at $0.32, up 28% from Q4 2011. Capital spending was $150 million in the quarter. Free cash flow, adjusted for the Alibaba tax payment that was paid in Q4 was 22 -- again, for the Alibaba tax payment that we did pay in Q4, was $221 million for the quarter and $1.43 billion for the full year. We ended the quarter here with cash and marketable securities of just over $6 billion.

So now let me turn to the full year. Revenue ex-TAC grew 2% to $4.468 billion, marking the first year of growth since 2008. For the year, Search revenue grew ex-TAC 9%, Display revenue ex-TAC fell 2% and other revenue ex-TAC was basically even as the broadband fee amortization step down offset the increase from the TIPLA amortization. The adjusted EBITDA grew 3% versus 2011 to $1.7 billion, off 38% of revenue ex-TAC. Non-GAAP operating income was flat at 280 -- yes, at $825 million, yielding an 18% margin on an ex-TAC basis, and non-GAAP EPS grew 44% year-over-year to $1.17 per share.

Let me walk you through the financial results for Q4 in more detail, and then I'll go through again the business drivers and how we see the revenue by business line. Starting with the [indiscernible] for the business drivers in revenue ex-TAC detailed by business line, refer to Slide 7. We have included a new set of business metrics to track the progress of key revenue drivers, and this is consistent with what we discussed last quarter about providing these.

For the Search business, we will be looking at the number of paid clicks and price per click. These metrics include our O&O properties and Affiliate partners, as well as Display ads sold on a PPC or price-per-click basis. In Display, we will report number of ads sold and price per ad. These metrics are for our global O&O but exclude Display ads sold on a price-per-click basis.

Now turning to Slide 10, looking at how these impact revenue ex-TAC for the different businesses. You can see that again on Slide 10. In terms of Search, our Search business performed well in the quarter, accelerating from prior quarters to a growth rate of 14% year-over-year to $427 million on an ex-TAC basis. Price per click grew 1%, clicks grew approximately 11% in the quarter.

Turning [ph] to the quarter's [ph] primarily result of some new ad products and other technology upgrades to the marketplace, which delivered higher click-through rates for our advertisers. Specifically, the introduction of longer title ads, site link extensions below ads and introduction of a new Yahoo!-specific click prediction model by Microsoft really drove results.

Looking at trends over the last few quarters, we are pleased to see that volume turned the corner in Q4 of last year, really, last year of '11, volume growth has steadily increased throughout 2012. Price per clicks held up in Q4 on top of the gained fee in 2011 resulting from the switch to adCenter.

Stepping back a bit, I also want to highlight that this was the highest quarterly Search revenue ex-TAC reported by the company since Q3 2010, which was prior to sharing 12% of our Search revenue with Microsoft. So while there's still plenty of potential to continue to grow this business, we are pleased with the recent progress both teams have made and feel good about the opportunity to continue to deliver or drive innovation in revenue in the business.

On Display, revenue ex-TAC fell 5% in the quarter and was down 2% for the full year. From a high level, we believe the primary driver of this decline follows our overall user engagement trends, particularly in our webmail product. We are, therefore, very focused on improving the metrics in order to grow this revenue line going forward. We will continue to focus on user experience engagement, which although may affect lower ad inventory in the short term, we believe increased user satisfaction will result in improved engagement and ultimately more Display ad dollars in the longer run.

Turning to Other. Other revenue ex-TAC which includes our leads, listings and fees businesses, grew 10% year-over-year. This was driven primarily by amortization fee revenue of $34 million resulting from the Alibaba TIPLA payment and higher overall Alibaba royalties. We also saw some year-over-year strength in the lease [ph] revenue related to our Taiwan e-Commerce business.

In terms of revenue detail by region, you can see this on Slide 11. In the Americas region, revenue ex-TAC grew by 8%. Once again, Search revenue drove much of the growth for Q4, but this is partially offset by lower Display and Other revenue as described earlier.

In EMEA, revenue ex-TAC fell 12% in the quarter. Search revenue was impacted on a year-over-year basis as we completed the Search transition in Europe and are now sharing 12% of our Search revenue with Microsoft across the entire region. On the plus side, post transaction -- post transition, RPS is performing well in most markets and we do not expect any meaningful RPS GAAP [ph] to impact Search revenue per region going forward.

Turning to APAC. Excluding the impact of Korea, revenue ex-TAC in APAC was just about even year-over-year. While we have maintained our leadership position in certain markets like Taiwan and Hong Kong, we expect to grow international revenue overall as we diversify our geographic revenue mix.

Let me now turn to expenses. Beginning with traffic acquisition costs, TAC for the quarter was down $30 million, just over $80 million for the full year versus the prior year. As a reminder, we expect this to continue to trend down as we complete the transition to adCenter around the globe.

As noted earlier, we completed the transition in May in 2012, which accounts for nearly all the decline in tax Q4 and the full year. Non-GAAP total operating expenses were $938 million a quarter, an increase of 3% over the prior year. As I mentioned in my opening, we realized some meaningful cost reduction in 2012 where we're able to rationalize headcount and consolidate activities. We ended the year with 11,500 employees, which is down 18% from 2011. Offsetting this a bit but still keeping operating expenses flat year-over-year were much-needed investments in new ad technology in products, content and our workforce and productivity.

Now I'll turn to EBITDA and operating income. In terms of profitability, the company once again performed well. If you turn to Slide 14, you will notice that we have included adjusted EBITDA as a new metric to track our progress. We know many of you look at this metric anyway as it is representative of the strong cash-flow-generating ability of this company. As noted, we have adjusted for the closure of the Korea operations, as well as certain restructuring costs. Adjusted EBITDA for the quarter was $509 million, an increase of 8% over the prior year, representing 42% margin of revenue ex-TAC, in line with that of Q4 2011.

Non-GAAP operating income grew 9% over the last year to $283 million for a 23% margin. It should be noted that this number includes costs associated with stock-based compensation while many of our industry peers exclude these costs on a pro forma basis.

In terms of some other comments on the income statement, let me call out for modeling purposes. Other income was $18 million a quarter. This includes the recognition of interest on the Alibaba preferred shares that we received as part of the transition -- transaction from last year, that is in addition to the TIPLA revenue.

Our non-GAAP tax rate was 26% in the quarter. For the full year, the non-GAAP tax rate was 15%, which compares favorably to our GAAP rate of 38% -- 37%. Earnings and equity interest grew 17% in Q4, driven by growth in our equity pickup of Alibaba and Yahoo! Japan.

Regarding Yahoo! Japan, we are extremely pleased with the progress they are making, and we will look for new initiatives to partner with them further. We believe this is a valuable asset with renewed growth prospects. We've also been monitoring [ph] and balancing the investment in YJ, and determined in Q4, that it would be in the best interest to limit our currency exposure through our hedging program. We will continue to monitor the currency exposure on an ongoing basis.

I'd also like to take this opportunity to congratulate Alibaba on the achievement of topping RMB 1 trillion in GMV on their shopping sites for the year on November 30, which they announced this quarter -- in the quarter. This is a huge accomplishment. Alibaba continued to show very impressive results, and we are pleased to be partners and shareholders. As a reminder, we report the equity pickup from our partners one quarter in arrears. This means for Q1 going forward, you should adjust your models to reduce ownership in Alibaba.

Finally, as we've been very actively repurchasing shares, please adjust your model for the latest diluted share count, which is 1.3 billion -- 1.13 billion, sorry, as of year end.

Turning now to a few balance sheet and cash flow items to call out. The company remains on a very strong footing from a balance sheet perspective. Cash and marketable securities, we began Q4 with $9.4 billion in cash and marketable securities. During the quarter, approximately $2.3 billion was used for the majority of the tax payment related to Alibaba and approximately $1.5 billion was used to repurchase 80 million shares in the quarter. Factor in the free cash flow generated from the business of approximately $220 million and other items on the cash flow statement, we ended with a balance of just over $6 billion at the end of Q4, $5.6 billion of which is held domestically.

Accounts receivable and DSOs were in line with levels seen a year ago. Looking sequentially, Q4 is typically higher than Q3 due to seasonal factors.

We had PP&E decline approximately $45 million over 2012, as depreciation exceeded our capital expenditures for the period. Most of our CapEx spending is focused on developing and maximizing efficiency in our data center footprint. These investments improve the speed and efficiency of our products and further develop our incredibly [ph] risk data set, which are key tenets of our execution plan.

And in the short-term and long-term deferred revenue increased to a combined $704 million at the end of the year. This was due entirely to the TIPLA payment, which was received at the end of Q3. As a reminder, we will continue to amortize this over the next 15 quarters.

The redeemable preferred from Alibaba balance was $816 million at period end, and total equity of the company was $14.6 billion at the end, an increase of just over $2 billion from a year ago.

Based on the closing price per share at the end of the -- of our period, our stake in YJ is worth approximately $6.6 billion. Again, this is obviously pretax. Finally, our Alibaba stake is worth $8.1 billion pretax based on the most recent capital raise transaction. As a reminder, this is in addition to the $816 million of preferred shares we own.

You can see on Slide -- I can't read that, cash flow from operations excluding Alibaba tax payment was $366 million in the quarter. CapEx was $150 million in Q4, as we continue to make certain data center investments. Free cash flow also adjusting for Alibaba tax payment was $221 million.

Before I give guidance, I'd like to provide a brief overview and update on the pending litigation in Mexico. We reported November 30, 2012, that a court in Mexico entered a non-final judgment of $2.75 billion against us and Yahoo! Mexico, our subsidiary. The lawsuit was brought by Worldwide Directories and Ideas Indirectivas. It involves a commercial contract dispute. We believe the claims are without merit and have filed appeals on behalf of both Yahoo! and Yahoo! Mexico. We believe that our appeals will be successful, and we have not made accrual for judgment in the fourth quarter. As this matter is ongoing, we do not intend to comment further at this time.

I will now turn to guidance, and I'm sure we'll get no questions on this. Turning now to our business outlook and guidance, it's January, early in the year. We're providing our perspective as we see it now. We think these forecasts are reasonable at this time. We will update our outlook for the year in subsequent quarters. We intend to invest during the year in order to lay the foundation for growth that we expect to occur in the second half of the year and subsequent years. It's very simple. Just from a strategy, we're going to invest in our properties. We expect to increase engagement. We expect to drive revenue growth and profitability.

So revenue ex-TAC could be in the range for the quarter of $1.07 billion to $1.1 billion for Q1 and $4.5 billion to $4.6 billion for 2013. We are facing a modest headwind from the combined impact of anticipated loss of the Microsoft RPS guarantee and the closure of operations in Korea. This is partially offset by the TIPLA amortization.

We are also exercising some conservatism in our forecast in conjunction with our recent sales force reorganization and key product updates. Impact is expected to be felt more predominantly in the first half. We are forecasting adjusted EBITDA to be between $340 million and $360 million in the first quarter and $1.6 billion to $1.7 billion for the full year. Operating income is expected to be between $155 million and $175 million for the quarter and [indiscernible] between $810 million and $850 million for the year. As I have noted, while we are focused on driving revenue growth in the company, we will be diligent with cost and, wherever possible, use cost efficiencies to fund new investments. We are confident we can continue to improve our cost and expense structure. That being said, we expect to see more of an investment phase in the first half of 2013, which is reflected on our margin guidance. The back half of the year and beyond should experience operating leverage as our investments begin to show return and modestly grow revenue. So thank you again for tuning in today. Let me now turn the call back to Marissa.

Marissa A. Mayer

Thank you, Ken. Turning to 2013, I'd like to talk about the biggest opportunities for growth we see and take a few minutes to talk more about specifically our road on how to get there.

At Yahoo!, we've identified 3 key business challenges. If addressed, each offers an opportunity to advance the company towards growth. Our 3 key challenges are: increasing usage, growing our international presence and appealing to a broader demographic of users in roughly that order of priority.

Yahoo! is focused on making the world's daily habits inspiring and entertaining. And while we're starting with unique strengths, exceeding the growth that we aspire to will take multiple years. Essentially, we need to start a chain reaction. First, we need to achieve product excellence and differentiation by launching new revamped and innovative products. With great products, comes user growth and more engaged audiences. And finally, that user adoption drives advertiser attention, spend and, therefore, revenue.

To start [ph] that chain reaction of growth, we've identified approximately a dozen products to focus on, each a daily digital habit. When taking multiple platforms into consideration for each product, desktops, mobile web, mobile apps and tablets, there's a lot of work to be done. The December launch of the Yahoo! Mail and Flickr marks the start of these efforts, and you will see us continually and methodically revamp and innovate in these and other core areas. While the road to growth is certain, it will not be immediate.

Going product by product, platform by platform and country by country, we'll be delivering growth in usage, relevance within key demographics and growth in markets internationally.

Focusing more on the pure advertising and monetization standpoint, there's greater opportunity with the big 4: Search, Display, Mobile and Video. In terms of Search, we see encouraging trends. There's a lot more potential here, both through the user interface improvements, as well as continued attention to our Microsoft partnership. With search revenue ex-TAC up 14% in Q4 on a year-over-year basis, we're going to continue to focus on innovation, monetization and growing our share on both desktop and mobile.

Turning to Display, we remain intensely focused on optimizing our monetization opportunities, both on and off network. We recognize, first and foremost, that we need to improve our overall engagement metric. The combination of more personalized content and increased product innovation will be key in getting us back to a path for Display revenue growth.

I talked a lot about how Mobile will be key to our business. In 2012, we saw our Mobile adoption grow to more than 200 million unique monthly users. From a monetization perspective, this is still a very nascent source of revenue for us. With any platform shift, revenue always follows users, and Mobile will be no different. Smart monetization of this usage is inevitable. We intend to participate fully in the innovation and experimentation required to make Mobile a material part of our business.

Finally, Video. Video is one of our hottest advertising products. We're seeing some segments of our video advertising units sold 6 months in advance. We've had some impressive early results with our premium video content, and our advertisers are seeing great value on this platform. We see Video as a big opportunity for future monetization, and we're really just getting started here.

Today, our business is heavily skewed towards the U.S., so we're looking closely at our international product footprint. For 2012 as a whole, for example, around 3/4 of our revenue was derived from the Americas region. The opportunity to expand and scale globally are worth noting, and we are committed to growing the international portion of our revenue over time.

In closing, I'm pleased with our Q4 performance. We had another solid quarter, continued progress on our key initiatives and swift execution. Yahoo! helped define the consumer Internet as a daily habit for hundreds of millions of users across the globe. As we redouble our efforts to put these users first and to deliver world-class products, we're returning to these roots. The future of Yahoo! will be about innovation, execution and continued progress on a multiyear march towards growth, delighting users and driving shareholder value.

We're starting the new year with a terrific executive team in place and with smart, passionate aligned employees who already begun executing our vision and strategy. We expect 2013 to be a year of hard work, steady improvement and excellence in achievement. The best is yet to come. Now let's take some time for your questions.

Question-and-Answer Session

Operator

[Operator Instructions] Up first, we have Anthony DiClemente with Barclays.

Anthony J. DiClemente - Barclays Capital, Research Division

First for Marissa. Marissa, just wanted to get your view on what you think the level of commercialization of the Yahoo! products is out there. And do you think that the level of commercialization needs to be taken down first in order to improve users and engagement for some time before that clicks back in? And I guess that sort of line of questioning segues into a question for Ken about the guidance. I heard what you said about cost savings. The guidance does imply margin contraction for adjusted EBITDA year-over-year, so I just want to know is that conservative or should our takeaway be that your investment for growth somewhat outweighs the cost efficiencies that you guys hope to find throughout the year in 2013? I hope that's clear.

Marissa A. Mayer

Sure. On commercialization, I would, on the whole, say no. I'm a very active user of the site myself, and I actually think that the ads add a lot to the overall user experience. Every now and then we do see a property where we see ads that we don't think enhance the user experience. And for example, I think if you look at Mail, the launch that we did in Q4 eliminated the What's New page, which was essentially a page of advertising. It has [ph] actually benefited the users in terms of getting them to their e-mail faster and making the use of the tool more seamless. And interestingly, what we've seen there is while the product now has fewer ads, the ads that remain have actually increased in click-through rates and actually are delivering more value to our advertisers. While we haven't yet been able to reprice those advertisements and we're not sure we will, it is something that we're looking at moving forward as we collect more data post-launch.

Kenneth A. Goldman

Yes, if you've taken -- yes, you'd say based upon the guidance we provided in the small revenue increase, so to speak, that we provided, that the margin's going down slightly. Again, I think if you look at '11 up to the '12, we took down headcount. And so that was more direct. As we go into '13, we're really looking at how we can be more efficient in some of our other spending categories. I have -- we have some thoughts on that. We're working hard on that. Some of that's been identified, some of it we're still working on. At the same time, we are going to invest. And so I think the balance of all that ends with numbers relatively consistent in terms of margins with '12, you could say going down a little bit just because we do have some revenue growth. And again, hopefully we'll do better.

Operator

Our next question comes from the line of Youssef Squali with Cantor Fitzgerald.

Youssef H. Squali - Cantor Fitzgerald & Co., Research Division

Two quick questions for Marissa, please. First, what are the key metrics for us folks on the outside to actually track to gauge Yahoo!'s success in Mobile? And I'm thinking particularly on the Display, how early do you think we'll start seeing traction there? Because if there was a surprise, this quarter was probably on the Display side being a little weaker than expected, so wondering just how much of a headwind growth in Mobile is for you guys. And second, how do you see programmatic opportunity for Yahoo!? This is something that you talked about a great deal in the third quarter call, did not hear much about it this quarter. Maybe just talk about how Yahoo! differentiates its offering here.

Marissa A. Mayer

Sure. In terms of metrics to track for Mobile, we are not breaking out Mobile separately right now. As you can see, we've offered new operating metrics this quarter, especially on Search, this is the PPC, the price per click and paid clicks. One is about pricing, the other's about volume. And on Display, we have the number of ads sold and the price per ad. Again, one about volume, one about pricing. I think, here, I really believe this is about the user migration to Mobile and the fact that we have 200 million monthly unique users on Mobile is particularly strong. So I would look at those overall user numbers because I think the revenue will follow there. In terms of Display in the last quarter and why it was maybe a little weaker than some people would ultimately expect, if you look at these new metrics we've released, what you can see is that impressions were down but they were reasonably stably down throughout the year at about 10%. In Q3, we saw a nice bump in terms of pricing, which offset this and drove the business back to being reasonably flat year-over-year. One of the reasons that happened is because we had really excellent Class 1 premium advertising opportunities in Q3, particularly around the Olympics. So we will continue to look for opportunities like that moving forward to enhance pricing. Obviously, we're working really hard on the #1 business challenge we see, which is increasing engagement and ultimately increasing the number of impressions that we have available. And that's ultimately what I would look at around Display, because as we increase those impressions and as we keep one mix [ph] high, that's something that will help. There is a little bit of the shift to Mobile affecting us there, but again we have historically seen that the Mobile usage that we see across our products is generally incremental and additive to what we've experienced. On the programmatic advertising opportunities, we still are very excited about them. We have teams here working diligently on them. In fact, our investment in ad technology is one of the key strategic investments that we're making this year that you heard Ken refer to. So we'll have more to offer there. We do think that this is a great way for us to be able to ultimately serve our advertisers and it is an area where you'll see us deliver in the future.

Operator

Our next question comes from the line of Jason Helfstein with Oppenheimer & Co.

Jason S. Helfstein - Oppenheimer & Co. Inc., Research Division

So the first question is, I want to ask about Google's pending Toolbar change. It would seem that's probably a positive benefit to Yahoo! and Bing with respect to how the policies are different. So can you comment if there's any expectation for a lift for that? And then secondly, can you just talk about the visibility in equity income? Obviously, that's becoming a bigger and bigger part of the overall profitability of the company, yet we have kind of limited visibility on that because Alibaba gives out limited information. Do you think there's any way to get increased visibility on how that business line moves forward?

Marissa A. Mayer

I'll take the first question, and then have Ken address the second. On the Toolbar change from Google, we'd be remiss to offer comment on another company's product, so I'm not going to comment further there.

Kenneth A. Goldman

I guess Marissa's sending it over to me pretty fast. The -- I wouldn't call it greater share. I think if you look at the equity investments line income, it's been relatively consistent over the quarters in 2012. And I think if you look at '13, and while I'm not going to give exact guidance on the number, there are some pluses and minuses. Clearly, we do expect the Alibaba portion to go down, as I mentioned, relative to our reduced ownership in that. And we have certain assumptions relative to YJ, relative to at least what we think they'll deliver in '13, although we don't have any insight right now into their numbers, so I'm not trying to suggest that at all. So I would say overall, over the 2 years, we don't see a tremendous amount of difference. So expect an increase in YJ offset by some expected decrease in Alibaba primarily because of our reduced ownership in them.

Jason S. Helfstein - Oppenheimer & Co. Inc., Research Division

And just a quick follow-up. Obviously, we appreciate the additional Search and Display metrics. And just given your comments on the investment in engagement, I mean should we expect you to provide engagement of, let's say, kind of minutes types of metrics over time or should we continue to rely on third-party comScore similar data for that?

Marissa A. Mayer

For us, it's really important to -- that we provide accurate measurements. And I will say that overall, the HCB [ph] standard is very challenging in terms of providing accurately the number of minutes per user because you really don't know that -- at that, for example, that page could be sitting open on a tab that's not actively selected, you don't know exactly how long someone looked at it. It's really kind of a guessing game to get to minutes provided. There are some mediums like video where you can really accurately get that information. But across the entire portfolio of our products, it's a difficult number to provide. It's one of the reasons we're not providing it is because we just don't think we can provide the level of accuracy required. If it's the number that is ultimately important to you, obviously, there are third-party providers that you can look to. But I would caveat that with the fact that the accuracy issue I'm describing are ones that are challenging for everyone. I do think that overall, in terms of volume, and engagement, the 2 metrics that we're providing that will provide you some insight here are the number of paid clicks, because obviously as we get more search and more search share, the number of paid clicks goes up. And the other of the 4 metrics that we released today that is relevant here is the number of ads sold because one of the things that enables us to sell more ads is, in fact, having more page views, more impressions to sell.

Operator

Our next question comes from the line of Ben Schachter with Macquarie.

Benjamin A. Schachter - Macquarie Research

Marissa, at a high level, how do you see Yahoo!'s fundamental position in Search over the long term, and is that different between Mobile and desktop? And then one specific question on Search. If you look at the Search footnotes, it states that Search also includes Display PPC. I wonder if you could tell us what percentage of the Search growth came from those PPC Display ads, which I'm not sure they really are Search?

Marissa A. Mayer

Sure. So overall in Search, I think that it's a key area of investment for us. We are really excited and happy with the -- to be working with Microsoft on the overall Search Alliance. Again, the teams are working incredibly well together. We actually saw some nice increases in some of the key metrics in Q4, though [ph] I am excited about that. We need to invest in a lot of interface improvements. All of the innovations in Search, in my opinion, are going to happen at the user interface level moving forward. And we need to invest on those features both on desktop and on mobile. And I think that both ultimately will be key plays for us. It's noteworthy to mention, by the way, for example, on Siri on iPhone, they actually use Yahoo!'s data. And there's a nice link to our services from there. So overall, we think that we have a big investment that we want to make and a big push on Search. We have lost some share and -- in recent years, and we'd like to regain some of that share and we have some ideas as to how, but we'll be very focused here. In terms of the Display, price-per-click ads are included. My belief is that it's actually overall a small number. With that said, in the breakdown of the 2 sets of numbers we sent out, we really felt that PPC ads, price per click ads, should be grouped with the former and obviously paid clicks being the correlating measure there. And that CPM ads cost -- ads are sold on the cost-per-thousand basis are in the cost per ad metric and the number of ads sold metric.

Operator

Our next question comes from the line of Heath Terry with Goldman Sachs.

Heath P. Terry - Goldman Sachs Group Inc., Research Division

Marissa, when you're focusing on areas for improvement and engagement, you've mentioned the success with e-mail usage and Flickr's relaunch, both of which are heavily mobile. Are there areas for engagement improvement that you're focused on that will start with the desktop?

Marissa A. Mayer

I think that overall, I don't really think of them as 2 separate platforms, because I think for most people and in the services we provide, they're really a system of applications. I would expect that in the future, most people who, say, for example, use Yahoo! Finance heavily, use it on both the desktop and on Mobile and they go back and forth. And so it's really important for us to be able to lower the switching costs. Make it really clear that it's Yahoo! Finance on desktop, that is [indiscernible] branded as Yahoo! Finance. Today, it's branded as MarketDash, but it's branded as Yahoo! Finance on the phone. And in the tablet, it's really easy to switch back and forth. And so to me, it's less about where the innovation happens. I do think that in some of the key daily habits we're addressing, there will be innovations on desktop. And I also think there will be innovations on the phone because it's important not to miss the opportunities that mobility gives us. For example, things like group communication happening on desktop is very different than group communication happening on the phone. You have a lot more tools available to you. We want to make sure not to miss some of those innovative twists and additional functionality that you can offer your end user.

Heath P. Terry - Goldman Sachs Group Inc., Research Division

That's great. And is there a sense, as you work through this, of which area, as you mentioned Finance that are going to be the first priorities for you now that e-mail and Flickr have been addressed?

Marissa A. Mayer

I mean, I don't like to preannounce projects and what we're working on. But basically, as I said, we've identified approximately a dozen or so applications that we need to work our way through. And you're going to see each quarter, we're going to make releases in these areas to make those products more innovative and to redesign and revamp them.

Operator

Our next question comes from the line of Mark Mahaney with RBC.

Mark S. Mahaney - RBC Capital Markets, LLC, Research Division

When you talk about investing in properties in 2013, from a financial perspective, Ken, what does that mean? Would you see mostly Product Development expenses rise or will it be across the P&L lines? And then, Marissa, I think you may have already answered this question, but I was going to try to tease you out a little bit on those dozen products. You mentioned the 2, Yahoo! Mail and Flickr. Would you give us any signs as to what other products you specifically may be working on, the current products that you think could really use a tune-up?

Kenneth A. Goldman

Yes, there's a number of investments we are going to make that will be primarily in the development area, platform area. So yes, I think that's the good way. You should think about it. There'll be product engineering, product marketing as well to go along with that. So I would expect that to be the primary area. Honestly, I'm hoping that we can make a dent, if you will, in the G&A expense. And so that's part of my job being here, so hopefully, that won't be going the same direction. So we'll -- I think it's correct. I think in development, in R&D, that computer science and so forth, that's where we're heavily focused on hiring today.

Marissa A. Mayer

And I would just add there that I also think that we will have some content costs, which you'll see as we make some of these developments. And that's obviously been a big part of what we provide to our end user and where they really draw a lot of the value. In terms of the dozen products, again, like I really would rather have some internal flexibility around how to operate and how to think about those 12, because they are just an approximate dozen areas, so it may not map exactly to a dozen applications. But I do think that there's no surprise. It's things like Mail, Search and Home Page, those are 3 of the big entry points into our system, and making them work really well for end users is incredibly important. Those are verticals where Yahoo! has always been strong. Things like finance, sports, news, these are the types of the things that we are going to focus on, and there's a few others where we've got some great innovative ideas that we're going to experiment with and see where they take us.

Operator

Our next question comes from the line of Carlos Kirjner with Sanford and Bernstein.

Carlos Kirjner - Sanford C. Bernstein & Co., LLC., Research Division

I have 2 questions. First, can you give us a sense of the expected impact of the sales reorg and the potential RPS loss on your 2013 guidance? In other words, what should guidance be excess to [ph] Factors? And second, you compete for advertising dollars with Google, Facebook and Microsoft, which either have very large or very fast growing R&D budgets. How do you think about your product innovation and the potential for regaining competitiveness when you'll likely be outspent in innovation?

Kenneth A. Goldman

Yes. In terms of the RPS, if you look, it's really -- you have to look at it 2 different ways. If you look at year-over-year, the lack of RPS guarantee is about $100 million lower revenue. Again, this is year-over-year. If you look at it now, we are improving our own RPS. So if you look at what it would have been had we continued beyond the first quarter, it's probably more in the $45 million to $65 million rough range. I'll get it -- a lot of it depends upon where we end up in our own RPS. So it depends how you look at, whether you look at year-over-year, whether you look at what would occur had we continued to have the guarantee in place.

Marissa A. Mayer

And on the question on research and development, we're investing in fast, nimble, small teams. We need different -- a lot of times, we can take a smaller team of people and put them on, say, the iOS application and another and actually split it into an iPhone team and an iPad team. And then a different team takes on Android. So we have small teams. And so yes, we do think that technology is an area where you really do need to invest in research and development. But at the same time, and I think there's a great quote, which I'll probably get somewhat wrong, but there's the notion of, "Don't think that a small number of people can't change the world." In truth, no one else ever has. Everything starts small and starts with a small team. And so we've got very small, nimble, excellent teams, and we are putting them on very focused missions in terms of where to innovate and where to release products. And we think that'll change -- end up changing our products and our user base and, hopefully, the world for the better because that's the way these things get done.

Operator

Our next question comes from the line of Douglas Anmuth with JPMorgan.

Douglas Anmuth - JP Morgan Chase & Co, Research Division

I just want to ask 2 things. First, just on Search, you talked about paid clicks increasing 11%; pricing, up 1%, but yet the GAAP Search is only up 4% year-over-year. So I was just hoping you could help us reconcile that. And then secondly, RTB on some estimates looks like it could become about 20% of Display in 2013, and we're obviously seeing a lot of increased competition sort of like from Google over the last couple of years, but with Facebook now as well. How are you thinking about how Yahoo! is positioned here with Right Media, and how do you strengthen this position in RTB?

Kenneth A. Goldman

I mean, again, from a ex-TAC revenue, which is really where we're driving, it was up 14%, the TAC does change. And as you remember my comments relative to Europe and how we -- how that's changing over time in terms of now with the Microsoft and so forth. So it's really -- it's much more consistent with the revenue ex-TAC, which is the number we reported versus the gross number.

Marissa A. Mayer

And in the area of real-time bidding, we are very happy with our Right Media Exchange. It does incredible volume, and we think it's an excellent tool. We've got a lot of great inventory there and the way that it matches up the publishers and advertisers is something that delivers a lot of value on both sides. So we've continued our investment there. And as we announced in September, this is something that we're committed to. We're committed to really having a lot of excellence there, and it is one of the key areas where we hope to make improvements in 2013.

Operator

Our next question comes from the line of Justin Post with Merrill Lynch.

A. Justin Post - BofA Merrill Lynch, Research Division

A couple of questions. What has been driving the acceleration in paid clicks over the last few quarters? I know you have easy comps, and I really appreciate the data you provided. But can you help us with the acceleration and any thoughts on whether you can stay at a high-growth rate? Second, Marissa, maybe you could talk about Mobile queries. How does Yahoo! get most of its mobile Search queries? Is it in Toolbar or is it in an app? And how can you really take share and grow your business on Mobile? That would be really helpful.

Marissa A. Mayer

Sure. In terms of paid clicks acceleration, we think that there's a few things that are playing into that. One of the things to note is, and not surprisingly, Q4 is a very commercial quarter. There's a lot of shopping going on. We think that a lot of those increased -- the increased clicks in Q4 had to do with just the users actually clicking on multiple ads in the same Search. And so there was a lot of additional paid clicks, even though our Search volume and our Search share, while we think they're up somewhat, they're not up as markedly as the paid clicks were. Moving forward, we actually think that even though Q1, of course, some of that commercialism subsides, we actually think that if we can grow share by having a great user interface, a great user experience, introducing a few innovative features, we hope that we can keep the paid clicks high and growing by actually gaining Search share. And that will be where we're focused. In terms of the mobile queries, there's any number of ways that the mobile queries can end up on our site. Obviously, we have a large mobile web offering and people tend to use things like Yahoo! Finance, omg! on their mobile browsers on their phone. They also tend to use some of our applications. We have 200 million monthly users on mobile, and so most of our applications and our mobile web experiences have Yahoo! Search boxes. Also, you can go on the different phones and decide who your default search provider should be. So for example, on my iPhone, I selected Yahoo! as my search provider, which basically means every time I use a search box on Safari, I end up doing a Yahoo! Search.

A. Justin Post - BofA Merrill Lynch, Research Division

Great. And maybe a follow-up if I can for Ken. New to the company, I think this is your first guidance since you've taken over. What's your philosophical viewpoint on guidance? Is it to guide conservatively or try to hit the midpoint, which was kind of Yahoo's! old philosophy?

Kenneth A. Goldman

Yes, I can't obviously speak to the old philosophy. I think our approach really is to guide as best as we know given all the facts we know at a particular point in time. And we'll leave it at that. So it's not necessarily [ph] people think I'm conservative, hopefully I am. But then the last -- our goal is to provide the best feel we can for the business as we see it at a particular time. And obviously, we want to do at least as well, if not better, but that's the goal.

Operator

Our next question comes from the line of Jordan Monahan with Morgan Stanley.

Jordan Monahan - Morgan Stanley, Research Division

Actually just a couple of quick ones. So the full year guidance -- and sorry to keep talking about guidance, but the full year guidance implies just 2% growth. So I was wondering if you could help us -- you helped us out a little bit in terms of first half versus second half, but I'm wondering if you could help us out a little bit in terms of the components of revenue. And then the second, and apologies if I missed it, but on the other revenue line, that was roughly $30-or-so million in TIPLA and $20-or-so million in accrued interest. Is that set to continue for the next 15 quarters or was part of that one-time?

Kenneth A. Goldman

The -- yes, in terms of the other revenue, it was also Alibaba or additional Alibaba royalties is more of it. The interest in -- both interest income and the preferred dividend, preferred interest, if you will, on the preferred stock is really in other income. So those are 2 separate line items. I really don't -- we're not going to really provide additional guidance breakout by revenue. I think that's going to a level of detail that, honestly, right now, probably because I'm still new, I'd rather stay away from. And again, I think generally, we'll probably not provide at least for a while. So I think honestly, we provided 3 metrics. I think that's what we'll use for now. Maybe over time, we increase from that. But I think, given what we know today, it's probably best to leave it at 3.

Operator

Our final question comes from the line of Ken Sena with Evercore Partners.

Kenneth Sena - Evercore Partners Inc., Research Division

Just going back to the ad technology. Can you just talk a little bit about what percentage of the liquidity or revenues now would be for third-party publishers and where you see that getting to over time? And then also, is there anything that you could point to that provides Yahoo! some differentiation here in terms of competing within that technology on Mobile?

Marissa A. Mayer

I'll take the second one in terms of ad technology on Mobile. Here, I think that basically Mobile monetization is something that's new for everyone, and it's not entirely clear that everyone has a great answer yet. That said, I do fully believe that when users migrate en masse to a platform as they have here on Mobile, that there will be monetization opportunities that are as of the end user experience while providing great opportunities for advertisers. And it's usually a combination of getting the right format, the right pricing and the right dynamics to ultimately encourage quality ads to match up with user activities. You saw -- if you look historically, you've seen something very similar happen on Search. For a long time, we believed Search wasn't a moneymaker, which is almost absurd now looking back. But when you get the right combination of users participating there: a, the right format; b, right bidding motivations and quality controls overall in the system, you end up with a really lucrative model. And I think that there's something similar will happen in monetization for Mobile; it's just that we need to do a lot of experimentation to find it. And we're positioning ourselves to do that. We're also watching overall industry trends to understand how we can deliver value in terms of this monetization to both our end users and to advertisers.

Kenneth A. Goldman

Ken, with my name, you're not supposed to be giving me a hard question. I think you're asking how much revenue we get from Affiliates, which I don't know if we have disclosed. If you're asking about the Interclick acquisition itself, the only thing I would say is it's going well, we're very pleased with it. And so I'm not sure if you're asking anything in addition to that. Maybe we could handle it with our IR and so forth.

Kenneth Sena - Evercore Partners Inc., Research Division

Well, it could be total revenues or just total impressions. Like right now, when you think about the Right Media exchange, what percentage maybe in terms of ads that are delivered are for third-party publishers versus Yahoo!? I think that...

Kenneth A. Goldman

I don't think we have that information. I don't have any at hand. I'm not -- and also I don't think we disclosed it, so I'll probably leave it there.

Operator

Our next question comes from the line of John Blackledge with Cowen and Company.

John R. Blackledge - Cowen and Company, LLC, Research Division

I think on the last call, you mentioned shifting, roughly adding about 50% of your engineers being Mobile at some point. Just wondering if you can update us on that area. And then secondly, a question that's been asked a couple of times. Are you concerned or do you think there's a risk to your positioning in mobile assuming rising mobile usage leads to mobile search cannibalizing desktop search?

Marissa A. Mayer

Well, as we discussed in the past, the mobile usage we've seen to date is, in fact, incremental beyond desktop usage. So there may come a point where there's some of the cannibalization you're talking about, but it doesn't seem to be happening yet. And we certainly hope that we would -- and we're positioning ourselves to understand Mobile monetization well enough that when that shift does start to happen, the Mobile monetization we see on that platform is equal to what we see on desktop for equivalent end user actions. In terms of having 50% of our engineering workforce on Mobile, I think that this is something that will ultimately happen. I think you start looking many years in the future, it's hard to imagine that there are going to be technology companies where that isn't true. To date, we have started to shift some of our engineering teams to be more focused on Mobile. We need to get to a critical mass on that. And we're not going to report the overall percentage of our workforce that works on it, other than I will say that we have nicely grown the area through talent acquisitions and the fact that we hired 120 new computer science degrees -- people with computer science degrees in Q4. And those people are largely being allocated to Mobile and some of these new areas.

Operator

Our final question comes from the line of Peter Stabler with Wells Fargo Securities.

Peter Stabler - Wells Fargo Securities, LLC, Research Division

I'll be brief. Marissa, you talked about reorganizing the sales force into key verticals. Wondering if you could offer any commentary on where you see the greatest opportunity. CPG comes to mind as a vertical that's underinvested on the net thus far.

Marissa A. Mayer

Sure. I think that what we really see by organizing around verticals is the opportunity to look at best practices, really understand how things -- what's working, where should these ads -- for things, like consumer packaged goods, be placed in order to ultimately really deliver value to both the advertiser and the end user. And when we see those opportunities, it's really great to be able to actually bring them and offer them to other people in the same vertical. And so that's really the type of optimization that we can see with this new sales force realignment. In terms of particular verticals, I do think that there's all kinds of good opportunities across sectors. I think you're right to point out consumer packaged goods is certainly one of them. But overall, we can see that the advertising dollars are flowing on line across all verticals, and that's something that obviously we'd like to facilitate and participate in.

Joon Huh

Great. Thank you. Thank you all for joining us today.

Operator

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a wonderful day.

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