Yahoo expands Tumblr's ad reach; Alibaba keeps weighing on shares

Tumblr's (YHOO -1.1%) Sponsored Post ads are set to begin appearing on Yahoo News, Yahoo Beauty, and other properties in the Web giant's empire.

The ads will be offered via Yahoo's recently-launched Gemini ad marketplace, which integrates mobile search and native ad inventory. At the same time, Yahoo plans to phase out standard mobile banner ads, notorious for their low prices and accidental clicks.

The effort is part of a push by Yahoo to shore up slumping display ad sales by embracing native ad formats. Healthy uptake for the company's Stream ads contributed to Yahoo's better-than-expected Q1 display numbers.

Shares added to yesterday's losses amid continued worries about Alibaba's (ABABA) Q1. In addition to top-line concerns - calendar Q1 rev. growth was 39% Y/Y, down from the 66% reported (by Yahoo) for calendar Q4 - some are on edge over a 600 bps Y/Y drop in Alibaba's op. margin to 45.3%. Alibaba attributed the decline to higher Web/mobile marketing spend.

MKM is reiterating a Buy and $45 PT for Yahoo. The firm states the Alibaba numbers only affect its Yahoo valuation framework by $0.50/share, and thinks shares could see "another leg" higher thanks to Alibaba's roadshow and post-IPO valuation.

MKM chalks up Alibaba's near-term slowdown to mobile transition issues (i.e. a lower mobile take rate) that can be handled in time. It thinks mobile take rate is for now ~1/3 of PC levels.

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Comments (2)
  • Guy in Ithaca
    , contributor
    Comments (428) | Send Message
    The "continued worries" are dumb. From what I'm reading isn't even making a profit but the stock goes up? Most of Alibaba's slower growth rate is probably due to natural seasonal issues and so forth. First quarter revenue growth was 39%. So ABABA had less phenomenal incredible revenue growth. Doesn't seem panic worthy to me.


    I'll be interested to see how these new "native" ads do on Yahoo!. I never imagined Yahoo! had a secret plan to not make money. Yahoo! was simply getting their plan in place to make money with advertising which isn't mind numbing annoying like most internet and mobile advertising. So soon we get to see if they can do this. That should be much more interesting, and relevant, than the pointless speculation and meaningless negativity (which is getting very boring). I think the "sinking ship" metaphor is the worst. I've only read that one a couple of dozen times now. Who knows? Perhaps Yahoo! will fail miserably and only get 39% revenue growth down from 66% revenue growth??


    I've misplaced my crystal ball again so I'll have to wait and see.


    I'd love to have a business that got 39% revenue growth, especially in a quarter when business was down everywhere and the market was flat.
    18 Jun 2014, 12:36 AM Reply Like
  • BullishonManagement
    , contributor
    Comments (812) | Send Message
    I agree, this is yet another example of manipulating the market, drive down Yahoo so you can buy, then when Alibaba hype and IPO the quote will be "clearly the markets have shaken off any concerns about growth as it hits record Market Value" .. What is the opposite of pump and dump?
    18 Jun 2014, 08:04 AM Reply Like
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