Yahoo Posts a Loss, but Revenue Rises

Marissa Mayer is finally seeing some growth at Yahoo Inc.—but it is coming at a cost.

The company on Tuesday reported its revenue, minus commissions paid to partners for Web traffic, edged higher in the second quarter, only the second time sales have grown in the past five periods. Revenue from display ads, excluding the traffic costs, rose 3.3% to $406.7 million.

But the company posted a loss for its most recent quarter, as the cost of acquiring traffic jumped sharply to $200.2 million from $43.8 million in the year-earlier period.

Yahoo shares fell 2% in after-hours trading to $38.95.

Total revenue rose 15%. Yahoo reported its highest quarterly revenue increase in almost nine years and display advertising saw the "most substantial" revenue increase since 2010, Ms. Mayer said.

Ms. Mayer, three years into her tenure as chief executive of the aging Internet portal, is betting heavily on emerging areas including mobile and video ads. Those new steams of revenue are now starting to offset the declines in Yahoo's legacy business of desktop display advertising.

Revenue growth from "Mavens" – a financial metric the company introduced earlier this year to track mobile, video, native and social ads – is growing. Mavens revenue makes up about 32% of the company's total, growing 60% to $399 million in the second quarter. That was up from 58% growth in the previous quarter.

Ms. Mayer has made some of her boldest bets on new mobile and video offerings this year. In May, Yahoo announced it had won the exclusive rights to the National Football League's first streaming-only broadcast of a football game, a deal costing the company more than $20 million, a person familiar with the matter said at the time.

Earlier this month, Yahoo unveiled a new foray into legal online gambling with a retooled version of its fantasy-sports mobile app that lets users wager real money daily and weekly against their friends and in bigger online tournaments.

Yahoo continues to lose ground to Internet ad rivals Google and Facebook. This year, Yahoo will claim 4.6% of the $27 billion market for online ads in the U.S., down from a 5.5% share last year, estimates eMarketer Inc. Facebook will grow its share to 25.2%, up from 23.8% last year. Google will drop slightly to 13% this year, down from 13.7% in 2014.

Yahoo posted a loss of $21.6 million, or 2 cents a share, from a year-earlier profit of $269.7 million, or 26 cents a share. On an adjusted basis, earnings were 16 cents, falling just below analyst estimates of 18 cents a share.

Investors continue to look for signs that Yahoo's planned tax-free spin-off of its shares in Alibaba Group Holding Ltd. will happen later this year as planned. Ms. Mayer and finance chief Ken Goldman will likely face questions about the status of that deal on a call with analysts Tuesday.

Write to Douglas MacMillan at [e-mail]

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