Yahoo’s Ad Business Could Unlock Great Upside

1/20/14 10:46AM EST

Yahoos Ad Business Could Unlock Great Upside Yahoos Ad Business Could Unlock Great Upside

Image via Flickr/ eric hayes

Ever since Yahoo Inc. CEO Marissa Mayer took over the reins in mid 2012, the internet company has gone through major changes. Not only has she acquired a slew of startups (more than twenty), but she has also shaken things up within the company, including prompting a change in the organizational culture and more recently, giving marching orders to her second in command, Chief Operating Officer Henrique de Castro.

However, the hallmarks of Marissa Mayer’s leadership so far do not include de Castro, or the debate of his hefty send out package- which is well over $100 million. The real headline in the Marissa Mayer narrative is how under her leadership, Yahoo’s stock has gained. Currently trading at around $40 a share, the stock has progressively gained from lows of around $15 a share in mid 2012, the time Mayer took over.

While Yahoo’s share price appreciation was in part boosted by the $7.6 billion Alibaba deal, the stocks resilience has been cemented by Mayer’s renewed focus on the ad business. At the recent annual Consumer Electronics Show (CES) in Las Vegas, the internet company unveiled a spate of new products. While these products boast different features and target diverse markets, one thing remains unmistakably clear; Yahoo’s plan to create a personalized web is coming into greater focus. This has the potential resuscitate its ad business and unlock more upside for its stock.

Chance To Rope In Deep Pocketed Advertisers

Yahoo unveiled Yahoo Food and Yahoo Tech at CES. These new digital magazines not only target niche audiences, but are also tailored for tablets and phones. Niche targeting is the way to go as it allows a content publisher like Yahoo to build more genuine and interactive relationships with users. This presents an opportunity for Yahoo to gain more meaningful insights from its users. The fact that Yahoo Food and Yahoo Tech are also tailored for tablets and phones also allows the internet bigwig to drive its mobile strategy.

Yahoo also unveiled Yahoo Smart TV at CES. The product concept draws heavily the company’s existing Connected TV platform, which is already in use in millions of households today. However, Yahoo Smart TV goes a step further and presents personalized programming with features such as complementary content related to the user’s show. So for instance if you are watching a baseball game, player statistics, club history or even player salaries can stream in concurrently, establishing greater context around users’ interests.

While we can’t go into the details of every product that Yahoo unveiled at CES, it remains signally clear that Yahoo’s new products are built around creating greater context around users’ interest and more notably, encouraging interactivity. This approach presents a chance for Yahoo to rope in deep-pocketed advertisers; advertisers who are willing to accept premium charges in return for precise targeting and continued relationships with their prospects. Already, Yahoo has unveiled Yahoo Audience Ads, which allows advertisers to buy ads targeted to specific audiences. This new platform delivers the right messages to the right users across Yahoo and other high-quality sites.

There is still a lot of potential bubbling beneath Yahoo’s ad business. As Mayer’s ad business strategy continue to come to greater focus, Yahoo’s share price may continue in its upward movement. The stock could be a good long-term buy.

Disclosure: Author represents that he has no position in any stocks mentioned in this article at the time this article was submitted.

 
 

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