Yahoo! (NASDAQ: YHOO) surpassed Google to reclaim the top spot in web traffic with over 196 million unique visitors in the month of July. While this can be attributed to Yahoo’s push for personalized content, we believe that its redesigned homepage was a major contributor to the increase in web traffic.
Yahoo has announced that it is now extending these changes to seven of its websites, which includes Yahoo Sports and Yahoo Games, as well as TV, music, weather, movies, and Yahoo omg! Although, the impact of the redesign will manifest over the next few quarters, we believe that it can substantially increase user engagement over the long term and provide upside to our price estimate.
The New Design
The redesigned properties will imitate Yahoo’s homepage with personalized news and services. Staying with tradition, these properties will have news feed which initially lists out generic news content which changes according to the user’s click history and interests. Additionally, automatic personalization feature will allow users to specifically remove unappealing content from the front page of their stream. However, the functioning of the websites remains more or less the same so as to keep the usage consistent with older versions.
While the redesign aims to bring the user interface of Yahoo’s mobile websites in line with its native mobile apps, it also hopes to provide unified user experience across devices.  Overall, we think that these changes have the potential to positively impact Yahoo!’s page views per unique visitor. We currently forecast that page views per unique visitor will decline to 155 by the end of our forecast period. However, if the user engagement improves and the figure reaches around 190, there can be approximately 5% upside to our price estimate.
New Design Can Help Drive Ad Revenues
We think that the new design, which is consistent across different devices, could help drive the company’s revenue per page view (RPM). According to Comscore, Yahoo’s unique user count increased to 196 million in July. We attribute this growth to better user engagement and personalized content delivered on Yahoo’s home page. We believe that the company can leverage the user generated interest information to increase targeted ads across its sites. Since advertisers will be willing to pay for more such ads, we could see some upside to our RPM estimate.
At present we forecast that RPMs will remain flat at around $1.40 during our forecast period. However, if the redesign of these websites increases the company’s revenues per page view to $1.80 by the end of our forecast period, there can be 5% upside to our price estimate.
We currently have a $28 price estimate for Yahoo!, which is in line with the current market price.Notes:
- Bringing a refreshed Yahoo! to our global mobile web users on all devices, August 27 2013, yahoo.tumblr.com [↩]