Yahoo! (NASDAQ: YHOO) announced launch of new products and services across smartphone, tablets and the web at the recently concluded Consumer Electronics Show (CES) in Las Vegas. The company also launched a new suite of advertising technology, which consists of an Ad Manager, Ad Exchange and Audience Ads. Through these launches, the company is not only looking to increase its footprint of unique users, but also address the needs of the advertisers that advertise across its properties. In this note, we will analyze how these new launches can bolster Yahoo’s revenues.
New Products To Boost Page Views And Unique Visitor Count
Yahoo launched two new digital magazines, namely Yahoo Food and Yahoo Tech, that curate content, videos and photos from Flickr and across the web. Furthermore, the company launched Yahoo News Digest based on the summarization technology of Summly, and acquired Aviate to further strengthen its mobile platform. 
In the past few quarters Yahoo has started offering customized content to individuals based on their search history and sharing patterns on social media. As a result of these initiatives, Yahoo reported a jump in monthly unique visitors from 676 million in 2012 to over 800 million in September 2013.  We currently project the number of unique users across Yahoo’s properties to rise 890 million per year by the end of our forecast period in 2020. With new product launch, Yahoo is aiming to increase its unique user count further. If the number of unique visitors to Yahoo properties reached 1 billion per year, as a result of improving content and product launch, this would increase our price estimate by 5%.
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The number of unique visitors is vital for Yahoo’s display ad revenue, as more people visiting the website generally translates into more pages viewed across Yahoo’s websites. These product launches not only aim to increase content, but to increase user engagement by enhancing their experience. As user engagement and unique user counts increase, we expect Yahoo!’s page views per unique visitor to rise. We currently forecast that page views per unique visitor will decline to 150 by the end of our forecast period, but if these launches could increase user engagement and page views increase to around 190, we would see approximately 5% upside to our price estimate.
New Improved Ad Technology To Boost Revenues
Since Marissa Mayer took over the company in 2012, the company has been focusing on improving user experience and increasing user count. However, it has paid very little attention to the needs of the marketers that advertise across its properties. As a result, the company has failed to monetize its properties effectively. This is reflected in company’s results, which have remained flat over the past few quarters.
According to eMarketer, digital ad spending is expected to increase to $163 billion by 2016.  Through the recent launch of its ad platforms, the company is aiming to capture a bigger chunk of the growing online ads industry and address the needs of advertisers. Yahoo Audience Ads provides a way to buy ads targeted to specific audiences, while Ad Manager gives advertisers direct access to Yahoo’s advertising products. Furthermore, Ad Exchange ensures more transparency and control for premium publishers on their sites.
While the content providers can use the exchange platform to sell their ad slots to the highest bidder, the advertisers can use Yahoo’s ad tools to leverage user information to promote targeted ads across Yahoo’s sites. Since advertisers will be willing to pay more for targeted ads, we could see some upside to our RPM estimate. At present we forecast that RPMs will stay relatively flat over our forecast period at around $1.20. However, if the redesign of Yahoo!’s homepage increases the company’s revenues per page view to $1.80 by the end of our forecast period, we would see 5% upside to our price estimate.
We currently have a $31.17 price estimate for Yahoo!, which is approximately 25% below the current market price.Notes: