Yahoo Looks To Boost Revenues With Native Mobile Video Ads Support For Developers

Yahoo! (NASDAQ:Yahoo) has been struggling to post more meaningful growth in its topline and bottom line over the past few year. In the recently held developer’s conference in New York, Yahoo announced that it will enable mobile developers integrate native video ads into their apps as users. ^[1] This move signifies that most users now use mobile devices to browse the Internet. Moreover, these users spend more time in apps installed on a mobile devices than on mobile browsers. As a result, monetizing that content has become imperative for companies such as Yahoo that are focusing on delivering content on a mobile platform. In this article, we will explore the video ads industry, and how Yahoo’s offering plans to leverage the popularity of content to rake in more ad dollars.

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The Advancing World Of User Generated Content, Especially Videos

On the supply side, user generated video content is on the rise due to a number of factors, including the proliferation of low cost but high quality video equipment, the increase in Internet penetration and bandwidth, and the low storage costs of online content. Additionally, premium video content is also growing because many traditional media companies are boosting their online presence to capture a shift of viewers moving online for streaming digital content. On the demand side, online video content is becoming increasingly popular due to broader Internet access and the advent of smart connected devices (which include tablets, smartphones and notebook PCs). Furthermore, newer video formats are coming to fore that allow easy rollout of pre-roll and interstitial video ads. As online video content empowers users to choose what, when and over which medium to watch content, viewers are spending more time viewing videos online rather than on traditional TV. We expect these trends will continue to drive demand and supply for online video content in the future.

Trends Video Ad Spending

The change in consumer behavior is prompting the migration of TV ad budgets to online spending. As a result, the video advertising industry has become fragmented, primarily due to the growing popularity of online video streaming. Advertisers now have to manage their ad budgets across different media and screen sizes. While TV ad spending was at $66 billion in the U.S. during 2014, mobile ad spending was close to $12.5 billion during the year, according to Interactive Advertising Bureau (IAB). ^[2] Furthermore, digital video ad spending is increasing at a faster pace and much of this growth is coming from mobile devices.

However, online video ads cost per impression (CPM) still lags TV CPM. While a Turns study estimates that cost per impression (eCPM) for online video is in the $8-$12 range, ^[3] TVB estimates this at $25 for TV. ^[4] We expect TV and digital video advertising spend to converge as multi-platform and multi-screen video advertising get integrated.

Yahoo’s Looks to Monetize Mobile Content with Video Ads

Content is the driving force behind display ad revenue and affects both users and advertisers on Yahoo. Users care about the quality of content and personalized information, which together lead to better engagement. According to a report by Flurry, the time spent in the mobile browser is a rapidly shrinking part of that pie, with more than 90 percent of time spent in apps. And media consumption accounts for more than half of that app time. ^[1] Yahoo is aiming to help developers to monetize their content by integrating native mobile video ads. These ads spots can then be offered on Flurry, which has an RTB platform called the Flurry marketplace that enables automated sales of ads across different ad properties. It plans to combine customized content by developers with bespoke ads to improve user experience. This can not only improve user engagement but also boost the number of ads it can sell through Flurry. Furthermore, the number of unique visitors is vital for Yahoo’s ad revenues as more people visiting the apps generally translate into more pages content consumed across apps powered by Flurry.

We currently have a $42.58 price estimate for Yahoo!, which is 30% above the current market price.

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More Trefis Research

1. Seven Years Into The Mobile Revolution: Content is King… Again, August 26 [↩] [↩]
2. U.S. Online Ad Spending Continues to Catch TV, April 22 2015 [↩]
3. Advertsing Intelligence Report, May 2015, www.turn.com [↩]
4. TV Cost & CPM Trends- Network TV Primetime [↩]