Higher costs to attract eyeballs weigh on Yahoo forecast

Tue Jul 21, 2015 7:16pm EDT
 
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By Abhirup Roy and Kshitiz Goliya

(Reuters) - Yahoo Inc (YHOO.O: Quote) forecast lower-than-expected revenue for the current quarter as it struggles to revive its core online advertising business and spends more to attract users to its websites.

Shares of Yahoo were marginally down at $39.34 in after-market trading.

Yahoo has been developing content for its mobile platform to drive user engagement and ad sales as its core online advertising business struggles in the face of stiff competition from Google Inc (GOOGL.O: Quote) and Facebook Inc (FB.O: Quote).

Traffic acquisition costs (TAC), the amount Yahoo spends to attract users to Yahoo websites, rose to $200.2 million in the second quarter ended June 30, from $43.8 million a year earlier.

Total revenue, after deducting fees paid to partner websites, was flat at $1.04 billion.

Chief Financial Officer Ken Goldman said the company expects TAC to grow for the next few quarters.

"Their core business has been struggling and they've done relatively little to fix it and you could argue that there is not much that they can do," Pivotal Research Group analyst Brian Wieser told Reuters.

"Right now it's all about Alibaba and Yahoo Japan and whatever your expectations are around the spins," Wieser said.   Continued...

 
A Yahoo logo is pictured in front of a building in Rolle, 30 km (19 miles) east of Geneva, in this file picture taken December 12, 2012.    REUTERS/Denis Balibouse