Yahoo! (YHOO) Has Opportunity in Mobile But Needs to Take a Swing

This year mobile advertising revenue at Facebook (NASDAQ: FB) is expected to increase from 11 to 25 percent. At Google (NASDAQ: GOOG), mobile will increase from 17 to 28 percent of total advertising revenue. However, despite rising important, not every company has begun to capitalize. For example, Yahoo! (NASDAQ: YHOO) mobile adverting revenue is an embarrassing zero percent.

Clearly, if Yahoo! wants to compete, it needs to take a page from Facebook and Google. Failure to do so will result in further share loss within online advertising.

CEO Marissa Mayers recently acknowledged challenges in this area and pledged change. Specifically, analyst Brian Nowak of Numura thinks Yahoo! needs to address mobile monetization in its four most important display advertising categories of News, Sports, Finance, and Entertainment.

Nowark recently began tracking Yahoo!’s performance in each category, and called the performance mixed.

"On the positive side, Yahoo!'s pre-install relationship powering the Apple iOS 'Weather' and 'Stocks' apps has made it into a mobile leader in each of those categories. In our view, these are the best near-term opportunities for Yahoo!, as they currently don't have any advertising but they do have audiences," said Nowark.

The other categories may prove more challenging. Yahoo! has a presence in Sports but trails ESPN.

"It is notable that ESPN's engagement edge on mobile is 2.4x larger than it is on desktop. ESPN's category leadership will be difficult for Yahoo! to displace and take share from," said Norwark.

Yahoo! is also behind in News and Entertainment. The analyst believes leading sites have anywhere from 46X to 1,034X more engagement than Yahoo! does in the mobile ecosystem.

"In all, these mobile share trends speak to the opportunities and challenges that Yahoo! needs to address in mobile before we could become more constructive on their forward advertising growth trajectory," concluded Nomura.

Nomura Securities has a Neutral rating on Yahoo! (NASDAQ: YHOO) with a price target of $18.00.

For an analyst ratings summary and ratings history on Yahoo! click here. For more ratings news on Yahoo! click here.

Shares of Yahoo! closed at $19.88 yesterday.

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