Yahoo! Progress Report

‘Q2 was one of the most productive in the history of Yahoo! We basically reached a pace of launching a new product every week’ – Marissa Mayer, President and CEO

Product Releases and launches in Q2

Yahoo! launched a beautiful weather app for iOS including stunning photos from Flicker. At the end of Q2 Yahoo! Weather was the number one ranked weather app in 23 countries, has held a strong 4.5 star rating in the App Store and received the prestigious Apple Design Award. This product sets the standard for the visual beauty and ease of use that Yahoo! is striving for in all of their products and since launch daily users have increased by 150%.

Yahoo! Mail is also an important driver of business and was a focus in Q2, following December mail launches, and the management optimized Yahoo! Mail for mobile and in Q2, the Yahoo! Mail app for tablets was launched. This beautiful magazine like reading experience has contributed to daily active users being up 120% across Yahoo! mobile mail applications.

Also launched redesigned Yahoo! app for iOS and Android, complete with some integration; as a result of this launch, Yahoo! saw 55% increase in daily active users and a 60% increase in time spent using the application.

At the beginning of May, Yahoo! launched two new monetization products; Yahoo! Stream app and Homepage Billboard. In both cases it is still early but the reception from advertisers has been warm.

In May, Yahoo! delivered the new Flickr, puts photos front and center bringing them to life and beautiful full resolution. Yahoo! also pulled off an engineering marvel giving their Flickr users one terabyte of space each for free. That space for more than half a million photos of original, full resolution, pixel perfect quality. Since the launch, Yahoo! has seen daily photo upload increase by a factor of 3 and occasionally by a factor of 7 across Flickr desktop and mobile.

Yahoo! Sports app was refreshed with more content, faster performance and a more modern design. Yahoo! has already seen 50% growth in daily users from Q1 to Q2 driven by this launch.

Yahoo! introduced a completely redesigned Search Results page; the new design combines beauty with utility. The company placed search results high on the page and were delivering them faster and are doing essentially an experiment each day more than 130 this past quarter to improve the user experience and deliver revenue and that's in addition to the work Microsoft is doing on their end.

In Q2 the company also redesigned Yahoo! News, easier to user and features a personalized news stream. This new design is the first step towards creating a more consistent and modern content experience across Yahoo!.

Partnerships

Yahoo! has strengthened partnerships with major tact players including Apple, Microsoft, Google, Facebook and this quarter Twitter. In Q2, Yahoo! integrated tweets into their homepage newsfeed.

On the media side, Yahoo! extended their partnerships with leading news entertainment brands like ABC News, CNBC and Condé Nast adding breadth to the company’s portfolio of partner content. And also on the content front, the management intends to bring the complete Saturday Night Live archives to Yahoo!, all 38 years. Through a partnership with NBC Entertainment and Broadway Video, Yahoo! will be one of the most comprehensive digital homes for Saturday Night Live content.

People

In Q2 Yahoo! saw a 59% decrease in attrition year-over-year. The management has not only inspired Yahoo! internally, people are applying to work in record numbers. In Yahoo’s peak week, they received nearly 10,000 resumes.

With aggressive hiring and strategic acquisitions, Yahoo! has grown their dedicated mobile team by a factor of six in the past 12 months. Yahoo! has gone from having dozens of engineers to now having hundreds of engineers dedicated to mobile.

Acquisitions

In Q2 alone Yahoo! closed a number of key acquisitions including Summly, Astrid, Go Poll Go, Milewise, Loki Studios, Rondee, Ghostbird Software, PlayerScale and of course Tumblr . ‘These companies bring sophisticated technology and intellectual property to strengthen our product portfolio and they bring great engineering and product talent to Yahoo!’ said Marissa Mayer.

Tumblr

And in May Yahoo! acquired Tumblr. As one of the fastest growing media networks in the world, Tumblr has an incredibly engaged community of younger users to complement Yahoo’s core audience. Since the deal, Tumblr’s growth has seen acceleration with almost a quarter of a million new blogs being set up each day. While Tumblr is now officially part of Yahoo!, the Tumblr team will continue to operate independently. They will continue on their mission to empower creators and curators alike to do what they love, create.

As part of the Yahoo!, Tumblr gains access to its sophisticated personalization technologies to improve serendipity and discovery. Meanwhile, the potential to integrate Tumblr content into Yahoo's product will create more compelling experiences for its users.

Business Outlook and Guidance

Traffic improvement is taking shape, the company also needs to increase its emphasis on monetization and take steps to optimize pricing and improve the sell through rate.

For Q3, Yahoo! expects revenue excluding TAC to be in the range of 1.06 billion to 1.1 billion. Adjusted EBITDA to be between 330 million and 350 million and non- GAAP operating income to be between 165 million and 185 million.

Relative to annual guidance, Yahoo! is adjusting its revenue anticipation modestly with the confident results in the first half of the year. The management is adjusting their EBITDA and operating income expectations down to account for the lower revenue, investments and expenses primarily related to Tumblr. They expect full year revenue excluding TAC to be 4.45 billion to 4.55 billion, adjusted EBITDA to be 1.55 billion to 1.65 billion and non-GAAP operating income to be 900 million to 1.0 billion.