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  • Yahoo Launches Programmatic Native Ads on BrightRoll Exchange

    Yahoo announced the availability of programmatic native ads on the BrightRoll Exchange. Advertisers and publishers have access to bid on native mobile inventory.

    “The BrightRoll Exchange is integrated with more than 100 DSPs and enables access to thousands of sites and apps via real-time bidding (RTB),” a spokesperson tells WebProNews.

    “Advertisers integrated with the BrightRoll Exchange can now access native inventory from third-party app developers who utilize Yahoo App Publishing, such as Cheetah Mobile, Pinger and WeatherBug, among others,” the spokesperson adds. “They can also continue to access native inventory on Yahoo premium sites and apps using Yahoo Gemini or through Yahoo Gemini API partners.”

    The new API aligns with the IAB OpenRTB 2.3 standard, the company notes.

    “The prevalence of native ads has skyrocketed, and advertisers and publishers alike are taking notice of its increasing potential,” said Tod Sacerdoti, Vice President of Display and Video Ads at Yahoo. “This new offering through the BrightRoll Exchange combines the power of data and technology to give advertisers even more flexibility to buy native the way they want.”

    Advertisers can keep accessing native inventory on Yahoo premium sites and apps via Gemini or through Gemini API partners.

    Native ad spend is projected by eMarketer to hit $9 billion (10% of all digital ad spend) by 2018.

    Image via Yahoo

  • Yahoo Said To Be Considering Sale, Unrelated Report Claims Company Has Massive Ad Fraud Problem

    A month ago, Yahoo announced that its board of directors had unanimously decided to suspend work on the pending plan announced earlier last year to spin off Yahoo’s remaining holdings in Alibaba. It said the board would now evaluate “alternative transaction structures to separate the Alibaba stake, focusing specifically on a reverse of the previously announced spin transaction.”

    It went on to say that Yahoo’s assets and liabilities other than the Alibaba stake would be transferred to a newly formed company. In other words, Yahoo would spinoff its core web business.

    Now, according to a new report from Bloomberg Business, the company is considering an outright sale. From the report:

    Yahoo still hasn’t concluded that it has to sell and hasn’t hired a bank to run an official process or contacted potential buyers, said the people, who asked not to identified because a final decision hadn’t been made. Nonetheless, there has been a shift in the internal thinking at Yahoo, in part because the company and its advisers now believe they need a new plan in light of an expected proxy fight by an activist investor, said the people.

    Obviously Yahoo isn’t commenting.

    Meanwhile, a report from CNBC has come out citing multiple sources suggesting that the company’s programmatic video ad platform (powered by BrightRoll) generates “mostly fraudulent ad traffic, and otherwise does not work as promised.” From that report:

    One company that used Yahoo’s programmatic video ad platform said it discovered 30 to 70 percent of its ads were not running in areas where Yahoo was claiming they were. Most of the problems were tied to the fact that although it was paying $20 CPMs (cost per thousand views) for pre-roll advertising (ads that appear before a video), its ads were appearing in videos inside banners, which should have only been one-tenth of the price.

    Another source said that it found BrightRoll’s traffic was mostly coming from data centers’ IP addresses, suggesting most of the ad views were nonhuman and fraudulent.

    Yahoo has commented on that bombshell, denying such claims.

    Earlier this week, reports emerged that Yahoo is facing a class action suit over alleged text message spam.

    So it’s been an interesting week for Yahoo to say the least.

    Image via Marissa Mayer (Twitter)

  • Facebook Stops Accepting New Customers For LiveRail Ad Server

    Facebook Stops Accepting New Customers For LiveRail Ad Server

    A couple of years ago, Facebook acquired ad tech company and publisher monetization platform LiveRail, but since then, Audience Network has become much more of a priority.

    Facebook announced that it will no longer accept new customers for LiveRail’s ad server, and will work on helping existing customers transition to other publisher products or alternative ad servers.

    This is mainly an effort to put more emphasis on its more modern Audience Network.

    “Over the past two years, a growing number of mobile app publishers have found success – better returns and more relevant advertising – through Facebook’s Audience Network and the people-based marketing approach that powers it,” says Facebook’s Alvin Bowles. “We have seen the number of apps on Audience Network increase 10x YoY, and agencies and advertisers like Dentsu Aegis, Home Depot and Spotify continue to see great results. In fact, apps running on the Audience Network account for 6% of all time spent in mobile apps. In Q4 we reached a $1B annual run rate for advertising spend through the Audience Network, with the bulk of that value being passed to publishers, and the remainder being recorded as net revenue for Facebook.”

    Facebook says the changes will enable it to focus its attention on growing Audience Network and LiveRail’s private marketplaces and mediation services. Publishers will still be able to work with LiveRail and Audience Network to monetize and manage their ad inventory.

    “As we build out LiveRail’s programmatic private marketplaces and mediation services, we will continue to focus on native and video,” says Bowles. “We believe native and video are key ad formats and that programmatic platforms are the best way through which to deliver them. LiveRail already powers about 75 programmatic private marketplaces for some of the world’s largest publishers, including Hulu and A+E Networks.”

    TechCrunch shares some additional insight into Facebook’s thinking after speaking with the company’s head of advertising technology, who notes that the change isn’t particularly dramatic as the LiveRail ad server only represents “tens of clients, well under 100”.

    Image via Facebook

  • AOL Makes Programmatic Ad Deal With A+E Networks

    AOL Makes Programmatic Ad Deal With A+E Networks

    AOL announced that it has formed a new programmatic and publisher solutions partnership with A+E Networks that will enable the latter to leverage AOL’s programmatic platform as a publisher and as an advertisers.

    AOL describes it as a first of its kind partnership for the company.

    A+E will use AOL’s tech to optimize its monetization across its video and display inventory and drive personalization across its portfolio, which includes A&E, HISTORY, Lifetime, FYI and more. It will also utilize AOL’s premium content brands including Huffington Post, Xbox (presumably AOL On), TechCrunch, Moviefone, etc. to drive awareness for its content programming. It will also use its own first-party data along with AOL’s to improve targeting.

    AOL President Bob Lord said, “With consumers driving media transformation today, it’s become that much more important for publishers to deploy technology and data in new ways to offer unique, personalized experiences to their audiences. A+E Networks has been a first-mover in that regard, and we look forward to working with them to deliver increased revenue opportunities and scalable technologies.”

    “A+E Networks has brought a level of flexibility to the market by affording advertisers and agencies the ability to use advanced tools and software that create more dynamic campaigns based on optimization and targeting capabilities,” added Mel Berning, President and Chief Revenue Officer at A+E Networks. “By partnering with ONE by AOL, we extend these opportunities to their client list in an uninterrupted execution.”

    The partnership includes video, display, and personalization components as well as an upfront ad commitment. AOL has set aside premium video and display ad inventory across mobile and desktop for A+E Networks programming.

    Image via A+E Networks

  • DoubleClick Ad Exchange Gets Native Ads, Mobile Video Interstitials

    Google announced that it is bringing programmatic support native ads and mobile video interstitials to the DoubleClick Ad Exchange.

    The company announced native formats in DoubleClick for Publishers earlier this year, but now publishers can sell native ads programatically in the open auction and in private marketplaces on the exchange.

    It’s available immediately in apps and will roll out for cross-screen native ads over the coming months.

    “Along with native ads, we’re also introducing programmatic support for mobile video interstitials in apps on DoubleClick Ad Exchange,” says Jonathan Bellack, director of product management. “Video is key to driving brand impact in the moments that matter, no matter where they occur. With these new immersive, full-screen video ads available programmatically, again in both the open auction and in private marketplaces, publishers can offer their advertising partners a new way to bring engaging brand experiences to users seamlessly, driving advertiser performance and growing publisher revenue. During beta tests, publishers realized gains as high as 30% CPM in interstitial video compared to regular interstitial performance.”

    “Together, these innovations help address a strong demand from ad buyers for native and mobile video formats that can be bought programmatically,” he adds.

    Earlier this week, the company announced support for Payment IDs on the Ad Exchange as well as some new DoubleClick active view updates.

    Images via Google

  • DoubleClick Active View Updates Announced

    Google announced a couple of Active View-related updates for DoubleClick as part of the company’s efforts to help with the advertising industry’s viewability woes.

    The first is the addition of Active View optimization to DoubleClick Bid Manager, which the company describes as a better way to programmatically buy viewable impressions. This is available to all clients globally.

    “This new bid optimization feature uses the collective intelligence from many signals (e.g. URL, time of day, page category) to predict, impression by impression, the probability that it will be viewable,” Google says in a blog post. “It then dynamically adjusts bids higher or lower based on that probability to deliver the viewable CPM target that advertisers set for their video and display campaigns. Active View optimization delivers what advertisers actually care about – the total volume of viewable impressions – and doesn’t fixate on a viewable percentage.”

    “This will help solve a common problem: when marketers buy viewable impressions programmatically using current viewability targeting, the decision to bid on a single impression is very basic,” it adds. “Buyers choose a target viewable percentage (e.g. 50%) and their programmatic buying system bids the same amount for any impressions with a likelihood of being viewed above that target – or nothing at all for impressions with a likelihood of being viewed below that target. This means that buyers are missing out on wide swaths of inventory that may actually be viewable and are driving up competition (and CPMs) for the inventory they are buying.”

    Google also announced Active View for mobile apps in DoubleClick for Publishers and DoubleClick Ad Exchange, which the company says brings holistic viewability measurement to publishers.

    Earlier this week, Google announced Payment ID support to the DoubleClick Ad Exchange.

    Image via DoubleClick

  • DoubleClick Adds Payment IDs to Ad Exchange For All Buyers

    DoubleClick Adds Payment IDs to Ad Exchange For All Buyers

    Google’s DoubleClick announced that it is currently in the process of applying for TAG Registration and that its version of Payment IDs is available in the DoubleClick Ad Exchange to all buyers globally. This is an effort to support the adoption of Payment IDs across the ecosystem.

    Last week, the Trustworthy Accountability Group (TAG) announced the Verified by TAG initiative. This is a two-part initiative, which includes Payment ID – aimed at preventing payments to fraudsters – and TAG Registry, which is to identify responsible ad providers. The registry is already available.

    “The TAG Registry and upcoming Payment ID system will act like a ‘two-factor authentication’ for the digital ad supply chain,” said TAG CEO Mike Zaneis. “Through the TAG Registry, buyers will be able to ensure that they are working with trusted parties at every step of their campaigns, while the Payment ID system will ensure that payments only go to legitimate players, choking off the cash to criminals. These programs will serve as the cornerstone of TAG’s anti-fraud efforts by providing transparency across the digital ad ecosystem. Registration is now open, and it’s time for every company in digital advertising to get TAG’ed.”

    In a post on DoubleClick’s blogs, Google writes:

    Currently, if a programmatic buyer finds they’ve bought fraudulent inventory, there is no way to directly identify the supply source responsible for the fraud. The Payment ID system we proposed to the TAG Anti-Fraud working group fixes this problem by asking all supply sources (e.g. ad exchanges, ad networks, supply side platforms) of advertising inventory to create and provide unique and persistent anonymous identifiers that link every impression to who is paid in their accounting systems. If a buyer finds invalid activity from any source in their supply chain, these Payment IDs will help the buyer to identify who is responsible and blacklist those suppliers from their campaigns.

    We’ve always invested heavily to keep DoubleClick Ad Exchange free of invalid activity and ensure that money spent on our platform only goes to support legitimate publishers, app developers, and content creators. To show our commitment to a better ads ecosystem, accelerate the adoption of Payment IDs, and help DSPs start integrating them, we’ve implemented the standard as it exists today, and we’ll continue to work closely with TAG and others in the industry to formalize an industry-wide Payment ID program. When the TAG Anti-Fraud Working Group has finalized the broader industry standard, we’ll happily make any changes to ensure we are compliant with TAG’s efforts.

    Among those who have already vowed their support of Payment IDs are DoubleClick Bid Manager, Dstillery, Magnetic, MediaMath, Rocket Fuel, The Trade Desk. Integrations should come within a few months.

    You can learn more about the Verified by TAG initiative and the Tag Registry in an announcement here.

    Image via TAG (Facebook)

  • Adobe Digital Index: Facebook Continues To Grow More Quickly Than Google On Display CTRs

    Adobe Digital Index: Facebook Continues To Grow More Quickly Than Google On Display CTRs

    Adobe Digital Index released its latest Digital Advertising Report finding that Facebook’s click-through-rates continue to grow more quickly than Google’s display CTRs.

    Facebook has been leading Google in this area for the past year, and its growth continues to come more rapidly than Google’s. That said, Google’s recently announced Customer Match feature could help narrow the gap. Time will tell.

    “Facebook ad click-through rates rose 35% year over year, indicating that targeting efforts are paying off,” said Adobe Digital Index principal analyst Tamara Gaffney. “Marketers are using the platform more, and impressions are rebounding.”

    “According to ADI, Google’s display click-through rates (CTRs) are up 25% YoY,” the company says. “Here again, Facebook outperforms in terms of display CTR, up 35% YoY. The Customer Match announcement demonstrates that Google is under pressure to better leverage targeting data in order to improve its performance, ADI maintains.”

    Customer Match allows advertisers to target people whose email addresses they have and others similar to those people across Google Search, YouTube, and Gmail. Advertisers upload a list of email addresses, which can be matched to signed-in users on Google, and build campaigns and ads specifically for these audiences.

    “70% of online consumers agree that the quality, timing, and relevance of a brand’s message influences their perception of a brand,” said Sridhar Ramaswamy, Senior Vice President, Ads and Commerce at Google when the feature was announced. “Google is in a unique position to connect consumers with your business in the most relevant ways. Whether they’re searching on Google, checking promotions on Gmail, or watching videos on YouTube, we can deliver the most relevant information based on what they’re doing, wherever they are, when they’re looking, and on any device they’re using.”

    Adobe Digital Index senior analyst Matt Roberts said, “Google’s CTR continued growth amid declining costs is likely due to the influence of programmatic media buying. It demonstrates that display remains a compelling opportunity. We’ll watch to see what impact Customer Match has going forward.”

    You can check out the full Adobe report here:

  • Alphabet Announces Q3 Google Results

    Alphabet Announces Q3 Google Results

    Alphabet, parent company of Google (that’s still weird to type), announced the Q3 financial results for Google as it existed before the company reorganization that went into effect on October 2. The results are for the quarter ended September 30.

    Google saw revenues of $18.7 billion and revenue growth of 13% year over year with constant currency revenue growth of 21% year over year.

    The company reported substantial growth in mobile search revenue, which was complemented by contributions from its YouTube and programmatic ad offerings.

    Google also reported:

    – GAAP and non-GAAP operating income of $4.7 billion and $6.1 billion, respectively

    – GAAP and non-GAAP diluted EPS of $5.73 and $7.35, respectively

    – Strong operating cash flow of $6.0 billion

    Ruth Porat, CFO of Alphabet and Google, said, “Our Q3 results show the strength of Google’s business, particularly in mobile search. With six products now having more than 1 billion users globally, we’re excited about the opportunities ahead of Google, and across Alphabet.”

    Here’s a look at paid clicks and cost-per-click:

    Screen Shot 2015-10-22 at 4.23.09 PM

    The Alphabet reorganization is being introduced in phases. For financial reporting purposes, the company says it expects the reorganization will result in disclosing its Google busienss as a single segment and all other Alphabet businesses combined as “Other Bets” starting in Q4.

    You can look at the full earnings release here.

    Image via Thinkstock

  • Elton John Pens Op-Ed On AIDS Fight

    Elton John wrote an op-ed for Billboard on “tirelessly fighting AIDS through his foundation.” The piece appears in Billboard’s first philanthropy issue, out this week.

    In the piece, John talks about the AIDS epidemic in the 80s and realizing that his speaking about the subject was not enough to help, which led to him creating the Elton John AIDS Foundation in the United States. He would start it in the United Kingdom the following year.

    “We weren’t looking for a cure — we simply wanted to help people, provide care and support and comfort, and fight the injustices faced by those living with HIV/AIDS,” John writes. “Most of all, we wanted them to know they mattered and that someone cared.”

    He goes on to taLk about how far the world has come in getting AIDS under control. For example, while it was once the number one cause of death for men between the ages 25 and 44 in the United States, it’s “no longer a death sentence.”

    “But we have so much work left to do. There are too many people who lack access to critical treatment and prevention programs,” he writes. “There is still a dangerous lack of compassion for those living with HIV and those at risk of contracting it. As a result, there is a lack of social services and sexual health education, especially in minority, rural and gay communities. But despite all these challenges, I truly believe that we have the power to achieve an AIDS-free generation, because I’ve seen with my own eyes the incredible progress we’ve made during the past three decades. I never thought we’d get this far, this close to ending the epidemic. And my greatest hope is to live to see the day when we win the fight once and for all.”

    A few weeks ago, the Elton John AIDS Foundation released its annual report detailing its grantmaking, programmatic, fundraising, and communications achievements for 2014. This includes an introduction by Elton John himself.

  • Yahoo Has BrightRoll and Gemini News

    Yahoo Has BrightRoll and Gemini News

    With Advertising Week in full swing, there’s a ton of ad-related news coming out from the big players. Yahoo announced some updates to its ad tech portfolio, which it says brings together the strengths of Yahoo, BrightRoll, and Flurry into one offering that “simplifies the overall experience of digital advertising.”

    Yahoo acquired BrightRoll in December, and is now calling it its new, unified brand for programmatic ad tech, offering a suite of tools to help advertisers, publishers, and partners.

    “As one of the leading programmatic advertising technology offerings in the marketplace, BrightRoll powers digital advertising for 99 of the AdAge Top 100 advertisers and half of the comScore Top 50 publishers,” the company says.

    “The BrightRoll DSP drives efficient programmatic buying for video, display and native advertising, leveraging exclusive access to Yahoo data and unique insights from one billion people and 165 billion daily data events to target the right audience,” it adds. “The BrightRoll Exchange seamlessly connects buyers and sellers of high-quality video and display inventory, including Yahoo properties and other premium publishers. The exchange is integrated with 100 DSPs and enables access to thousands of sites and apps via RTB, private marketplaces and programmatic direct.”

    Yahoo also has news for Gemini in that it has a new custom audience feature letting advertisers utilize their own data alongside Yahoo data for retargeting.

    They also launched the Yahoo Preferred Partner Program for advertisers to connect with ad tech and service providers like Acquisio, ChannelAdvisor, Dealer.com, DrivenLocal, Fiksu, Kenshoo, Marin Software, Sprinklr and Tealium. Partners are selected via the Yahoo Gemini Certification Program.

    Image via Yahoo

  • Adobe Launches New Programmatic Ad Platform

    Adobe Launches New Programmatic Ad Platform

    Adobe announced that it is rolling out what it is calling “the industry’s most advanced” global programmatic advertising platform, specifically for advertisers and publishers using Adobe Marketing Cloud products.

    “It offers a new level of personalized, transparent, data-driven and efficient ad buying and delivery to boost ad performance and revenue across channels,” a spokesperson for the company tells WebProNews.

    The new self-serve platform is powered by Adobe Media Optimizer and lets advertisers control automated ad buying for search, display, and social media across exchanges and media networks from Google, Facebook, Yahoo, Rubicon Project, Index Exchange, and others.

    “Advertisers continue to struggle with the fragmentation of the programmatic ad buying process and the lack of transparency,” says Adobe’s Justin Merickel in a blog post. “This new platform provides full transparency into media costs, ad performance and revenue with a customer commitment to never arbitrage or hide fees. Tight integration with Adobe Analytics and Adobe Audience Manager ensures that advertisers can tap into data to refine and target granular audience segments. Dynamic creative capabilities enable advertisers to use images, video and other assets from Adobe Creative Cloud to deliver the right content to the right user at the right time.”

    Adobe also announced its programmatic offering for media publishers via Adobe Primetime (in beta).

    Image via Adobe

  • Amazon Web Services Adds New APIs For Testing Access Control Policies

    Amazon Web Services announced two new APIs for AWS Identity and Access Management (IAM) that lets you automate validation and auditing of permissions for IAM users, groups, and roles. They let you call the IAM policy simulator with the AWS CLI or any AWS SDK.

    The new iam:SimulatePrincipalPolicy API lets you programmatically test existing IAM policies to verify that policies work properly and identify specific statements in a policy that grant or deny access to specific resources or actions.

    Amazon explains:

    Simulate the set of IAM policies attached to an IAM entity against a list of API actions and AWS resources to determine the policies’ effective permissions. The entity can be an IAM user, group, or role. If you specify a user, then the simulation also includes all of the policies attached to groups that the user is a member of.

    You can optionally include a list of one or more additional policies specified as strings to include in the simulation. If you want to simulate only policies specified as strings, use SimulateCustomPolicy instead.

    The simulation does not perform the API actions, it only checks the authorization to determine if the simulated policies allow or deny the actions.

    The iam:SimulateCustomPolicy API will let you test the effects of new and/or updated policies that aren’t attached to users, groups, or roles.

    Brigid Johnson from Amazon Web Services walks you through utilizing the APIs in a blog post here. You can find documentation here and further discussion in a forum here.

    Image via Amazon

  • Google’s DoubleClick Integrates App Install, Event Data From Measurement Partners

    Google is striving to improve the measurement accuracy between different app attribution trackers and DoubleClick with the announcement of its ability to integrate app install and event data from third party measurement partners, beginning with TUNE.

    As a result of the integration, marketers can use third-party partners to attribute in-app activities to the in-app ads they’ve run through DoubleClick.

    Google says the launch gives customers choice, accuracy, and better performance. The choice comes from being able to use one of the supported app tracking tools.

    On accuracy, Google’s Steve Chang says, “Get reliable and accurate metrics so you can report on your results with confidence, while getting the benefits of a unified view of all your programmatic or reservation app attribution data inside DoubleClick reporting.”

    “Minimize cost-per-acquisition to get the best performance for your budget,” he says in regard to performance. “You can optimize your bids in DoubleClick Bid Manager against your post-view and post-click conversions. You can also create targetable audience lists based on these in-app activities (e.g. customers who’ve installed your app or customers who’ve logged in).”

    If you want to use the feature with DoubleClick Bid Manager, Google offers directions for doing so here. For Campaign Managers, you can find directions here.

    Image via DoubleClick

  • Verizon’s AOL Is Acquiring Millennial Media

    Verizon’s AOL Is Acquiring Millennial Media

    AOL, which as a reminder, is now owned by Verizon, announced on Thursday that it has entered agreement to acquire mobile ad platform Millennial Media. It’s paying $1.75/share, which comes to roughly $238 million.

    AOL says it will use Millennial Media to add a supply-side platform for app monetization with over 65,000 apps; add significant mobile brand advertising scale across ONE by AOL; gain access to a billion global active unique users and new cross-screen targeting capabilities; accelerate its mobile position in key international markets; and add “world-class” engineering, sales, and product talent.

    “AOL is well positioned as consumers spend more and more time on mobile devices, and as advertisers, agencies and publishers become more reliant on programmatic monetization tools,” said AOL President Bob Lord. “As we continue to invest in our platforms and technology, the acquisition of Millennial Media accelerates our competitive mobile offering in ONE by AOL and enhances our current publisher offering with an ‘all in’ monetization platform for app developers.”

    “By joining AOL, we will be adding additional mobile expertise to AOL’s growing technology assets,” added Michael Barrett, President & CEO of Millennial Media. “I am excited by what this acquisition means for our shareholders, our employees and our partners.”

    The deal will comes by way of tender offer to be followed by a merger. It’s expected to be completed this fall, and Millennial Media will become a wholly owned subsidiary of AOL.

    Image via Millennial Media

  • This Is A Disturbing Stat For Businesses

    This Is A Disturbing Stat For Businesses

    Businesses have a long way to go when it comes to online customer service, particularly on social media channels, which is where more and more people are seeking to interact with them.

    Are you making efforts to improve your customer service on social media? What steps are you taking? What steps should other businesses be taking? Discuss.

    Poor customer service on social media is nothing new. We’ve been looking at quite a few reports and studies on the topic lately, but they keep coming, and a finding from this most recent one might be the most alarming yet.

    A new study from Sprout Social finds that despite an increase in messages sent to brands on social media, nearly 90% go unanswered.That’s a pretty disturbing stat when you think about how important social media has become to the business world and how much time people spend using it to interact with businesses.

    Not only are the vast majority of messages going unanswered, but people are sending more of them.

    “The report, which analyzed brands across 15 key industries, found that the number of social messages sent to brands increased by 21 percent in the first two quarters of 2015; however, 7 out of 8 messages went unanswered,” a spokesperson for Sprout Social told WebProNews in an email.

    “According to the report, brands have an imbalanced social strategy, sending four times as many posts as replies,” they added. “Across the industries analyzed, retail and utilities brands are closing the gap between posts and replies, while media/entertainment and real estate struggle to find a balance.”

    They found that the media/entertainment industry responds to roughly 1 in 12 messages.

    Brands in Asia receive over three times as many messages as brands in Europe, Africa, and North America, and The Middle East has the best response rate at 13.1%.

    Sprout Social released this infographic looking at highlights from its findings:

    social-customer-care

    The social platforms like Facebook and Twitter are starting to make things easier on businesses, announcing new tools to help them or at least motivate them to get better at social customer care.

    In fact, Sprout Social itself recently teamed up with Twitter on a suite of tools to help brands provide better customer service, though this isn’t widely available at this point. They’re providing programmatic access to impression and engagements data for the first time, which will help brands prioritize conversations, get insights from interactions, and measure audience, Twitter says. They’re also providing better access to historical public tweets so brands can get a better understanding of their customers and create relevant and personalized experiences.

    This is all in pilot right now, but Twitter says the efforts will “pave the way for the next revolution of social customer service”.

    “Our goal is to make it easier for brands to provide outstanding customer service on Twitter,” said Twitter’s Zach Hofer-Shall. “Twitter can transform the way brands approach customer service but companies need the right solutions and the right data to take advantage of this opportunity. At the core of these improved solutions is early access to new data and a more collaborative relationship model.”

    Twitter also greatly raised the character limit on direct messages, which should make customers feel more comfortable about messaging businesses with customer service related issues, and could lead to increased efforts to have issues resolved in that format. This is another thing businesses are going to have to keep up with.

    Facebook recently announced Page Messaging, giving customers more ways to send private messages to businesses and ways for businesses to manage and respond to them. There’s a new guide available from Facebook that details how to go about using that.

    Long story short, people are sending more messages to businesses on Facebook and Twitter, and businesses are doing a terrible job of keeping up with them and responding. That needs to improve, but at least the social platforms are giving businesses more ways of helping them.

    Do you expect social media customer care to improve going forward? What needs to happen for things to get better? Share your thoughts in the comments.

    Images via Thinkstock, Sprout Social

  • Twitter Launches Full-Archive Search API

    Twitter Launches Full-Archive Search API

    Last year, Twitter updated its search feature to enable users to search every tweet ever tweeted. Now, they’re making all of these tweets available via a new search API – the Full-Archive Search API.

    Twitter acquired GNIP (also last year) to make data more accessible, and with the new API they’re doing just that. In fact, it builds on products already offered via GNIP. Twitter’s Adam Tornes explains in a blog post:

    Dr. Carl Sagan once famously said, “You have to know the past to understand the present.” For brands to most effectively analyze Twitter data in the present, they also need to know what’s happened in the past. This is the case whether you’re talking about messaging and advertising campaigns or developing new products. Gnip’s Historical PowerTrack and 30-Day Search API tools were developed with these pressing customer needs in mind. Today we’re extending our historical product offerings with the launch of our Full-Archive Search API.

    This new product builds off of our existing 30-Day search solution and extends the available window of instant and complete Twitter access to a span of more than nine years… and counting. The Full-Archive Search API will now allow Gnip customers to immediately search for any historical public Tweet — ever.

    The offering is geared toward enterprises and is considered a premium feature. In other words, it’s not just free to everyone.

    Twitter says partners can use the API to inform new product launches, create instant real-time data activity benchmarks for ad campaigns, provide instant historical insights to new customers of analytics solutions, and explore historical Twitter activity for context when responding to customer service inquiries.

    This is actually the second announcement from Twitter in the past week that gives enterprises tools to improve customer service. The company partnered with Sprout Social on a new suite of tools to help brands provide better customer service. This concerns a pilot of programmatic access to impression and engagements data, which is aimed at helping brands prioritize conversations, get insights, and measure audience. Oracle will release a related solution soon, Twitter says. More on that here.

    Image via Garrett Heath, Flickr Creative Commons

  • Twitter Gets Serious About Helping Businesses With Customer Service

    Twitter Gets Serious About Helping Businesses With Customer Service

    We’ve been writing a lot about social media-based customer service lately. There have been numerous studies on the subject coming out in recent months, and both Facebook and Twitter themselves have been bringing it up a lot.

    This week alone, Facebook launched some new features for Pages to better respond to and engage with customers, and Twitter put out an infographic about ways to get better at doing so. You can get a look at both of those here.

    On Thursday, Twitter announced the Twitter for Customer Service Playbook.

    “The introduction of the 1-800 number changed the way brands approached customer service,” says Chris Moody, Vice President of Twitter Data Strategy. “In the nearly 50 years since, customer service hasn’t changed much, until now. We’re in the early days of the next revolution — customer service on Twitter.”

    As the company notes, 80% of customer service requests on social are happening on Twitter, according to Socialbakers. It says it has also seen a 2.5X increase in the number of tweets to brands and their customer service usernames over the past two years.

    Screen Shot 2015-08-06 at 4.40.12 PM

    “Not only are customers turning to Twitter for help, Twitter is also significantly more efficient and effective for companies who are seeing a cost per resolution on Twitter that’s ⅙ of what they’re seeing in call centers,” says Moody. “And companies that developed social care capabilities improved year-over-year revenue per contact by 18.8% over companies without social customer service, according to a study by the Aberdeen group.”

    Twitter says the actual “playbook” goes into “everything from the high-level opportunity to the key steps and best practices in creating a world class social care organization.”

    The playbook is free. You can find it here.

    In a related announcement, Twitter announced that it has partnered with Sprout Social on a new suite of tools to help brands provide better customer service. This concerns a pilot of programmatic access to impression and engagements data, which is aimed at helping brands prioritize conversations, get insights, and measure audience. Oracle will release a related solution soon, Twitter says.

    Image via Garrett Heath, Flickr Creative Commons

  • Yelp Earnings Disappoint As Chairman Leaves And Company Moves Away From Display Ads

    Yelp reported its second quarter earnings on Tuesday with better than expected revenue, but worse than expected profit, sending shares tumbling. But that wasn’t the only news to come out of the company. Yelp also announced the resignation of Max Levchin from its Board of Directors, and said it will discontinue display advertising by the end of the year.

    Levchin Leaves

    Let’s start with Levchin leaving. He was Chairman and Director, and he is officially leaving “to pursue other interests”. His departure is effective immediately. The Board has yet to appoint a replacement Chairman, but says it “plans to consider the issue at the next Board meeting in September.”

    “We thank Max for all his contributions to Yelp since its founding in 2004 when he provided the seed capital to start the company,” said CEO Jeremy Stoppelman. “Max saw Yelp grow from just an idea in my head to a company worth billions of dollars with Yelpers around the world. We have mutually agreed this is the right time for him to step down given the demands on his time. I am grateful for his contributions to Yelp’s success and wish him all the best going forward.”

    “I am extremely proud of what Yelp has accomplished over the last 11 years and believe I leave it well-positioned to take advantage of the large local advertising market,” said Levchin. “I spoke with Jeremy and felt now is the right time to transition off the board. I’m confident that Yelp is prepared to continue its success as I increase my focus on my CEO responsibilities at Affirm, along with other demands on my time.”

    Display No More

    During the company’s earnings conference call, Stoppelman revealed that Yelp will phase out display advertising by the end of 2015 as it turns its ad focus to native and local products. Here’s what he had to say about it (via SeekingAlpha’s transcript of the call):

    Our mission is to connect people with great local businesses. Consumers are increasingly relying on our 83 million reviews when choosing where to spend their money, making Yelp the ideal place for local businesses to advertise. To better leverage Yelp’s strengths with consumers and local businesses, we decided to phase out brand advertising by the end of the year. We believe that eliminating brand advertising, which we also refer to as our display advertising product, will benefit the company over the long-term. The industry trend towards increasingly disruptive display advertising is at odds with our focus on the consumer experience, particularly within the app.

    Direct brand advertising sales is in decline, while programmatic advertising has its own challenges with privacy implications, ever declining CPMs, and lower ad quality. For example, ads that play video or audio intrude upon the consumer experience increasing load times and data usage on smartphones. We believe that prioritizing the consumer experience while delivering highly relevant native local advertising will provide us with the strategic long-term advantage. Given that our brand advertising as a percent of total revenues declined from 25% in 2010 to 6% in the second quarter of 2015 now is the right time for us to reallocate those resources to our highly differentiated core business

    The Results

    Yelp reported net revenue of $133.9 million for the quarter, which is up 51% year-over-year. It also reported a $0.02 per share loss, which put off Wall Street, which expected a positive $0.01 per share net income.

    Cumulative reviews grew 35% year-over-year, reaching 83 million, while mobile unique visitors surpassed the desktop number for the first time, growing 22% to 83 million on a monthly average basis. Local advertising accounts grew 40% year over year to 97,1004.

    Brand ad revenue was $8.3 million, which is a decrease of 8%.

    Here’s the full earnings release:

    SAN FRANCISCO, July 28, 2015 /PRNewswire/ — Yelp Inc. (NYSE: YELP), the company that connects consumers with great local businesses, today announced financial results for the second quarter ended June 30, 2015.

    Yelp logo
    • Net revenue was $133.9 million in the second quarter of 2015 reflecting 51% growth over the second quarter of 2014.
    • Adjusted EBITDA for the second quarter of 2015 was $22.7 million, reflecting a 32% increase over the second quarter of 2014.
    • Cumulative reviews grew 35% year over year to approximately 83 million.
    • Mobile Unique Visitors1 surpassed the number of Desktop Unique Visitors2 for the first time, growing 22% year over year to approximately 83 million on a monthly average basis. App Unique Devices grew 51% year over year to approximately 18 million on a monthly average basis3.
    • Local advertising accounts grew 40% year over year to approximately 97,1004.

    Net loss in the second quarter of 2015 was $(1.3) million, or $(0.02) per share, compared to a net income of $2.7 million, or $0.04 per share, in the second quarter of 2014.

    Non-GAAP net income, which consists of net income excluding stock-based compensation and amortization was$9.4 million, or $0.12 per share, for the second quarter of 2015.

    Net revenue for the six months ended June 30, 2015 was $252.4 million, an increase of 53% compared to $165.2 million in the same period last year. Adjusted EBITDA for the six months ended June 30, 2015 was $39.1 millioncompared to $25.8 million in the first six months of 2014. Net loss for the six months ended June 30, 2015 was$(2.6) million, or $(0.03) per share, compared to net income of $0.1 million, or $0.00 per share, in the comparable period in 2014. Non-GAAP net income for the six months ended June 30, 2015 was $17.3 million, or $0.22 per share, compared to non-GAAP net income of $15.0 million, or $0.19 per share, in the comparable period in 2014.

    “We continue to demonstrate solid topline growth, with total net revenue increasing 51% year over year to approximately $134 million,” said Jeremy Stoppelman, Yelp’s chief executive officer. “Consumers are increasingly turning to apps when using their mobile phones, and we are excited about the growth we’ve seen in app usage which accelerated to 51% year over year. We believe our rich content married with our highly-differentiated local advertising product will position us well to capture a meaningful share of the large local market.”

    “Our core local advertising business remains strong, and we are investing in Yelp’s future,” added Rob Krolik, Yelp’s chief financial officer. “We expect local advertising will continue to be our primary driver of growth as we work towards our goal of generating one billion dollars of revenue in 2017.”

    Second Quarter Operating Summary

    • Local advertising revenue totaled $107.9 million, representing 43% growth over the second quarter of 2014.
    • Transactions revenue, which was previously included in Other revenue and will be broken out separately going forward, totaled $11.3 million, compared to $1.2 million in the second quarter of 2014, primarily due to the acquisition of Eat24 in the first quarter of 2015. Transactions revenue is comprised of Eat24, Platform transactions, Yelp Deals and Gift Certificates.
    • Brand advertising revenue totaled $8.3 million, representing an 8% decrease compared to the second quarter of 2014. As of today, Yelp is announcing that it plans to phase out its brand advertising product by the end of 2015 to continue its focus on the consumer experience and its native, local advertising products.
    • Other revenue totaled $6.4 million, representing 128% growth over the second quarter of 2014. Other revenue is primarily comprised of revenue from partnership arrangements.

    Business Highlights

    • Mobile Traffic: Mobile Unique Visitors surpassed Desktop Unique Visitors for the first time in company history in the second quarter of 2015, growing to approximately 83 million compared to approximately 79 million Desktop Unique Visitors. Growth in unique devices accessing the Yelp app accelerated to 51% over the second quarter of 2014. The majority of Yelp consumer engagement now occurs on the app with approximately 70% of new reviews and photos and approximately 70% of calls, clicks for directions and map views coming via the Yelp app.
    • Local Advertising: With the full rollout of its packaged cost-per-click (CPC) advertising package inSeptember 2014, Yelp increased the percent of local revenue generated by CPC advertisers to 46% in the second quarter of 2015, an increase from 40% in the first quarter of 2015. Based on Yelp’s internal analysis, local advertisers on Yelp receive on average approximately 270% ROI on their advertising spend, demonstrating the compelling nature of its highly relevant, native advertising products.

    Business Outlook

    Yelp is providing its outlook for the third quarter and lowering its outlook for the full year of 2015 based on slower sales headcount growth and the elimination of its brand advertising product.

    • For the third quarter of 2015, net revenue is expected to be in the range of $139 million to $142 million, representing growth of approximately 37% compared to the third quarter of 2014. Adjusted EBITDA is expected to be in the range of $12 million to $15 million. Stock-based compensation is expected to be in the range of $16 million to $17 million, and depreciation and amortization is expected to be 5%-6% of revenue.
    • For the full year of 2015, net revenue is expected to be in the range of $544 million to $550 million, representing growth of approximately 45% compared to full year 2014. Adjusted EBITDA is expected to be in the range of $72 million to $78 million. Stock-based compensation is expected to be in the range of $62 million to $64 million, and depreciation and amortization is expected to be 5%-6% of revenue.

    Quarterly Conference Call

    To access the call, please dial 1 (800) 708-4539, or outside the U.S. 1 (847) 619-6396, with Passcode 40205168, at least five minutes prior to the 1:30 p.m. PT start time.  A live webcast of the call will also be available at http://www.yelp-ir.com under the Events & Presentations menu.  An audio replay will be available between 4:00 p.m. PT July 28, 2015 and 11:59 p.m. PT August 4, 2015 by calling 1 (888) 843-7419 or 1 (630) 652-3042, with Passcode 40205168.  The replay will also be available on Yelp’s website at http://www.yelp-ir.com.

    About Yelp

    Yelp Inc. (http://www.yelp.com) connects people with great local businesses. Yelp was founded in San Franciscoin July 2004. Since then, Yelp communities have taken hold in major metros across 31 countries. Approximately 83 million unique visitors visited Yelp via their mobile device1, including approximately 18 million unique devices accessing the Yelp app3, and approximately 79 million unique visitors visited Yelp via a desktop computer2 on a monthly average basis during the second quarter of 2015. By the end of the same quarter, Yelpers had written approximately 83 million rich, local reviews, making Yelp the leading local guide for real word-of-mouth on everything from boutiques and mechanics to restaurants and dentists.

    1 Calculated as the number of “users,” as measured by Google Analytics, accessing Yelp via mobile web plus unique devices accessing the app, each on a monthly average basis over a given three-month period.

    2 Calculated as the number of “users,” as measured by Google Analytics, accessing Yelp via desktop computer on an average monthly basis over a given three-month period.

    3 Calculated as the number of unique devices accessing the app on a monthly average basis over a given three-month period, according to internal Yelp logs.

    4 Local advertising accounts comprise all local business accounts from which we recognize local advertising revenue in a given three-month period.

    Non-GAAP Financial Measures

    This press release includes information relating to adjusted EBITDA, non-GAAP net income and non-GAAP net income per share, each of which the Securities and Exchange Commission has defined as a “non-GAAP financial measure.” Adjusted EBITDA, non-GAAP net income and non-GAAP net income per share have been included in this press release because they are key measures used by Yelp management and board of directors to understand and evaluate core operating performance and trends, to prepare and approve its annual budget and to develop short- and long-term operational plans. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles in the United States (“GAAP”).

    Adjusted EBITDA and non-GAAP net income have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of Yelp’s financial results as reported under GAAP. Some of these limitations are:

    • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA and non-GAAP net income do not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
    • adjusted EBITDA does not reflect changes in, or cash requirements for, Yelp’s working capital needs;
    • adjusted EBITDA and non-GAAP net income do not consider the potentially dilutive impact of equity-based compensation;
    • adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to Yelp; and
    • other companies, including those in Yelp’s industry, may calculate adjusted EBITDA and non-GAAP net income differently, which reduces their usefulness as comparative measures.

    Because of these limitations, you should consider adjusted EBITDA, non-GAAP net income and non-GAAP net income per share alongside other financial performance measures, including various cash flow metrics, net income (loss) and Yelp’s other GAAP results. Additionally, Yelp has not reconciled its adjusted EBITDA outlook for the third quarter and full year 2015 to its net income (loss) outlook because it does not provide an outlook for other income (expense) and provision for income taxes, which are reconciling items between net income (loss) and adjusted EBITDA. As items that impact net income (loss) are out of Yelp’s control and cannot be reasonably predicted, Yelp is unable to provide such an outlook. Accordingly, reconciliation to net income (loss) outlook for the third quarter and full year 2015 is not available without unreasonable effort. For a reconciliation of historical non-GAAP financial measures to the nearest comparable GAAP measures, see the non-GAAP reconciliations included below in this press release.

    Forward-Looking Statements

    This press release contains forward-looking statements relating to, among other things, the future performance of Yelp and its consolidated subsidiaries that are based on Yelp’s current expectations, forecasts and assumptions and involve risks and uncertainties. These statements include, but are not limited to, statements regarding expected financial results for the third quarter and full year 2015, Yelp’s ability to capture a meaningful share of the large local market, Yelp’s target revenue for 2017 and its expectations regarding local advertising as the primary driver of growth, Yelp’s estimates regarding local advertisers’ ROI on advertising spend, the future growth in Yelp revenue and continued investing by Yelp in its future growth, and Yelp’s ability to drive daily usage and engagement (particularly on mobile), increase awareness of Yelp among consumers, and deliver value to local businesses. Yelp’s actual results could differ materially from those predicted or implied and reported results should not be considered as an indication of future performance. Factors that could cause or contribute to such differences include, but are not limited to: Yelp’s short operating history in an evolving industry; Yelp’s ability to generate sufficient revenue to maintain profitability, particularly in light of its significant ongoing sales and marketing expenses; the impact of Yelp phasing out its brand advertising products by the end of 2015; Yelp’s ability to attract, retain and motivate well-qualified employees, particularly in sales and marketing; successfully manage acquisitions of new businesses, solutions or technologies, such as Eat24, and to integrate those businesses, solutions or technologies; Yelp’s reliance on traffic to its website from search engines like Googleand Bing; Yelp’s ability to generate and maintain sufficient high quality content from its users; maintaining a strong brand and managing negative publicity that may arise; maintaining and expanding Yelp’s base of advertisers; changes in political, business and economic conditions, including any European or general economic downturn or crisis and any conditions that affect ecommerce growth; fluctuations in foreign currency exchange rates; Yelp’s  ability to deal with the increasingly competitive local search environment; Yelp’s need and ability to manage other regulatory, tax and litigation risks as its services are offered in more jurisdictions and applicable laws become more restrictive; the competitive and regulatory environment while Yelp continues to expand geographically and introduce new products and as new laws and regulations related to Internet companies come into effect; Yelp’s ability to timely upgrade and develop its systems, infrastructure and customer service capabilities. The forward-looking statements in this release do not include the potential impact of any acquisitions or divestitures that may be announced and/or completed after the date hereof.

    More information about factors that could affect Yelp’s operating results is included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Yelp’s most recent Quarterly Report on Form 10-Q at http://www.yelp-ir.com or the SEC’s website at www.sec.gov. Undue reliance should not be placed on the forward-looking statements in this release, which are based on information available to Yelp on the date hereof. Yelp assumes no obligation to update such statements.

    Investor Relations Contact Information
    Wendy Lim, Allie Dalglish
    (415) 635-2412
    [email protected]

     

    Yelp Inc.
    Condensed Consolidated Balance Sheets
    (In thousands)
    (Unaudited)
    June 30, December 31,
    2015 2014
    Assets
    Current assets:
    Cash and cash equivalents $ 181,460 $        247,312
    Short-term marketable securities 186,673 118,498
    Accounts receivable, net 41,339 35,593
    Prepaid expenses and other current assets 22,713 19,355
    Total current assets 432,185 420,758
    Long-term marketable securities – 38,612
    Property, equipment and software, net 72,603 62,761
    Goodwill 173,296 67,307
    Intangibles, net 42,458 5,786
    Restricted cash 16,285 17,943
    Other assets 4,560 16,483
    Total assets $ 741,387 $        629,650
    Liabilities  and stockholders’ equity
    Current liabilities:
    Accounts payable $     1,706 $            1,398
    Accrued liabilities 37,716 29,581
    Deferred revenue 2,546 2,994
    Total current liabilities 41,968 33,973
    Long-term liabilities 13,254 7,527
    Total liabilities 55,222 41,500
    Commitments and contingencies
    Stockholders’ equity
    Common stock – –
    Additional paid-in capital 734,867 627,742
    Accumulated other comprehensive loss (12,130) (5,609)
    Accumulated deficit (36,572) (33,983)
    Total stockholders’ equity 686,165 588,150
    Total liabilities and stockholders’ equity $  741,387 $         629,650

     

    Yelp Inc.
    Condensed Consolidated Statements of Operations
    (In thousands, except per share amounts)
    (Unaudited)
    Three Months Ended Six Months Ended
    June 30, June 30,
    2015 2014 2015 2014
    Net revenue $ 133,913 $ 88,787 $ 252,421 $ 165,194
    Cost and expenses
    Cost of revenue (1) 13,057 5,845 21,756 10,922
    Sales and marketing (1) 68,014 47,798 131,280 92,919
    Product development (1) 26,345 14,726 50,305 28,708
    General and administrative (1) 19,280 13,257 39,217 26,427
    Depreciation and amortization 7,167 4,034 14,062 7,695
    Total cost and expenses 133,863 85,660 256,620 166,671
    Income (loss) from operations 50 3,127 (4,199) (1,477)
    Other income (expense), net 329 (15) 891 (17)
    Income (loss) before income taxes 379 3,112 (3,308) (1,494)
    Benefit (provision) for income taxes (1,684) (369) 719 1,602
    Net income (loss) attributable to common stockholders $   (1,305) $   2,743 $   (2,589) $        108
    Net (income) loss per share attributable to common stockholders:
    Basic $     (0.02) $     0.04 $     (0.03) $       0.00
    Diluted $     (0.02) $     0.04 $     (0.03) $       0.00
    Weighted-average shares used to compute net loss per share attributable to common stockholders:
    Basic 74,631 71,714 74,009 71,444
    Diluted 74,631 77,056 74,009 76,903
    (1) Includes stock-based compensation expense as follows:
    Three Months Ended Six Months Ended
    June 30, June 30,
    2015 2014 2015 2014
    Cost of revenue $        222 $      119 $        346 $        269
    Sales and marketing 5,654 3,728 10,591 7,125
    Product development 6,065 3,456 11,170 6,498
    General and administrative 3,575 2,780 7,080 5,647
    Total stock-based compensation $   15,516 $ 10,083 $   29,187 $   19,539

     

    Yelp Inc.
    Condensed Consolidated Statements of Cash Flows
    (In thousands)
    (Unaudited)
    Six Months Ended
    June 30,
    2015 2014
    Operating activities
    Net income (loss) $        (2,589) $         108
     Adjustments to reconcile net income (loss) to net
     cash provided by (used in) operating activities:
    Depreciation and amortization 14,062 7,695
    Provision for doubtful accounts and sales returns 6,076 2,581
    Stock-based compensation 29,187 19,539
    Loss (gain) on disposal of assets and website development costs 144 (5)
    Premium amortization, net, on securities held-to-maturity 481 93
    Excess tax benefit from share-based award activity (3,952) (460)
    Changes in operating assets and liabilities:
    Accounts receivable (7,855) (6,716)
    Prepaid expenses and other assets (7,079) (5,980)
    Accounts payable, accrued expenses and other liabilities 15,616 3,567
    Deferred revenue (426) (433)
    Net cash provided by operating activities 43,665 19,989
    Investing activities
    Acquisitions, net of cash received (73,422) –
    Purchases of property, equipment and software (18,059) (7,212)
    Capitalized website and software development costs (6,012) (4,327)
    Change in restricted cash 1,672 (397)
    Purchase of intangibles (314) –
    Proceeds from sale of property and equipment 109 14
    Purchases of investment securities held-to-maturity (93,914) (122,226)
    Maturities of investment securities held-to-maturity 63,870 –
    Cash used in investing activities (126,070) (134,148)
    Financing activities
    Proceeds from exercise of employee stock options 8,534 10,841
    Proceeds from issuance of common stock for Employee Stock Purchase Plan 5,061 4,087
    Excess tax benefit from share-based award activity 3,952 460
    Repurchase of common stock (396) (642)
    Net cash provided by financing activities 17,151 14,746
    Effect of exchange rate changes on cash and cash equivalents (598) 35
    Net decrease in cash and cash equivalents (65,852) (99,378)
    Cash and cash equivalents at beginning of period 247,312 389,764
    Cash and cash equivalents at end of period 181,460 $   290,386

     

    Yelp Inc.
    Reconciliation of GAAP to Non-GAAP Financial Measures
    (In thousands)
    (Unaudited)
    Three Months Ended Six Months Ended
    June 30, June 30,
    2015 2014 2015 2014
    Adjusted EBITDA:
    Net income (loss) $ (1,305) $   2,743 $ (2,589) $      108
    Provision (benefit) for income taxes 1,684 369 (719) (1,602)
    Other (income) expense, net (329) 15 (891) 17
    Depreciation and amortization 7,167 4,034 14,062 7,695
    Stock-based compensation 15,516 10,083 29,187 19,539
    Adjusted EBITDA $ 22,733 $ 17,244 $ 39,050 $ 25,757
    Non-GAAP net income and income per share:
    GAAP net income (loss) attributable to common

    shareholders
    $ (1,305) $   2,743 $ (2,589) $      108
       Add back: stock-based compensation 15,516 10,083 29,187 19,539
       Add back: amortization of intangible assets 1,803 629 3,034 1,255
       Less: tax effect of stock-based compensation & amortization of intangible assets
    (6,660) (4,039) (12,376) (7,899)
       Add back: valuation allowance release (net of tax) – – – 1,958
    NON-GAAP NET INCOME $   9,354 $   9,416 $ 17,256 $ 14,961
    GAAP diluted shares 78,749 77,056 78,205 76,903
    NON-GAAP NET INCOME PER SHARE $     0.12 $     0.12 $     0.22 $     0.19

    Image via Yelp (Flickr)

  • Yahoo Revenue Better Than Expected, Earnings Not Quite

    Yahoo Revenue Better Than Expected, Earnings Not Quite

    Yahoo just released its earnings report for the second quarter with revenue up 15% year-over-year. The company reported a net loss of $21.6 million. Revenue after costs paid to partners was pretty much flat.

    Gross search revenue was also up 15% at $920 million while GAAP search revenue was up 22% at $521 million. Paid clicks were up 13% and price-per-click increased 4%.

    On the display side of things, GAAP display revenue was $500 million, up 15% year-over-year. The number of ads sold increased by 9% and pre-per-ad was up 10%.

    CEO Marissa Mayer said, “I’m extremely pleased with our achievements in Q2, with revenue growing 15% year-over-year, marking our most substantial GAAP revenue growth in almost 9 years. Our Mavens investment businesses across mobile, video, native and social grew to nearly $400 million in revenue this quarter, delivering 60% GAAP growth year-over-year. Further, our display business saw the most substantial revenue growth since 2010. Yahoo’s transformation continues to make great progress.”

    The company beat Wall Street estimates on revenue, but fell short on EPS at $0.16 (versus estimated $0.18).

    Here’s the full earnings release:

    SUNNYVALE, Calif.–(BUSINESS WIRE)– Yahoo! Inc. (NASDAQ: YHOO) today reported results for the quarter ended June 30, 2015.

    “I’m extremely pleased with our achievements in Q2, with revenue growing 15% year-over-year, marking our most substantial GAAP revenue growth in almost 9 years,” saidMarissa Mayer, CEO of Yahoo. “Our Mavens investment businesses across mobile, video, native and social grew to nearly $400 million in revenue this quarter, delivering 60% GAAP growth year-over-year. Further, our display business saw the most substantial revenue growth since 2010. Yahoo’s transformation continues to make great progress.”

    Q2 2014 Q2 2015
    GAAP revenue $1,084 million $1,243 million
    Cost of revenue – TAC $44 million $200 million
    Income (loss) from operations $38 million $(45) million
    Non-GAAP income from operations $194 million $108 million
    Adjusted EBITDA $340 million $262 million
    Net earnings (loss) $270 million $(22) million
    GAAP net earnings (loss) per diluted share $0.26 ($0.02)
    Non-GAAP net earnings per diluted share $0.37 $0.16

    Business Highlights

    • Search:
      • Over the past year, Yahoo’s search presence has steadily grown through innovation and partnerships with industry leaders. In Q2, Yahoo introduced a new mobile search experience in the U.S. that connects users immediately to the people, places and things they care about by using context and location cues to deliver the most relevant search results.
    • Communications:
      • In Q2, Yahoo delivered several new features in Mail including Yahoo Mail on Firefox Share which allows users to instantly share web pages when using Firefox; integration of Twitter and LinkedIn information in Contacts; and the addition of breaking news notifications to the Mail news feed tab.
    • Digital Content:
      • In July, the Company launched Daily Fantasy, now available in the Yahoo Fantasy app, giving users the chance to win money every day with new fantasy lineups.
      • Yahoo announced a partnership with the NFL to live stream an International Series Game between the Buffalo Bills and the Jacksonville Jaguars from London this fall.
      • Yahoo launched new daily live finance, news and entertainment programming including Ultimate DJ, a global Electronic Music competition-style live series that is executive produced by Simon Cowell. The Company also announced 14 new shows across Yahoo’s digital magazine channels including Riding Shotgun withMichelle Rodriguez.
      • In Q2, Live Nation and Yahoo continued their partnership by kicking off a music festival live stream series to bring artists’ performances from this year’s most anticipated music festivals to our global audience.
    • Ad Technology:
      • Yahoo announced the availability of independent viewability and fraud measurement for display and video advertising across the Company’s programmatic buying platform, including Yahoo Properties. Advertisers can now choose from leading accredited, third-party measurement solutions to independently validate for viewability and fraud across display and video at every stage of the campaign lifecycle.
      • Yahoo introduced new powerful formats to help advertisers reach their audiences: native video and video app-install ads. With native video ads, brand content can be as compelling as video while beautifully integrated into other experiences on Yahoo’s homepage, digital magazines and apps. For marketers and developers looking to drive installs, the Company now offers a format that combines the engagement of video and the performance of install ads.

    Second Quarter 2015 Financial Highlights

    Mavens Revenue:

    Q2 2014 Q2 2015
    Mavens revenue $ 249 million $ 399 million
    Non-Mavens revenue 742 million 725 million
    Total traffic-driven revenue $ 991 million $1,124 million
    Non-traffic-driven revenue 93 million 119 million
    GAAP revenue $1,084 million $1,243 million

    Mavens revenue represented 25 percent of traffic-driven revenue in the second quarter of 2014, and increased to 35 percent in the second quarter of 2015.

    Mobile Revenue:

    Q2 2014 Q2 2015
    Mobile revenue $ 163 million $ 252 million
    PC revenue 828 million 872 million
    Total traffic-driven revenue $ 991 million $1,124 million
    Non-traffic-driven revenue 93 million 119 million
    GAAP revenue $1,084 million $1,243 million

    Mobile revenue represented 16 percent of traffic-driven revenue in the second quarter of 2014, and increased to 22 percent in the second quarter of 2015.

    Gross mobile revenue for the second quarter of 2014 and 2015 was approximately $272 million and $415 million, respectively.

    Search Revenue:

    • Gross search revenue was $920 million for the second quarter of 2015, an increase of 15 percent compared to the second quarter of 2014.
    • GAAP search revenue was $521 million for the second quarter of 2015, an increase of 22 percent compared to the second quarter of 2014.
    • Cost of revenue -TAC paid to search partners was $106 million for the second quarter of 2015 compared to less than $1 million in the second quarter of 2014.
    • The number of Paid Clicks increased approximately 13 percent compared to the second quarter of 2014.
    • Price-per-Click increased approximately 4 percent compared to the second quarter of 2014.

    Display Revenue:

    • GAAP display revenue was $500 million for the second quarter of 2015, a 15 percent increase compared to the second quarter of 2014.
    • Cost of revenue – TAC paid to display partners was $94 million for the second quarter of 2015 compared to $42 million in the second quarter of 2014.
    • The number of Ads Sold increased approximately 9 percent compared to the second quarter of 2014.
    • Price-per-Ad increased approximately 10 percent compared to the second quarter of 2014.

    Cash, Cash Equivalents, and Marketable Securities:

    • Cash, cash equivalents, and marketable securities were $7.0 billion as of June 30, 2015 compared to $10.2 billion as of December 31, 2014, a decrease of $3.2 billion. In the first quarter of 2015, the Company satisfied the $3.3 billion income tax liability related to the sale of Alibaba Group ADSs in 2014.

    “In addition to revenue outperformance, we reduced $30 million in sequential cash operating expenses driven by strategic headcount and footprint reductions, tight management of our discretionary costs and the benefit from IP monetization,” said CFOKen Goldman. “As we continued to reduce our workforce to fewer than 11,000 full-time employees over the last quarter, we have also continued to realign our resources as we become a more efficient business.”

    Live Stream

    Yahoo will live stream a video broadcast of the Company’s second quarter 2015 financial results at 2 p.m. Pacific Time/5 p.m. Eastern Time today. The live stream will be broadcast from Yahoo’s Sunnyvale studio and will be available exclusively on Yahoo Finance at finance.yahoo.com. The Company will provide its business outlook for the third quarter during the presentation. Supplemental financial information can be accessed through the Company’s Investor Relations website at investor.yahoo.net. The video will be archived after the event at investor.yahoo.net and will be available for 90 days following the broadcast.

    Non-GAAP Financial Measures

    This press release and its attachments include the following financial measures defined as non-GAAP financial measures by the Securities and Exchange Commission (“SEC”): gross mobile revenue; gross search revenue; revenue ex-TAC; adjusted EBITDA; non-GAAP income from operations; non-GAAP net earnings; non-GAAP net earnings per share – diluted; and free cash flow.

    Gross mobile revenue is GAAP mobile revenue plus the related revenue share with third parties. Gross search revenue is GAAP search revenue plus the related revenue share with third parties. Revenue ex-TAC is GAAP revenue less cost of revenue — TAC. Adjusted EBITDA, non-GAAP income from operations, non-GAAP net earnings, and non-GAAP net earnings per share – diluted, exclude from the most comparable GAAP financial measures certain gains, losses, and expenses that we do not believe are indicative of ongoing results, and exclude stock-based compensation expense. Adjusted EBITDA also excludes taxes, depreciation, amortization of intangible assets, other income, net (which includes interest), earnings in equity interests, and net income attributable to noncontrolling interests. Free cash flow is GAAP net cash provided by (used in) operating activities (adjusted to include excess tax benefits from stock-based awards), less acquisition of property and equipment, net and dividends received from equity investees.

    These measures may be different than non-GAAP financial measures used by other companies. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles (“GAAP”). Explanations of the Company’s non-GAAP financial measures and reconciliations of these financial measures to the GAAP financial measures the Company considers most comparable are included in the accompanying “Note to Unaudited Condensed Consolidated Financial Statements,” “Supplemental Financial Data and GAAP to Non-GAAP Reconciliations,” and “GAAP to Non-GAAP Reconciliations.”

    About Yahoo

    Yahoo is a guide focused on informing, connecting, and entertaining our users. By creating highly personalized experiences for our users, we keep people connected to what matters most to them, across devices and around the world. In turn, we create value for advertisers by connecting them with the audiences that build their businesses.Yahoo is headquartered in Sunnyvale, California, and has offices located throughout theAmericas, Asia Pacific (APAC) and the Europe, Middle East and Africa (EMEA) regions. For more information, visit the pressroom (pressroom.yahoo.net) or the Company’s blog(yahoo.tumblr.com).

    “Ads Sold” consist of display ad impressions for paying advertisers on Yahoo Propertiesand Affiliate sites.

    “Affiliates” refers to the third-party entities that have integrated Yahoo’s advertising offerings into their Websites or other offerings (those Websites and other offerings, “Affiliate sites”).

    “Alibaba Group” means Alibaba Group Holding Limited.

    “Gross mobile revenue” is GAAP mobile revenue plus the related revenue share with third parties.

    “Gross search revenue” is GAAP search revenue plus the related revenue share with third parties.

    “Mavens revenue” is revenue generated from, without duplication: (i) mobile (as defined below), (ii) video ads and video ad packages, (iii) native ads, and (iv) Tumblr ads and fees.

    “Mobile revenue” is revenue generated in connection with user activity on mobile devices, including smartphones and tablets, regardless of whether the device is accessing a mobile-optimized service. Mobile revenue is generated primarily from search and display ads. Mobile revenue also includes leads, listings and fees revenue and ecommerce revenue allocated to user activity on mobile devices.

    “Net earnings” means net income attributable to Yahoo! Inc., and “net earnings per diluted share” means net income attributable to Yahoo! Inc. common stockholders per share – diluted.

    “Non-Mavens revenue” is revenue generated from search ads and traditional (i.e., non-native, non-video, non-Tumblr) display ads served on PCs and also includes leads, listings and fees revenue and ecommerce revenue allocated to user activity on PCs.

    “Non-traffic-driven revenue” is revenue not arising from user activity on Yahoo Propertiesor Affiliate sites, and includes royalty revenue, license fee revenue, amortization under the technology and intellectual property license agreement with Alibaba Group, and all other revenue that is not traffic-driven.

    “Paid Clicks” are clicks by end-users on sponsored search listings (excluding native ads) on Yahoo Properties and Affiliate sites.

    “PC” means a desktop computer, and “PC revenue” is revenue generated from search and display ads served on PCs and also includes leads, listings and fees revenue and ecommerce revenue allocated to user activity on PCs.

    “Price-per-Ad” is defined as display revenue divided by our total number of Ads Sold.

    “Price-per-Click” is defined as Search click-driven revenue divided by our total number of Paid Clicks.

    “Search Agreement” refers to the Search and Advertising Services and Sales Agreement between Yahoo and Microsoft Corporation, as amended.

    “Search click-driven revenue” is gross search revenue excluding the Microsoft RPS guarantee and search revenue from Yahoo Japan.

    “TAC” refers to traffic acquisition costs. TAC consists of payments to Affiliates and payments made to companies that direct consumer and business traffic to Yahoo Properties.

    “Yahoo,” “Company,” and “we” refer to Yahoo! Inc. and its consolidated subsidiaries.

    “Yahoo Properties” refers to the online properties and services that Yahoo provides to users.

    We periodically review, refine and update our methodologies for monitoring, gathering, and counting number of Ads Sold and Paid Clicks, and for calculating Search click-driven revenue, Price-per-Ad, and Price-per-Click.

    Additional information about how “Ads Sold,” “Paid Clicks,” “Price-per-Ad,” “Price-per-Click,” and “Search click-driven revenue” are defined and calculated is included under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Quarterly Report on Form 10-Q for the quarter endedMarch 31, 2015, which is on file with the SEC and available on the SEC’s website atwww.sec.gov.

    This press release contains forward-looking statements concerning Yahoo’s expected financial performance and Yahoo’s strategic and operational plans (including, without limitation, the quotations from management). Risks and uncertainties may cause actual results to differ materially from the results predicted, and reported results should not be considered as an indication of future performance. The potential risks and uncertainties include, among others, possible delays or failure in satisfying conditions to completion of our proposed spin-off of our remaining stake in Alibaba Group into a newly-formed registered investment company; other factors related to the spin-off, including adverse regulatory developments or determinations or adverse changes in, or interpretations of, U.S. or foreign tax laws, rules or regulations, that could delay or prevent completion of the proposed spin-off or cause the terms of the proposed spin-off to be modified; risks related to realization of the expected benefits of the spin-off to Yahoo and its shareholders; risks related to acceptance by users of new products and services (including, without limitation, products and services for mobile devices and alternative platforms); risks related to Yahoo’s ability to compete with new or existing competitors; reduction in spending by, or loss of, advertising customers; risks associated with the Search Agreement with Microsoft Corporation; risks related to acquiring or developing compelling content; risks related to joint ventures and the integration of acquisitions; risks related to possible impairment of goodwill or other assets; risks related to Yahoo’s ability to protect its intellectual property and the value of its brands; adverse results in litigation; security breaches; interruptions or delays in the provision of Yahoo’s services; risks related to Yahoo’s regulatory environment; risks related to fluctuations in foreign currency exchange rates; risks related to Yahoo’s international operations; dependence on third parties for technology, services, content, and distribution; risks related to the calculation of our key operational metrics; and general economic conditions. All information set forth in this press release and its attachments is as of July 21, 2015. Yahoo does not intend, and undertakes no duty, to update this information to reflect subsequent events or circumstances. More information about potential factors that could affect the Company’s business and financial results is included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, which are on file with the SEC and available on the SEC’s website at www.sec.gov. Additional information will also be set forth in those sections in Yahoo’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, which will be filed with the SEC in the third quarter of 2015.

    Yahoo!, the Yahoo family of marks, and the associated logos are trademarks and/or registered trademarks of Yahoo! Inc. Tumblr is a registered trademark of Tumblr, Inc.Other names are trademarks and/or registered trademarks of their respective owners.

    Yahoo! Inc.
    Unaudited Condensed Consolidated Balance Sheets
    (in thousands)
    December 31, June 30,
    2014 2015
    ASSETS
    Current assets:
    Cash and cash equivalents $ 2,664,098 $ 1,188,169
    Short-term marketable securities 5,327,412 4,636,152
    Accounts receivable, net 1,032,704 999,646
    Prepaid expenses and other current assets 671,075 756,965
    Total current assets 9,695,289 7,580,932
    Long-term marketable securities 2,230,892 1,169,671
    Property and equipment, net 1,487,684 1,524,539
    Goodwill 5,163,654 5,146,579
    Intangible assets, net 470,842 412,235
    Other long-term assets and investments 554,616 475,497
    Investments in Alibaba Group 39,867,789 31,555,927
    Investments in equity interests 2,489,578 2,326,436
    Total assets $ 61,960,344 $ 50,191,816
    LIABILITIES AND EQUITY
    Current liabilities:
    Accounts payable $ 238,018 $ 301,433
    Income taxes payable related to sale of Alibaba Group ADSs 3,282,293 –
    Other accrued expenses and current liabilities 671,307 903,005
    Deferred revenue 336,963 202,246
    Total current liabilities 4,528,581 1,406,684
    Convertible notes 1,170,423 1,201,540
    Long-term deferred revenue 20,774 23,442
    Other long-term liabilities 143,095 126,138
    Deferred tax liabilities related to investment in Alibaba Group 16,154,906 12,768,155
    Deferred and other long-term tax liabilities 1,156,973 1,102,007
    Total liabilities 23,174,752 16,627,966
    Total Yahoo! Inc. stockholders’ equity 38,741,837 33,532,602
    Noncontrolling interests 43,755 31,248
    Total equity 38,785,592 33,563,850
    Total liabilities and equity $ 61,960,344 $ 50,191,816
    Yahoo! Inc.
    Unaudited Condensed Consolidated Statements of Operations
    (in thousands, except per share amounts)
    Three Months Ended Six Months Ended
    June 30, June 30,
    2014 2015 2014 2015
    Revenue $ 1,084,191 $ 1,243,265 $ 2,216,921 $ 2,469,235
    Operating expenses:
    Cost of revenue – traffic acquisition costs 43,826 200,230 89,735 383,369
    Cost of revenue – other 295,786 295,932 589,389 581,195
    Sales and marketing 253,198 274,304 555,523 549,661
    Product development 291,778 306,428 560,042 633,175
    General and administrative 154,881 180,595 319,504 354,108
    Amortization of intangibles 15,164 19,982 33,504 40,055
    Gain on sale of patents (61,500 ) (9,100 ) (61,500 ) (11,100 )
    Restructuring charges, net 52,621 19,688 62,108 70,920
    Total operating expenses 1,045,754 1,288,059 2,148,305 2,601,383
    Income (loss) from operations 38,437 (44,794 ) 68,616 (132,148 )
    Other expense, net (13,589 ) (11,741 ) (27,042 ) (42,804 )
    Income (loss) before income taxes and earnings in equity interests 24,848 (56,535 ) 41,574 (174,952 )
    Provision for income taxes (8,143 ) (58,495 ) (12,360 ) (17,595 )
    Earnings in equity interests 255,852 95,841 557,254 195,531
    Net income (loss) 272,557 (19,189 ) 586,468 2,984
    Less: Net income attributable to noncontrolling interests (2,850 ) (2,365 ) (5,183 ) (3,340 )
    Net income (loss) attributable toYahoo! Inc. $ 269,707 $ (21,554 ) $ 581,285 $ (356 )
    Net income (loss) attributable toYahoo! Inc.common stockholders per share – diluted (1) $ 0.26 $ (0.02 ) $ 0.55 $ (0.00 )
    Shares used in per share calculation – diluted 1,014,692 937,569 1,023,056 936,159
    Stock-based compensation expense by function:
    Cost of revenue – other $ 5,356 $ 7,200 $ 30,007 $ 13,209
    Sales and marketing 31,233 39,978 81,907 78,099
    Product development 39,507 50,762 53,434 98,983
    General and administrative 26,349 27,190 46,278 50,535
    Restructuring charges, net – – – 2,705
    Supplemental Financial Data:
    Revenue ex-TAC $ 1,040,365 $ 1,043,035 $ 2,127,186 $ 2,085,866
    Adjusted EBITDA $ 340,363 $ 261,703 $ 646,744 $ 492,816
    Free cash flow(2) $ 185,915 $ (24,780 ) $ 299,877 $ (3,059,702 )
    (1) The impact of outstanding stock awards of entities in which the Company holds equity interests that are accounted for using the equity method reduced the Company’s diluted earnings per share by $0.01 for the three months ended June 30, 2014, and by $0.02 for the six months ended June 30, 2014.
    (2) During the six months ended June 30, 2015, the Company satisfied the$3.3 billion income tax liability related to the sale of Alibaba Group ADSs in September 2014.
    Yahoo! Inc.
    Unaudited Condensed Consolidated Statements of Cash Flows
    (in thousands)
    Three Months Ended Six Months Ended
    June 30, June 30,
    2014 2015 2014 2015
    CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income (loss) $ 272,557 $ (19,189 ) $ 586,468 $ 2,984
    Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
    Depreciation 116,446 119,633 239,631 236,694
    Amortization of intangible assets 30,414 34,046 64,763 68,524
    Accretion of convertible notes discount 14,860 15,660 29,526 31,117
    Stock-based compensation expense 102,445 125,130 211,626 243,531
    Non-cash restructuring (credits) charges (7,031 ) (74 ) (7,031 ) (933 )
    Losses from sale of investments, assets, and other, net 15,117 10,539 18,667 44,847
    Gain on sale of patents (61,500 ) (9,100 ) (61,500 ) (11,100 )
    (Gain) loss on Hortonworks warrants – (5,449 ) – 6,460
    Earnings in equity interests (255,852 ) (95,841 ) (557,254 ) (195,531 )
    Tax benefits (detriments) from stock-based awards 19,161 (36,439 ) 76,828 (3,617 )
    Excess tax benefits from stock-based awards (19,544 ) 35,620 (79,100 ) (1,850 )
    Deferred income taxes (303 ) (30,227 ) 14,185 (13,218 )
    Dividends received from equity investee 83,685 141,670 83,685 141,670
    Changes in assets and liabilities, net of effects of acquisitions:
    Accounts receivable 55,725 (71,583 ) 154,129 18,340
    Prepaid expenses and other assets 22,803 (11,292 ) 13,592 (75,537 )
    Accounts payable (29,567 ) 6,892 (10,075 ) 37,505
    Accrued expenses and other liabilities 38,033 165,744 (202,142 ) 255,678
    Income taxes payable related to sale of Alibaba Group ADSs – – – (3,282,293 )
    Deferred revenue (40,035 ) (67,788 ) (79,523 ) (132,790 )
    Net cash provided by (used in) operating activities 357,414 307,952 496,475 (2,629,519 )
    CASH FLOWS FROM INVESTING ACTIVITIES:
    Acquisition of property and equipment, net (107,358 ) (155,442 ) (192,013 ) (290,363 )
    Purchases of marketable securities (451,739 ) (1,614,068 ) (1,363,836 ) (2,326,886 )
    Proceeds from sales of marketable securities 212,028 301,423 380,954 473,775
    Proceeds from maturities of marketable securities 408,356 1,224,829 690,018 3,584,596
    Purchases of intangible assets (984 ) (3,451 ) (2,174 ) (4,611 )
    Proceeds from sales of patents 1,500 – 1,500 20,000
    Proceeds from the settlement of derivative hedge contracts 170,457 45,140 173,258 64,767
    Payments for the settlement of derivative hedge contracts (4,016 ) (1,731 ) (4,616 ) (3,882 )
    Acquisitions, net of cash acquired – 1,782 (21,661 ) (21,291 )
    Payments for equity investments in privately held companies – – (10,399 ) –
    Other investing activities, net (74 ) (115 ) (640 ) (153 )
    Net cash provided by (used in) investing activities 228,170 (201,633 ) (349,609 ) 1,495,952
    CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from issuance of common stock 84,760 10,588 163,737 46,777
    Repurchases of common stock (718,628 ) – (1,168,206 ) (203,771 )
    Excess tax benefits from stock-based awards 19,544 (35,620 ) 79,100 1,850
    Tax withholdings related to net share settlements of restricted stock units (34,178 ) (52,534 ) (159,581 ) (149,960 )
    Distributions to noncontrolling interests (22,344 ) (15,847 ) (22,344 ) (15,847 )
    Other financing activities, net (3,037 ) (4,442 ) (6,130 ) (9,015 )
    Net cash used in financing activities (673,883 ) (97,855 ) (1,113,424 ) (329,966 )
    Effect of exchange rate changes on cash and cash equivalents 4,869 5,048 3,554 (12,396 )
    Net change in cash and cash equivalents (83,430 ) 13,512 (963,004 ) (1,475,929 )
    Cash and cash equivalents, beginning of period 1,198,016 1,174,657 2,077,590 2,664,098
    Cash and cash equivalents, end of period $ 1,114,586 $ 1,188,169 $ 1,114,586 $ 1,188,169

    Yahoo! Inc.
    Note to Unaudited Condensed Consolidated Financial Statements

    This press release and its attachments include the non-GAAP financial measures of revenue excluding traffic acquisition costs (“revenue ex-TAC”); gross mobile revenue; gross search revenue; adjusted EBITDA; non-GAAP income from operations; non-GAAP net earnings; non-GAAP net earnings per diluted share; and free cash flow, which are reconciled to revenue (in the case of revenue ex-TAC, gross mobile revenue, and gross search revenue); net income (loss) attributable to Yahoo! Inc. (in the case of adjusted EBITDA and non-GAAP net earnings); income (loss) from operations; net income (loss) attributable to Yahoo! Inc. common stockholders per share – diluted; and net cash provided by (used in) operating activities, which we believe are the most comparable GAAP measures. Yahoo! Inc. (together with its consolidated subsidiaries, “Yahoo,” the “Company,” or “we”) uses these non-GAAP financial measures for internal managerial purposes and to facilitate period-to-period comparisons. We describe limitations specific to each non-GAAP financial measure below. Management generally compensates for limitations in the use of non-GAAP financial measures by relying on comparable GAAP financial measures and providing investors with a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure or measures. Further, management uses non-GAAP financial measures only in addition to and in conjunction with results presented in accordance with GAAP. We believe that these non-GAAP financial measures reflect additional ways of viewing aspects of our operations that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business. These non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, revenue, net income (loss) attributable to Yahoo! Inc., income (loss) from operations, net income (loss) attributable to Yahoo! Inc. common stockholders per share – diluted, and net cash provided by (used in) operating activities calculated in accordance with GAAP.

    Revenue ex-TAC is a non-GAAP financial measure defined as GAAP revenue less TAC that has been recorded as a cost of revenue. TAC consists of payments made to Affiliates, and payments made to companies that direct consumer and business traffic toYahoo Properties.  Based on applicable accounting principles, TAC is recorded either as a cost of revenue or as a reduction of revenue.  We present revenue ex-TAC to provide investors a metric used by the Company for evaluation and decision-making purposes and to provide investors with comparable revenue numbers when comparing to our historical reported financial information. A limitation of revenue ex-TAC is that it is a measure we defined for internal and investor purposes that may be unique to the Company, and therefore it may not enhance the comparability of our results to those of other companies in our industry who have similar business arrangements but address the impact of TAC differently.  Management compensates for these limitations by also relying on the comparable GAAP financial measures of revenue and cost of revenue—TAC.

    Each of gross mobile revenue and gross search revenue is a non-GAAP financial measure. Gross mobile revenue is defined as GAAP mobile revenue plus the related revenue share with third parties. Gross search revenue is defined as GAAP search revenue plus the related revenue share with third parties. We present these amounts to provide investors with additional metrics used by the Company for evaluation and decision-making purposes and as an indicator of the size of our presence in the relevant business. To this end, gross mobile revenue and gross search revenue report the total receipts generated on Yahoo Properties and Affiliate sites by the specified relevantYahoo business (i.e., mobile or search), before any TAC or other revenue share is paid to the Affiliates and before any revenue share is allocated to Microsoft or other parties. A limitation of these non-GAAP measures is that they include revenue that is recognized by one or more third parties and not by Yahoo; furthermore, they are measures we defined for internal and investor purposes that may be unique to us, and therefore may not enhance the comparability of our results to those of other companies in our industry who have similar business arrangements but address the impact of TAC and revenue sharing differently. Management compensates for these limitations by also relying on the comparable financial measure GAAP revenue.

    Adjusted EBITDA is defined as net income (loss) attributable to Yahoo! Inc. before taxes, depreciation, amortization of intangible assets, stock-based compensation expense, other income, net (which includes interest), earnings in equity interests, net income attributable to noncontrolling interests and other gains, losses, and expenses that we do not believe are indicative of our ongoing results. We present adjusted EBITDA because the exclusion of certain gains, losses, and expenses facilitates comparisons of the operating performance of the Company on a period to period basis. Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or as a substitute for results reported under GAAP. These limitations include: adjusted EBITDA does not reflect tax payments and such payments reflect a reduction in cash available to us; adjusted EBITDA does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in our businesses; adjusted EBITDA does not include stock-based compensation expense related to the Company’s workforce; adjusted EBITDA also excludes other income, net (which includes interest), earnings in equity interests, net income attributable to noncontrolling interests and other gains, losses, and expenses that we do not believe are indicative of our ongoing results, and these items may represent a reduction or increase in cash available to us; and adjusted EBITDA is a measure that may be unique to the Company, and therefore it may not enhance the comparability of our results to other companies in our industry. Management compensates for these limitations by also relying on the comparable GAAP financial measure of net income (loss) attributable to Yahoo! Inc., which includes taxes, depreciation, amortization, stock-based compensation expense, other income, net (which includes interest), earnings in equity interests, net income attributable to noncontrolling interests and the other gains, losses and expenses that are excluded from adjusted EBITDA.

    Non-GAAP income from operations is defined as income from operations excluding certain gains, losses, and expenses that we do not believe are indicative of our ongoing operating results and further adjusted to exclude stock-based compensation expense. Because of the variety of equity awards used by companies, the varying methodologies for determining stock-based compensation expense, and the subjective assumptions involved in those determinations, we believe excluding stock-based compensation expense enhances the ability of management and investors to understand the impact of stock-based compensation expense on income from operations. We consider non-GAAP income from operations to be a profitability measure which facilitates the forecasting of our operating results for future periods and allows for the comparison of our results to historical periods. A limitation of non-GAAP income from operations is that it does not include all items that impact our income from operations for the period. Management compensates for this limitation by also relying on the comparable GAAP financial measure of income from operations which includes the gains, losses, and expenses that are excluded from non-GAAP income from operations.

    Non-GAAP net earnings is defined as net income (loss) attributable to Yahoo! Inc. (which we sometimes refer to as net earnings) excluding certain gains, losses, expenses, and their related tax effects that we do not believe are indicative of our ongoing results and further adjusted to exclude stock-based compensation expense and its related tax effects. Because of the variety of equity awards used by companies, the varying methodologies for determining stock-based compensation expense, and the subjective assumptions involved in those determinations, we believe excluding stock-based compensation expense enhances the ability of management and investors to understand the impact of stock-based compensation expense on net income and net income per share. We consider non-GAAP net earnings and non-GAAP net earnings per diluted share to be profitability measures which facilitate the forecasting of our results for future periods and allow for the comparison of our results to historical periods. A limitation of non-GAAP net earnings and non-GAAP net earnings per diluted share is that they do not include all items that impact our net income and net income per diluted share for the period. Management compensates for this limitation by also relying on the comparable GAAP financial measures of net income (loss) attributable to Yahoo! Inc. and net income attributable to Yahoo! Inc. common stockholders per share – diluted, both of which include the gains, losses, expenses and related tax effects that are excluded from non-GAAP net earnings and non-GAAP net earnings per diluted share.

    Free cash flow is a non-GAAP financial measure defined as net cash provided by (used in) operating activities (adjusted to include excess tax benefits from stock-based awards), less acquisition of property and equipment, net and dividends received from equity investees. We consider free cash flow to be a liquidity measure which provides useful information to management and investors about the amount of cash generated by the business after the acquisition of property and equipment, which can then be used for strategic opportunities including, among others, investing in the Company’s business, making strategic acquisitions, strengthening the balance sheet, and repurchasing stock. A limitation of free cash flow is that it does not represent the total increase or decrease in the cash balance for the period. Management compensates for this limitation by also relying on the net change in cash and cash equivalents as presented in the Company’s unaudited condensed consolidated statements of cash flows prepared in accordance with GAAP which incorporates all cash movements during the period.

    Yahoo! Inc.
    Supplemental Financial Data and GAAP to Non-GAAP Reconciliations
    (in thousands)
    Three Months Ended Six Months Ended
    June 30, June 30,
    2014 2015 2014 2015
    Revenue for groups of similar services:
    Search $ 428,418 $ 521,126 $ 873,185 $ 1,052,792
    Display 436,053 500,376 889,277 964,109
    Other 219,720 221,763 454,459 452,334
    Total revenue $ 1,084,191 $ 1,243,265 $ 2,216,921 $ 2,469,235
    Revenue excluding traffic acquisition costs recorded as cost of revenue (“revenue ex-TAC”) for groups of similar services:
    GAAP search revenue $ 428,418 $ 521,126 $ 873,185 $ 1,052,792
    TAC associated with search revenue (784 ) (105,876 ) (1,470 ) (205,885 )
    Search revenue ex-TAC $ 427,634 $ 415,250 $ 871,715 $ 846,907
    GAAP display revenue $ 436,053 $ 500,376 $ 889,277 $ 964,109
    TAC associated with display revenue (42,217 ) (93,682 ) (86,579 ) (176,116 )
    Display revenue ex-TAC $ 393,836 $ 406,694 $ 802,698 $ 787,993
    Other GAAP revenue $ 219,720 $ 221,763 $ 454,459 $ 452,334
    TAC associated with other GAAP revenue (825 ) (672 ) (1,686 ) (1,368 )
    Other revenue ex-TAC $ 218,895 $ 221,091 $ 452,773 $ 450,966
    Revenue ex-TAC:
    GAAP revenue $ 1,084,191 $ 1,243,265 $ 2,216,921 $ 2,469,235
    TAC (43,826 ) (200,230 ) (89,735 ) (383,369 )
    Revenue ex-TAC $ 1,040,365 $ 1,043,035 $ 2,127,186 $ 2,085,866
    Revenue ex-TAC by segment:
    Americas:
    GAAP revenue $ 805,535 $ 992,210 $ 1,672,463 $ 1,976,931
    TAC (30,296 ) (180,822 ) (64,390 ) (347,477 )
    Revenue ex-TAC $ 775,239 $ 811,388 $ 1,608,073 $ 1,629,454
    EMEA:
    GAAP revenue $ 97,847 $ 85,830 $ 189,417 $ 166,916
    TAC (10,212 ) (12,950 ) (19,405 ) (24,654 )
    Revenue ex-TAC $ 87,635 $ 72,880 $ 170,012 $ 142,262
    Asia Pacific:
    GAAP revenue $ 180,809 $ 165,225 $ 355,041 $ 325,388
    TAC (3,318 ) (6,458 ) (5,940 ) (11,238 )
    Revenue ex-TAC $ 177,491 $ 158,767 $ 349,101 $ 314,150
    Total revenue ex-TAC $ 1,040,365 $ 1,043,035 $ 2,127,186 $ 2,085,866
    Direct costs by segment(3):
    Americas $ 60,167 $ 76,148 $ 120,977 $ 134,892
    EMEA 21,395 20,551 43,339 40,702
    Asia Pacific 48,139 51,818 94,967 102,550
    Global operating costs (4) 631,801 649,915 1,282,659 1,334,006
    Gain on sale of patents (61,500 ) (9,100 ) (61,500 ) (11,100 )
    Restructuring charges, net 52,621 19,688 62,108 70,920
    Depreciation and amortization 146,860 153,679 304,394 305,218
    Stock-based compensation expense 102,445 125,130 211,626 240,826
    Income (loss) from operations $ 38,437 $ (44,794 ) $ 68,616 $ (132,148 )
    (3) Direct costs for each segment include certain cost of revenue-other and costs associated with the local sales teams. Prior to the fourth quarter of 2014, marketing, media, costs associated with Yahoo Properties and ad operation costs were managed locally and included as direct costs for each segment. Prior period amounts have been revised to conform to the current presentation.
    (4) Global operating costs include product development, marketing, real estate workplace, general and administrative, and other corporate expenses that are managed on a global basis and that are not directly attributable to any particular segment. Beginning in the fourth quarter of 2014, marketing, media, costs associated with Yahoo Properties and other ad operation costs are managed globally and included as global costs. Prior period amounts have been revised to conform to the current presentation.
    Yahoo! Inc.
    Supplemental Financial Data and GAAP to Non-GAAP Reconciliations (continued)
    (in thousands)
    Three Months Ended Six Months Ended
    June 30, June 30,
    2014 2015 2014 2015
    Reconciliation of net income (loss) attributable toYahoo! Inc. to adjusted EBITDA:
    Net income (loss) attributable toYahoo! Inc. $ 269,707 $ (21,554 ) $ 581,285 $ (356 )
    Advisory fees – 8,000 – 8,000
    Depreciation and amortization 146,860 153,679 304,394 305,218
    Stock-based compensation expense 102,445 125,130 211,626 240,826
    Restructuring charges, net 52,621 19,688 62,108 70,920
    Other expense, net 13,589 11,741 27,042 42,804
    Provision for income taxes 8,143 58,495 12,360 17,595
    Earnings in equity interests (255,852 ) (95,841 ) (557,254 ) (195,531 )
    Net income attributable to noncontrolling interests 2,850 2,365 5,183 3,340
    Adjusted EBITDA $ 340,363 $ 261,703 $ 646,744 $ 492,816
    Reconciliation of net cash provided by (used in) operating activities to free cash flow:
    Net cash provided by (used in) operating activities $ 357,414 $ 307,952 $ 496,475 $ (2,629,519 )
    Acquisition of property and equipment, net (107,358 ) (155,442 ) (192,013 ) (290,363 )
    Dividends received from equity investee (83,685 ) (141,670 ) (83,685 ) (141,670 )
    Excess tax benefits from stock-based awards 19,544 (35,620 ) 79,100 1,850
    Free cash flow(2) $ 185,915 $ (24,780 ) $ 299,877 $ (3,059,702 )
    Three Months Ended Six Months Ended
    June 30, June 30,
    2014 2015 2014 2015
    Reconciliation of GAAP mobile revenue to gross mobile revenue:
    GAAP mobile revenue $ 163,007 $ 251,846 $ 307,679 $ 485,439
    Revenue share with third parties 108,634 162,801 195,352 320,678
    Gross mobile revenue $ 271,641 $ 414,647 $ 503,031 $ 806,117
    Reconciliation of GAAP search revenue to gross search revenue:
    GAAP search revenue $ 428,418 $ 521,126 $ 873,185 $ 1,052,792
    Revenue share with third parties 368,592 398,710 722,978 822,809
    Gross search revenue $ 797,010 $ 919,836 $ 1,596,163 $ 1,875,601
    (2) During the six months ended June 30, 2015, the Company satisfied the$3.3 billion income tax liability related to the sale of Alibaba Group ADSs in September 2014.
    Yahoo! Inc.
    GAAP to Non-GAAP Reconciliations
    (in thousands, except per share amounts)
    Three Months Ended
    June 30,
    2014 2015
    GAAP income (loss) from operations $ 38,437 $ (44,794 )
    (a) Restructuring charges, net 52,621 19,688
    (b) Stock-based compensation expense 102,445 125,130
    (c) Advisory fees – 8,000
    Non-GAAP income (loss) from operations $ 193,503 $ 108,024
    GAAP net income (loss) attributable to Yahoo! Inc. $ 269,707 $ (21,554 )
    (a) Restructuring charges, net 52,621 19,688
    (b) Stock-based compensation expense 102,445 125,130
    (c) Advisory fees – 8,000
    (d) Gain on Hortonworks warrants – (5,449 )
    (e) To adjust the provision for income taxes to reflect an effective tax rate of 35% for the three months ended June 30, 2015and to exclude the tax impact of items (a) through (d) above for the three months ended June 30, 2014 (43,032 ) 26,703
    Non-GAAP net earnings $ 381,741 $ 152,518
    GAAP net income (loss) attributable to Yahoo! Inc. common stockholders per share – diluted(1) $ 0.26 $ (0.02 )
    Non-GAAP net earnings per share – diluted (5) $ 0.37 $ 0.16
    Shares used in non-GAAP per share calculation – diluted 1,014,692 947,775
    Six Months Ended
    June 30,
    2014 2015
    GAAP income (loss) from operations $ 68,616 $ (132,148 )
    (a) Restructuring charges, net 62,108 70,920
    (b) Stock-based compensation 211,626 240,826
    (c) Advisory fees – 8,000
    Non-GAAP income from operations $ 342,350 $ 187,598
    GAAP net income attributable to Yahoo! Inc. $ 581,285 $ (356 )
    (a) Restructuring charges, net 62,108 70,920
    (b) Stock-based compensation 211,626 240,826
    (c) Advisory fees – 8,000
    (d) Loss on Hortonworks warrants – 6,460
    (e) To adjust the provision for income taxes to reflect an effective tax rate of 35% in the six months ended June 30, 2015 and to exclude the tax impact of items (a) through (d) above for the six months ended June 30, 2014 (71,654 ) (35,344 )
    Non-GAAP net earnings $ 783,365 $ 290,506
    GAAP net income attributable to Yahoo! Inc.common stockholders per share – diluted (1) $ 0.55 $ (0.00 )
    Non-GAAP net earnings per share – diluted (5) $ 0.74 $ 0.31
    Shares used in non-GAAP per share calculation – diluted 1,023,056 947,877
    (1) The impact of outstanding stock awards of entities in which the Company holds equity interests that are accounted for using the equity method reduced the Company’s diluted earnings per share by $0.01 for the three months ended June 30, 2014, and by $0.02 for the six months endedJune 30, 2014.
    (5) The impact of outstanding stock awards of entities in which the Company holds equity interests that are accounted for using the equity method reduced the Company’s non-GAAP diluted earnings per share by $0.01for the three months ended June 30, 2014, and by $0.02 for the six months ended June 30, 2014.

    Media Relations Contact:
    Yahoo! Inc.
    Sarah Meron, 408-349-4040
    [email protected]
    or
    Investor Relations Contact:
    Yahoo! Inc.
    Joon Huh, 408-349-3382
    [email protected]

    Source: Yahoo! Inc.

    Image via Wikimedia Commons

  • Google Posts 11% Revenue Increase At $17.7B

    Google Posts 11% Revenue Increase At $17.7B

    Google just reported its Q2 financial results, with revenue up 11% year-over-year at $17.7 billion.

    “Our strong Q2 results reflect continued growth across the breadth of our products, most notably core search, where mobile stood out, as well as YouTube and programmatic advertising”, said CFO Ruth Porat. We are focused every day on developing big new opportunities across a wide range of businesses. We will do so with great care regarding resource allocation.”

    This is Porat’s first quarter as CFO. She came over from Morgan Stanley to replace Patrick Pichette, who announced his retirement in March.

    Google reported GAAP and non-GAAP operating income with 13% and 16% year-over-year growth respectively. GAAP diluted EPS for Class A and B common stock and Class C capital stock were $4.93 and $6.43, respectively, and non-GAAP diluted EPS were $6.99.

    Aggregate paid clicks were up 18% year-over-year and 7% quarter-over-quarter. That’s up 30% year-over-year on Google sites and 9% year-over-year on network members’ sites. Aggregate CPCs were up 11% year-over-year and 4% quarter-over-quarter. CPC on Google sites was up 16% year-over-year and on network members’ sites up just 3$ year-over-year.

    Here’s the full release:

    MOUNTAIN VIEW, Calif. – July 16, 2015 – Google Inc. (NASDAQ: GOOG, GOOGL) today announced financial results for the quarter ended June 30, 2015.

    “Our strong Q2 results reflect continued growth across the breadth of our products, most notably core search, where mobile stood out, as well as YouTube and programmatic advertising”, said Ruth Porat, CFO of Google. “We are focused every day on developing big new opportunities across a wide range of businesses. We will do so with great care regarding resource allocation.”

    Q2 2015 Financial Highlights

    The following summarizes our consolidated financial results for the quarters ended June 30, 2014 and 2015 (in millions, except for per share information; unaudited):

    Three Months Ended
    June 30, 2014    		 Three Months Ended
    June 30, 2015
    Revenues $ 15,955 $ 17,727
    Increase in revenues year over year 22 % 11 %
    Traffic acquisition costs (TAC) $ 3,293 $ 3,377
    GAAP operating income $ 4,258 $ 4,825
    GAAP operating margin 27 % 27 %
    Non-GAAP operating income $ 5,138 $ 5,957
    Non-GAAP operating margin 32 % 34 %
    GAAP net income* $ 3,351 $ 3,931
    Non-GAAP net income $ 4,104 $ 4,829
    GAAP diluted EPS for Class A and B common stock* $ 4.88 $ 4.93
    GAAP diluted EPS for Class C capital stock* $ 4.88 $ 6.43
    Non-GAAP diluted EPS for Class A and B common stock and Class C capital stock 5.98 $ 6.99
    *GAAP net income and diluted EPS include Net Loss from Discontinued Operations for the three months ended June 30, 2014.

    Operating income, operating margin, net income, and earnings per share (EPS) are reported on a GAAP and non-GAAP basis. Non-GAAP operating income and non-GAAP operating margin exclude stock-based compensation (SBC) expense from continuing operations. Non-GAAP net income and non-GAAP diluted EPS exclude SBC expense from continuing operations, net of the related tax benefits, as well as the impact from Net Loss from Discontinued Operations. Non-GAAP diluted EPS also excludes the impact from the adjustment payment to Class C capital stockholders. These non-GAAP measures, as well as free cash flow, an alternative non-GAAP measure of liquidity, and non-GAAP constant currency revenues and growth, are described and reconciled to the corresponding GAAP measures at the end of this release.

    Adjustment Payment in Relation to Class C Capital Stock Distribution

    In May 2015, we paid $522 million to the holders of Class C capital stock in the form of approximately 853 thousand shares of Class C capital stock and $47 million of cash in lieu of fractional shares of Class C capital stock, in accordance with the settlement of litigation involving the authorization to distribute Class C capital stock (the Adjustment Payment). The Adjustment Payment was allocated to the numerator for calculating net income per share of Class C capital stock from net income available to all stockholders and the remaining undistributed earnings were allocated on a pro rata basis to Class A and Class B common stock and Class C capital stock based on the number of shares used in the per share computation for each class of stock. The weighted-average share impact of the Adjustment Payment is included in the denominator of both basic and diluted net income per share computations for the three and six months ended June 30, 2015.

    Q2 2015 Financial Summary

    Revenues and Monetization

    Revenues by source (in millions; unaudited):

    Three Months Ended
    June 30, 2015    		 Change from Q2 2014 to Q2 2015 (YoY) Change from Q1 2015 to Q2 2015 (QoQ)
    Google websites $ 12,402 13 % 4 %
    Google Network Members’ websites 3,621 2 % 1 %
    Total advertising revenues* 16,023 11 % 3 %
    Other revenues 1,704 17 % (3) %
    Revenues $ 17,727 11 % 3 %
    *Advertising revenues are generally reported on a gross basis, consistent with GAAP, without deducting TAC.

    Had foreign exchange rates remained constant from the second quarter of 2014 through the second quarter of 2015, our revenues in the second quarter of 2015 would have been $1,103 million higher with a constant currency growth rate of 18% year over year. This includes a foreign exchange rate impact of $1,574 million, offset by hedging gains of $471 million related to our foreign exchange risk management program. Our constant currency revenues are presented in the financial tables following this release as well as in the accompanying materials on the Investor Relations website.

    Paid clicks and cost-per-click information (unaudited):

    Change from Q2 2014 to Q2 2015 (YoY) Change from Q1 2015 to Q2 2015 (QoQ)
    Aggregate paid clicks 18 % 7 %
    Paid clicks on Google websites 30 % 10 %
    Paid clicks on Google Network Members’ websites (9) % (2) %
    Aggregate cost-per-click (11) % (4) %
    Cost-per-click on Google websites (16) % (5) %
    Cost-per-click on Google Network Members’ websites (3) % (3) %

    Costs and Expenses

    Traffic acquisition costs (TAC), other cost of revenues, operating expenses, stock-based compensation expense, and depreciation and amortization expense (in millions; unaudited):

    Three Months Ended
    June 30, 2014    		 Three Months Ended
    June 30, 2015
    TAC to Google Network Members $ 2,400 $ 2,432
    TAC to distribution partners $ 893 $ 945
    Total TAC $ 3,293 $ 3,377
    TAC to Google Network Members as % of Google Network Members’ revenues 67 % 67 %
    TAC to distribution partners as % of Google Website revenues 8 % 8 %
    Total TAC as % of advertising revenues 23 % 21 %
    Other cost of revenues $ 2,821 $ 3,206
    Other cost of revenue as % of revenues 18 % 18 %
    Operating expenses (other than cost of revenues) $ 5,583 $ 6,319
    Operating expenses as % of revenues 35 % 36 %
    Stock-based compensation expense* $ 880 $ 1,132
    Tax benefit related to stock-based compensation expense $ (195) $ (234)
    Depreciation, amortization, and impairment charges* $ 1,079 $ 1,234
    *Included in Cost of revenues and Operating expenses. Excludes impact from discontinued operations for the three months ended June 30, 2014.

    Supplemental Information (in millions except for headcount data; unaudited)

    Three Months Ended
    June 30, 2014    		 Three Months Ended
    June 30, 2015
    Cash, cash equivalents, and marketable securities $ 61,204 $ 69,780
    Net cash provided by operating activities $ 5,627 $ 6,985
    Capital expenditures* $ 2,646 $ 2,515
    Free cash flow $ 2,981 $ 4,470
    Effective tax rate 22 % 21 %
    Headcount 48,584 57,148
    *For Q2 2015, our capital expenditures are primarily related to production equipment and data center construction.

    Adjustments to Previously Reported Financial Information

    In the second quarter of 2015, we identified an incorrect classification of certain revenues between legal entities, and as a consequence, we revised our income tax expense for periods beginning in 2008 through the first quarter of 2015 in the cumulative amount of $711 million. The income tax amount is not material to the periods impacted and consolidated revenues are not impacted. We have elected to revise previously issued consolidated financial statements in our upcoming filings to correct prior periods. Please refer to the supplementary slides posted on our Investor Relations website for revised historical financial information.

    In the first quarter of 2015, we reclassified revenues primarily related to DoubleClick ad serving software revenues from Other revenues to Advertising revenues from Google Network Members’ Websites. Prior period amounts have been adjusted to conform with our current period presentation.

    Webcast and Conference Call Information

    A live audio webcast of Google’s second quarter 2015 earnings release call will be available at http://investor.google.com/webcast.html. The call begins today at 1:30 PM (PT) / 4:30 PM (ET). This press release, the financial tables, as well as other supplemental information including the reconciliations of certain non-GAAP measures to their nearest comparable GAAP measures, are also available on that site.

    We also announce investor information, including news and commentary about our business and financial performance, SEC filings, notices of investor events and our press and earnings releases, on our investor relations website (http://investor.google.com).

    Forward-Looking Statements

    This press release may contain forward-looking statements that involve risks and uncertainties. Actual results may differ materially from the results predicted, and reported results should not be considered as an indication of future performance. The potential risks and uncertainties that could cause actual results to differ from the results predicted include, among others, those risks and uncertainties included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2014 and our most recent Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, which are on file with the SEC and are available on our investor relations website at investor.google.com and on the SEC website atwww.sec.gov. Additional information will also be set forth in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2015. All information provided in this release and in the attachments is as of July 16, 2015, and we undertake no duty to update this information unless required by law.

    About Non-GAAP Financial Measures

    To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, non-GAAP diluted EPS, free cash flow, non-GAAP constant currency revenues, and non-GAAP constant currency revenue growth. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

    We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures that may not be indicative of our recurring core business operating results, such as our revenues excluding the impact for foreign currency fluctuations or our operating performance excluding not only non-cash charges, such as SBC, but also discrete cash charges that are infrequent in nature. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to our historical performance and liquidity as well as comparisons to our competitors’ operating results. We believe these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business.

    For more information on these non-GAAP financial measures, please see the tables captioned “Reconciliations of non-GAAP results of operations to the nearest comparable GAAP measures,” “Reconciliation from net cash provided by operating activities to free cash flow,” and “Reconciliation from GAAP revenues to non-GAAP constant currency revenues” included at the end of this release.

    Image via Wikimedia Commons