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Yahoo Digital Ad Dollars To Drop In 2016, As Facebook, Google Grow

Yahoo ( YHOO ) will see a major drop in its digital ad revenue this year, even as rivals Facebook ( FB ) and Alphabet ( GOOGL ) unit Google watch their share grow, according to eMarketer’s latest ad spending forecast, released Wednesday. Yahoo’s worldwide net digital ad revenues will fall nearly 14% to $2.83 billion this year. That will cut Yahoo’s share of the overall digital ad market to 1.5% from 2.1% last year, eMarketer said. Both search and display ad revenue for Yahoo will drop by double-digit percentages in 2016, says the forecast. The Web portal’s display business will shrink to $1.41 billion, down 15.1% year over year, while its search business will decline 12.7% to $1.41 billion. Google, which dominates the global digital ad market, will see its net ad revenue rise 9% this year, while Facebook’s net ad revenue will jump 31%, says the report. “As Yahoo trims down its legacy business to focus on its so-called ‘Mavens’ (mobile, video, native ads and social businesses), we expect the company to shrink in size relative to its competitors,” said eMarketer analyst Martin Utreras. “A leaner Yahoo, more focused on its core growing segments, will still face stiff competition in an ever more crowded and sophisticated market.” The one area of growth for Yahoo is mobile, said eMarketer. Worldwide, Yahoo’s mobile ad business will grow 24.5% this year to $1.31 billion. Yet with rivals Google and Facebook poised to grow by even larger percentages, Yahoo’s share of the mobile market will shrink to 1.3% from 1.5%. Besides Facebook and Alphabet, Sunnyvale, Calif.-based Yahoo faced ad competition from companies such as  Netflix ( NFLX ), Snapchat and Pinterest. Yahoo CEO Marissa Mayer is under fire from investors who are inpatient for profits and want to oust her from her job. The company has hired three investment banking firms to evaluate potential bids for the sale of its core Internet operations. The company has said it is looking at its strategic options and has been cutting costs, including laying off 15% of its staff and closing several offices overseas. Mayer’s turnaround plan for the company includes continued investment in “Mavens.” Rosenblatt Securities said on Monday that Yahoo could be facing a “take-under” — a buyout price lower than market value — from any of a number of private equity firms that might then dismantle the company. Much of Yahoo’s value comes from its holdings in China e-commerce giant Alibaba Group ( BABA ). Yahoo stock has fallen nearly 25% over the past year amid concerns about the company’s poor financial showing and its future prospects for growth. Yahoo stock, which touched a three-month high above 36 on Tuesday, was down 1.5% in midday trading in the stock market today , below 35.

How Will We Watch TV Next, And Will Apple Or Comcast Rule It?

Apple ( AAPL ) has the future of TV all wrong, says a Barclays analyst who follows the cable TV industry and who’s upbeat on Comcast ’s ( CMCSA ) X1 service platform. Apple, Alphabet ‘s ( GOOGL ) Google, Comcast and others are vying to be the gateway to entertainment, says Kannan Venkateshwar, a Barclays analyst, in the report. He expects a battle to unfold as both pay-TV companies and technology rivals aim to be the “aggregator of aggregators,” the one-stop shop consumers go to for all forms of content. Apple rolled out its fourth-generation TV hardware in late 2015, but it’s been stymied in content talks with media giants and has shelved plans, at least temporarily, for a web-based TV service. “According to Apple, television will become a collection of applications. We believe the world is likely to move in a different direction, with an aggregator of aggregators, which then directs traffic to all other apps,” Venkateshwar wrote in the report. “In our opinion, those that control the ‘last mile’ and the relationship with the consumer, like Comcast, are in a much better position to be the aggregator than technology platforms like Amazon ( AMZN ), Google or Apple.” In September 2015, Apple introduced new TV hardware, including a Siri-controlled remote control, and added an app store to the platform. “We believe the future of television is apps,” said Apple CEO Tim Cook. Pay-TV companies, though, may be poised to build up relationships with media and entertainment companies, speculates Venkateshwar. “Companies like Comcast are able to aggregate every stream of content used by a consumer (TV, DVR, video-on-demand, gaming, etc.) while technology platforms like Apple can only aggregate subscription VOD content,” he said. “While it may be difficult for companies like Comcast to compete with the likes of Apple on the metric of user experience, we think the resources being put behind the vision at present seem to be moving in the right direction, with the evolution of the X1 platform being a prime data point.” Comcast expects half of its 22 million video subscribers to be using X1 set-top boxes by the end of 2016. While X1 currently does not support a Netflix ( NFLX ) app, under Venkateshwar’s vision it would have to. The X1 entertainment platform provides access to live broadcast, on-demand video and DVR-stored content. In November, Comcast partnered with 30 broadcast and cable networks to bring short-form Web clips to X1 set-tops as part of its video-on-demand (VOD) lineup. IBD 50 company Alphabet gets a best-possible Composite Rating of 99 from IBD, looking at earnings growth, stock performance and a raft of other measures. Comcast has an 88, Amazon a 68 and Apple a 66. Image provided by Shutterstock .

Content Is King In The War For First Generation Virtual Reality

Nvidia ( NVDA )-powered virtual reality devices manufactured by HTC, Facebook ( FB )-owned Oculus, and Sony ( SNE ) dominated the Game Developers Conference this week in San Francisco. But software, not the hardware behind it, will likely determine if this new form of ingesting content will become the billion-dollar industry that is the source of dreams for developers at the show. “Content is going to be king,” Nvidia spokesman Bryan Del Rizzo told IBD in an interview on the GDC show floor. “And there’s much more than just games, there’s business applications.” Nvidia stock was down a fraction to 32.82 at the close Wednesday. The company has an IBD Composite Rating of 99, the highest possible. Facebook was down more than 1% to 111.02, and Sony was up 2.3% to 26.09. On Wednesday, Facebook-owned Oculus announced the names of the 30 titles that will be available for its Rift VR headset that starts shipping on March 28. Priced between $19 and $59, the selection includes traditional shoot-’em-up titles as well as several much-hyped “experiential” offerings. There are 11 more titles to be released in the future, though the company has not announced an exact date. Oculus will cost $599. When the price was first announced there was backlash from the gaming community which expected considerably less. In response, the company said it is not going to make a significant profit on the hardware — placing the burden for profit even further on the content that Facebook is able to bring to Oculus Rift. Meanwhile, HTC is going to market with 50 titles , but none of them will be exclusively available on its VR headset, called Vive, priced at $799. HTC did not immediately respond to a request for comment. E-commerce juggernaut Amazon.com ( AMZN ), Netflix ( NFLX ) and other content producers also are making VR plays, and exploring video opportunities. This week at the conference, Sony announced its own VR bet for the PlayStation console. Sony’s offering is priced below both its chief competitors at $399 — a $370 PlayStation 4 is required, plus several accessories — but will not get to market until October of this year. In its fiscal third-quarter earnings report to investors, the company said it had sold 37 million PlayStation 4 consoles since its launch in 2013. Though content may determine the industry’s future, the hardware it relies on — Nvidia’s graphics processing units generate the graphics — has never before been available to consumers. Of the PC-based VR options, Oculus Rift will hit the market first on March 28 — giving the Facebook-owned company a head start on HTC, which will hit the market sometime in April . Advanced Micro Devices ( AMD ) graphics cards also can be used to power VR headsets. “PCs will be the preeminent platform for VR,” says Del Rizzo. One issue for Sony is that the PlayStation 4 is aging. Several developers told IBD at the gaming conference that it could be a speed bump for bleeding-edge content. Sony declined to comment. Both Vive and Oculus Rift require top-of-the-line graphics hardware to run. Del Rizzo says that may generate more profits for the companies involved since gamers have a tendency to upgrade their graphics cards to ensure that they get the most out of the latest titles. Still, it’s too early to say VR will stick. There have been attempts to take VR mainstream in the past, notably in the 1990s, but they have failed — in large part because the hardware then was not as advanced as today. Now, at least with the devices from Sony and Oculus that IBD tested, the hardware appears to be able to deliver a palatable experience. The question becomes: Will developers and content creators produce offerings that will convince customers to open their wallets?