This article originally appeared on Jan. 29, 2014, on RealMoney.com. To read more content like this plus see inside Jim Cramer's multimillion-dollar portfolio for FREE... Click Here
Last night Yahoo! (YHOO) reported its fourth-quarter quarter results and, after being in the CEO hot seat for 18 months, we are still asking Marissa Mayer the same question: Where's the growth?
Revenue for the quarter continued the trend of year-over-year declines we've seen over the last few quarters and both EBITDA and operating income fell year over year. Digging through Yahoo!'s financial highlight slides, we see the company is making progress in growing its paid clicks and the number of ads it has sold. Better volume, but as we know revenue equals volume multiplied by price, and that is where the problem is.
Of all the slides in Yahoo!'s presentation, one of the most glaring is Slide 7 because it shows the negative trend in price-per-click (PPC) and price-per ad (PPA) the company has been dealing with over the last year. It could be that Yahoo! is getting aggressive on pricing to take share or the continued proliferation of online properties that stretching advertising dollars. While Yahoo!'s results reflect more recent pricing pressures, it has been a longer-term trend and has, according to some, resulted in standard banner display ad pricing falling between 30% and 40% over the last several years. Simple math tells us that for every 20% drop in price, volume has to grow 25% just to keep revenue flat.