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Yahoo's first quarter revenue up, but long road ahead to 'greatness'

Yahoo spends big on transformation

Yahoo’s CEO Marissa Mayer may be trying to “return an iconic company to greatness,” but she still has a long way to go.

The company’s first quarter revenue was up from the same period last year, but so were operational costs, which took a big bite out of profits.

The company recorded revenue of $1.2 billion, up 8% from the same period last year, with big gains in mobile revenue, a key metric indicating future growth.

But traffic acquisition costs were nearly four times larger, at $183.1 million. An increase in total expenses forced net earnings down, from $313.9 million to $22.1 million.

Still, it appears Mayer has put some promising wheels in motion for future earnings. After announcing its focus on its mobile, video, native advertising and social platforms last year, revenues from those areas (which Mayer calls Mavens) were up 33% to $363 million this quarter.

Mobile revenue on its own was up 61% year over year.

"Our mobile, video and native strategy is core to our growth because it counters the decline in our legacy business," Mayer said is a conference call with analysts Tuesday.

Last week Mayer announced that Yahoo had renegotiated a 2009 search contract deal with Microsoft. Under the new terms, Yahoo will no longer exclusively provide Microsoft Bing ads and search results for its desktop traffic, which could allow it to sell some of its desktop traffic to another party. The new terms also allow either party to terminate the agreement “at will” after Oct. 1.

Analysts described the move as a win for Yahoo, giving it the freedom and flexibility to serve its own ads off desktop search results.

The results were revealed Tuesday after New York markets closed with Yahoo trading at $44.49 per share, down .37%.

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