Photographer: David Ramos/Bloomberg

Yahoo's Future Won't Come by E-Mail: Rani Molla

If you plan to share this article, you’re more likely to use text, Twitter, Facebook, Slack, GChat or even SnapChat than e-mail.

E-mail, in other words, isn’t the main form of sharing in a world increasingly dominated by smartphones -- which makes Yahoo’s announcement on Thursday that it plans to invest tens of millions of dollars in upgrades to its 18-year-old e-mail service a bit of a head-scratcher.

Yahoo’s thinking is that by improving its e-mail service with features like passwordless entry, it will drive more traffic to its sites and, by extension, increase ad sales. But it seems as if Yahoo is fighting the previous war, one that it already lost.

Gmail is the only top e-mail service gaining traffic, with unique visitors up 13 percent in the U.S. since last September, according to ComScore data that include both mobile and desktop users. Yahoo’s e-mail traffic fell 10 percent during the period.

While gaining access to e-mail without a password is a nice feature, it’s probably not the key to improving Yahoo’s fortunes. The company would be better served by focusing on its real need: a mobile-first ad strategy. In one telling comparison, Facebook made 73 percent of its ad revenue from mobile in the first quarter of 2015, while Yahoo made only 19 percent, according to Bloomberg Intelligence.

From 2011 to 2015, global Internet advertising revenue rose to $156 billion from $84 billion, a compounded annual growth rate of about 17 percent. During the same period, Yahoo’s revenue, most of which comes from Internet advertising, has dipped to $4.8 billion from $4.9 billion.

Where the real action is going to be -- mobile -- the company has been slower than its peers to make money. Its share of U.S. mobile ad revenue was 3.3 percent in 2014, according to eMarketer, compared with 36.9 percent for Google and 18.5 percent for Facebook. It is projected to decline through at least 2017. Yahoo’s total Internet advertising market share fell below 4 percent in 2014, down from about 25 percent in 2005, according to eMarketer.

Indeed, none of Yahoo’s mobile apps rank in ComScore’s top 10 apps by reach, an area dominated by Facebook and Google.

Competing on mobile will be vital for Yahoo, and it clearly has a long way to go. A revamped e-mail service, even one that doesn’t need a password, isn’t going to be the answer.

(This column does not necessarily reflect the opinion of
Bloomberg LP and its owners.)

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