By Maghan McDowell
with contributions from Alexandra Steigrad
 on October 1, 2015

SAN FRANCISCO – The pressure is on for Yahoo chief executive officer Marissa Mayer, who continues to expand her company’s slate of digital magazines. The endeavor, which Mayer launched in January 2014, has come under fire from both Wall Street and the media industry.

This week the company has broadened Yahoo Style, the seventh vertical it launched last year, to include Décor, and on Wednesday, it relaunched Real Estate and Celebrity.

Like her rivals, Mayer emphasized the importance of mobile and native advertising this week at Advertising Week’s Conference in New York, but she didn’t talk about the trajectory of the digital magazines, which are central to what she calls Yahoo’s “renaissance.”

The company’s slate of 15 U.S. digital magazines, according to internal analytics, has attracted more than 67 million total monthly unique users in a little over a year, up more than 10 percent from the previous quarter. That may sound like a lot, but Condé Nast, a traditional magazine publisher that is still figuring out how to develop its digital business, logged 87.3 million uniques in July across all of its magazines, including the Web site Reddit, which garnered 32.8 million, according to Comscore.

For more context, Comscore said digital pure-play Buzzfeed garnered 82.4 million unique visitors in July across desktop and mobile.

Those at Yahoo are quick to note that the magazines are all in relative infancy and, despite skepticism from experts and impatience among investors, the company’s executives insist the numbers already indicate early success. While it’s too early to know if the gamble has paid off, it’s clear that in the highly competitive world of digital content, Yahoo is giving it everything they’ve got.

It has poured money into talent, hiring big-name editors including global news anchor Katie Couric, former New York Times columnist David Pogue (to run Tech), former Elle creative director Joe Zee (at Style and now Décor) and makeup entrepreneur Bobbi Brown (Beauty).

Many have been skeptical of whether high salaries have paid off, but Mayer, at a Fortune conference in May, addressed that concern. “You can do things like measure the ads that we have sold against those programs and the following views. And by all means, it’s a very profitable and good investment,” she said. “But I will say, to me, that it was really more about raising that journalistic standard, getting our name out there, as people who participate in news and participate in the dialogue in ways other than just republishing content.”

“When I look at a magazine like Yahoo Style that Joe Zee curates, he had a sizable social and offline following, in broadcast and traditional print,” said former chief marketing officer Kathy Savitt. “A Joe Zee fan is a Joe Zee fan.”

Savitt left the company for STX Entertainment in August, following another big hire, former Time Inc. editor Martha Nelson, who joined Yahoo as global editor in chief.

Although she hasn’t been there long, Nelson, too, is a cheerleader. “I believe that only Yahoo could have pulled this off, because of the unique assets that the company has,” she told WWD. “The power of the homepage, the engineering talent and the platform that Tumblr has provided have all come together to make some magic over the last 16 months.”

Still, some factors indicate that the strategy might need more time to find its footing. In second-quarter earnings in July, Yahoo showed some improvement, as Mayer noted strong growth in mobile revenue to $252 million and a stabilization of display advertising revenue, which had been struggling for some time. Total revenue minus traffic acquisition costs came in at $1.04 billion, just beating Wall Street’s estimates of $1.03 billion. However, Yahoo posted a $22 million net loss. Adjusted earnings per share totaled 16 cents, 2 cents below analysts’ estimates.

Although its 2015 mobile ad revenue growth is 40 percent, the market overall grew at 59 percent this year, explained eMarketer senior forecasting analyst Martin Utreras. “They are growing a little bit below the market rate, and we don’t think they are gaining market share at this point,” Utreras said. “It’s very strong, but it’s not catching up with the market, and that’s something that investors want to see.”

EMarketer expects that Yahoo will generate $3.37 billion in total digital ad revenue in 2015, capturing 2 percent of the worldwide total digital ad market, which is down from a 2.4 percent share in 2014.

“Everyone from Conde Nast to Hearst to Yahoo to start-ups are all chasing the same advertisers by churning out similar content on the same events and news,” said Jeff Inman, an assistant professor at Drake University’s School of Journalism and Mass Communication. “All these companies are all slicing the revenue pie into millimeter-sized wedges.

“With Web CPMs [cost per thousand impressions] where they are, even claiming hundreds of those millimeter-sized wedges doesn’t result in the kind of profits that Yahoo is craving,” he added.

High reader numbers don’t immediately translate into high advertising revenue. According to eMarketer, the average CPM for print magazines is $14, while digital display ads are at $1.90, and mobile at $3.

Like any 20-year-old, Yahoo is experiencing growing pains: What does it want to be known for? How will it make money? Are its glory days in the rearview mirror?

Even before Mayer took over in 2012, Yahoo, which refers to itself as the “world’s largest start-up,” has seemed to grapple between identities: Is it a tech-company — a search engine that competes with Google — or an editorial content provider that competes with publishers?

Savitt said Yahoo’s “mission as a company is to be a guide to the world’s digital information, manifested through search, communications and through…media products.”

Although they are called “magazines,” perhaps tellingly, the word “users” is often used in place of “readers,” and the concept of “destination” in place of “magazine.” According to Savitt, they launched with the words “digital magazines” because it was a new concept, and they wanted users to understand what that means.”

“In many ways, ‘magazine’ is a bit of a euphemism for a delightful destination where you can find the most interesting editorial, the most compelling photography, and hopefully the most entertaining video on a subject for which you have tremendous and passion,” she said.

Much of Yahoo’s focus is centered on what Mayer refers to as “MaVeNS,” which stands for mobile, video, native and social, the key areas through which she hopes to rebuild and drive revenue. In her talk this week, Mayer shared that Yahoo’s mobile audience is at 600 million active users a month, and in addition to creating digital magazines, the company is making video a priority with a crop of short segments from Zee, Couric and Simon Cowell, among others. This makes strategic sense; the average digital video CPM is higher than that of print or mobile, at $24.60.

Still, as Yahoo diversifies with original video programming, it also increases its already large pot of competitors, adding Netflix and Hulu.

Even with video, Yahoo faces the challenge of attracting younger consumers.

According to Comscore, more than 64 percent of U.S. visitors to Yahoo’s sites on desktop were 35 or older.

“Yahoo has always owned moms and dads,” admitted Savitt.

Yahoo recently bought Polyvore, a social commerce site, and uses user-generated content from micro-blogging site Tumblr, which it bought in 2013, to contribute content to its magazines. The purchase, Yahoo hopes, will help it lure Millennial consumers, and become more active in the social space.

On the business end, the focus on mobile aligns well with the much more lucrative development of native advertising and customized content.

“Ads within our digital magazines can be as entertaining as the content around them, but they are clearly marked sponsored placements,” said vice president of sales strategy and solutions Kathy Kayse. “We’re making it possible for brands to create their own destinations, leveraging the digital magazine design ethos. This means that an advertiser can have a custom content marketing platform to share branded articles, videos and other content on their own page.”

But back to those critics.

Nelson, who is now under pressure to turn the magazine business into a success, said she is not worried about the skeptics and the critics.

“The jubilation of creation is almost always followed by someone who is skeptical, but the task for all of us is to keep doing what we’re doing, and try to do a better job of it every day,” she said. “Given the amount of change and shift in both the industry and consumer habits, I don’t think there’s a media property out there that is immune from questions.”