How is Yahoo doing after the data breach?

Usage of Yahoo's email service appears stable, even after more than 500 million users saw their passwords, phone numbers, and other information accessed in a data breach.

First Look

Yahoo reported an increase in profits for the third quarter of this year, with earnings of $162.8 million, or 17 cents per share – a timely bit of reassuring news for a company that saw its credibility suffer greatly after a massive data breach.

“Frankly, I look at the numbers, they’re not that bad relative to what they could have been,” JMP Securities analyst Ron Josey told The Wall Street Journal. “It should be somewhat more comforting to see that things aren’t falling off a cliff.”

Perhaps more surprisingly, the number of emails sent and read by users also rose, as well as the number of page views on the email service – this, after the company acknowledged in September that more than 500 million users’ accounts were hacked back in late 2014, a belated announcement that brought on fierce criticism of its security capabilities. And earlier this month, Reuters reported that Yahoo had secretly scanned hundreds of millions of users’ emails for evidence of terrorist activity at the behest of law-enforcement authorities, raising fresh doubts about the privacy of users’ communications.

But many Yahoo email users are apparently persisting, in what could be a reflection of what many researchers say is a common reluctance to change longstanding habits when it comes to certain cyber-security practices.

In one 2015 conference paper analyzing why cyber-security awareness campaigns often failed to change behavior, experts from Oxford and the University of London wrote that influencing users’ behavior effectively would require more than simply providing them with information. Users "need, first of all, to accept that the information is relevant, secondly, understand how they ought to respond, and thirdly, be willing to do this in the face of many other demands," they wrote. 

The latest earnings report isn’t all rosy news for Yahoo, by any means. The company has benefitted from a cost-cutting program that saw one-fifth of its workforce, or some 2,200 workers, laid off over the past year, according to the Associated Press. But after subtracting advertising commissions for July through September, its revenue fell 14 percent, to $857 million – the fourth consecutive quarterly plunge of 10 percent or more. Projections by the company’s management see it extending into the final three months of the year.

The chief danger facing the company is the fate of a $4.83 billion buyout from Verizon, which has recently hinted at having cold feet. The buyout was announced in July, just a few months before the Yahoo data breach was made public.

Last week, Verizon general counsel Craig Silliman told Reuters that a clause in the deal could allow it to withdraw before the SEC and European Commission performed their review of the merger, if the data breach were found to have had a “material adverse effect” on the business.

"I think we have a reasonable basis to believe right now that the impact is material and we're looking to Yahoo to demonstrate to us the full impact," said Mr. Silliman. "If they believe that it's not then they'll need to show us that."