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Yahoo! profit soars but revenue falls

Update: April, 17/2013 - 11:27

SAN FRANCISCO – Marissa Mayer's quest to revive Yahoo! has stumbled with word that revenue from display ads at the heart of its business shrank in the first three months of this year.

Yahoo! profit on Tuesday soared to $390.9 million, a 36 per cent rise from the same period last year on the back of returns from stakes in Chinese Internet giant Alibaba and Yahoo! Japan. But money from its own online ads sagged.

Yahoo! shares fell more than four per cent to $22.80 in after-hours trade after the company reported that revenue fell 6.6 per cent to $1.14 billion in the quarter that ended March 31.

Display ad revenue dropped 11 per cent from the same period last year.

In contrast, the overall US digital ad market grew 14.8 per cent to $9.64 billion in the first three months of this year, according to industry tracker eMarketer. "To get the company growing at the rate we would like will take several years," Mayer said during an earnings call with financial analysts.

Google and Facebook are expected to account for 41.6 per cent and 6.5 per cent of US digital ad revenue this year, respectively, according to eMarketer. "It's a similar story in the display advertising market," eMarketer said in a release.

Mayer took over in July at Yahoo! after 13 years at Google, having been hired as the 20th employee and first woman engineer at the company that went on to be the new king of Internet searches.

She joined Yahoo! as the fifth chief executive there in as many years as the struggling Internet search pioneer tried to reinvent itself as a "premier digital media" company after withering in Google's shadow.

Mayer has echoed the mantra of predecessors who maintained that the company could find prosperity by mining information about users to insightfully tailor online content and target money-making advertising.

On Tuesday, she likened her plan to get Yahoo! back up to speed to a series of sprints, with the first leg comprised of bulking up the pool of talent at the company.

"We are nearing the end of the first sprint," Mayer said. "Now, our focus will shift to building beautiful products and executing well against our strategy." Mayer said that tailoring products for mobile gadgets is a priority at Yahoo! as lifestyles shift to smartphones and tablet computers.

The Sunnyvale, California-based company also planned to capitalise on multi-year partnerships with Google, Facebook, Apple and Microsoft.

Mayer praised what Facebook did with its Home software for smartphones powered by Google-backed Android software, calling the social network's creation a "great product."

Yahoo! executives expected to make more strategic acquisitions, particularly of companies with teams adept at designing products for mobile devices. Revenue from Internet search ads continued to fall short of expectations when Yahoo! sealed a deal to power the service using Microsoft's Bing engine, according to chief financial officer Ken Goldman.

"We talk to Microsoft every day to essentially optimise what we are doing together," Goldman said, noting that an extension of the revenue guarantee was not expected.

Yahoo! in 2009 began letting Bing handle the labor-intensive job of finding and indexing content on the Internet, freeing itself to concentrate on interesting or personalized ways to present results.

Yahoo! in February rolled out a make-over tailored by style savvy and engineering smart Mayer.

Web pages long cluttered with low-brow ads were redesigned to highlight news of interest to visitors along with feeds of what is getting attention online.

"I think she is doing fine," Silicon Valley analyst Rob Enderle said of Mayer's work so far at the Yahoo! helm. "Typically, you are looking at about five years to turn a company around." AFP



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