Yahoo! profit up but revenue falls

The quest by Yahoo! chief Marissa Mayer to reverse the struggling Internet pioneer’s fortunes stumbled on Tuesday as the company reported that profit rose modestly but revenue slipped.

Yahoo! shares fell 4.33 percent to $22.76 in after-hours trade after the company reported net income of $390.9 million, up 38.7 percent, but that revenue fell 6.6 percent to $1.14 billion in the quarter that ended March 31.

Earnings per share came in at 35 cents, compared to 23 cents a year earlier.

Display ad revenue dropped 11 percent from the same period last year while overall search revenue was down 10 percent after factoring in money paid to partners that route traffic to Yahoo! properties, according to earnings figures.

In contrast, the overall US digital ad market grew 14.8 percent to $9.64 billion in the first three months of this year, according to industry tracker eMarketer.

“I’m pleased with Yahoo!’s performance in the first quarter,” Mayer said.

“I’m confident that the improvements we’re making to our products will set up the company for long-term growth.”

Google and Facebook are expected to account for 41.6 percent and 6.5 percent 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.

While Yahoo! reported a decline in display ad revenue, “overall display market spending is increasing far faster, and competitors like Google and Facebook continue to stretch their lead,” according to eMarketer.

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 search.

Shortly after taking over at Yahoo!, Mayer expressed a vision to “make the world’s daily habits inspiring and entertaining.”

Mayer 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.

“To get the company growing at the rate we would like will take several years,” Mayer said during an earnings call with financial analysts.

Yahoo Inc Chief Executive Mayer attends the annual meeting of the World Economic Forum (WEF) in Davos
Yahoo Inc Chief Executive Mayer attends the annual meeting of the World Economic Forum (WEF) in Davos

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.

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.

She sidestepped a question about whether Yahoo! was working with Apple to showcase products or services on iPhones or iPad tablet computers.

Yahoo! will likely make more strategic acquisitions, particularly of companies with teams adept at designing products for mobile devices, according to Mayer.

She 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.”

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.

A revenue guarantee provided by Microsoft lapses in March.

“We talk to Microsoft every day to essentially optimize 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.

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Yahoo! profit up but revenue falls