Yahoo Continued to Struggle With Online Ad Sales in Q4

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Yahoo struggled selling both display and search advertising in the fourth quarter, as its revenue and net income both dropped year-on-year.

Subtracting the commissions paid to partners, Yahoo's revenue fell 3 percent to US$1.17 billion in the quarter ended Dec. 31, missing the $1.19 billion consensus expectation from analysts polled by Thomson Reuters. Gross revenue dropped 13 percent to $1.32 billion.

Net income fell 5 percent to $296 million, although earnings per share were flat at $0.24, matching analysts' consensus expectation.

Scott Thompson, the former PayPal president who was recently appointed Yahoo CEO, put a positive spin on the results, saying in a statement that the company "continued to make progress," offering its 10 percent operating income increase as proof.

"In 2012 we will be aligning resources behind key areas of focus to enable us to move aggressively in market and grow our business, bringing innovative new products and experiences to both our users and advertisers," he said in the statement.

For the full fiscal year, revenue came in at $5 billion, down 21 percent compared with 2010. Subtracting partner commissions, revenue was $4.4 billion, down 5 percent. Revenue for the full year was impacted in part by Yahoo's search advertising partnership with Microsoft, in which Yahoo pays Microsoft a commission on search ad sales and which includes a change in how Yahoo reports search ad revenue, the company said.

Advertising sales dropped across the board during the quarter for Yahoo. Subtracting commissions, display ad revenue fell 4 percent, while search ad revenue dropped 3 percent. Gross revenue fell 4 percent for display ads and 27 percent for search ads.

Yahoo's online ad sales performance contrasts with the overall market, which has been growing this year. For example, in the U.S. in the third quarter, online ad revenue grew 22 percent, according to the Interactive Advertising Bureau.

By comparison, Google, which makes most of its money from online ads as well, increased its revenue 25 percent in the fourth quarter.

For the full fiscal year, Yahoo's profit also fell, with net income shrinking from $1.23 billion, or $0.90 per share, to $1.05 billion, or $0.82 per share.

Yahoo has been in more turmoil than usual since Carol Bartz was fired as CEO in early September. There have been rumors that the board may sell the company entirely or in parts. Earlier this month, Thompson was brought on board to replace Bartz and last week co-founder Jerry Yang left the company.

Juan Carlos Perez covers search, social media, online advertising, e-commerce, web application development, enterprise cloud collaboration suites and general technology breaking news for The IDG News Service. Follow Juan on Twitter at @JuanCPerezIDG.

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