July 20, 2011 12:47 am

Yahoo revenues dip on US display ad sales fall

Yahoo revenues slid by 5 per cent to $1.08bn in the second quarter, which the company blamed in part on an unexpected drop in US display advertising sales.

Carol Bartz , chief executive, said the dip was “not about competitive developments and not about economy” but occurred as a result of “significant turnover” in the ranks of the company’s sales team.

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Display ad revenues were $40m below expectations at $467m, but increased 5 per cent overall compared to the same quarter last year.

Yahoo has come up against increasing competition from Facebook in display ads. The cost per click of Facebook ads has increased 74 per cent in the past year according to TPG Digital, a level of growth that is expected to help Facebook leap over Yahoo to become the leader in US display ad revenues, according to research by eMarketer. Google, ranked third, is also moving aggressively into display ads.

Ms Bartz said Yahoo would shift its sales strategy as it trained a new generation of salespeople. It had been “too easy to fall back on Yahoo’s huge reach and scale”, she said. “We left too many revenues on the table.”

The chief executive said some advertisers would go elsewhere to buy social ads and that Yahoo would instead focus on creative ads, particularly video ads, that let “advertisers tell their story, much like a commercial”.

Despite the fall in revenues, net earnings rose 11 per cent in the second quarter to $237m. Net earnings per diluted share were up 18 per cent to 18 cents, in line with analysts’ expectations.

Search revenue was down 15 per cent at $371m in the second quarter, which Ms Bartz attributed to the company’s search agreement with Microsoft and problems with its adCenter technology.

Ms Bartz addressed investor concerns over the Alibaba Group, the Chinese e-commere company, of which Yahoo owns 43 per cent. Yahoo in May said that Alibaba Group had sold Alipay, a valuable online payments business, to a group controlled by Jack Ma, the group’s founder, allegedly without the knowledge or approval of the group’s board of directors or shareholders.

“We’ve been working on this negotiation continuously, in fact, daily...ensuring that Alibaba Group is appropriately compensated for Alipay,” Ms Bartz said.

Yahoo has made “substantial progress” on the agreements, but “until every document is signed,” Ms Bartz said, “we’re not done.”

Yahoo stock was down 1.5 per cent in after hours trading.

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