January 26, 2011 12:19 am

Yahoo sales slide as rivals gain ground

Yahoo’s fourth-quarter sales fell 4 per cent as the internet group continued to cede audience time and advertising income to rivals.

Revenue fell to $1.2bn excluding referral costs in the last three months of 2010, though profit doubled to $312m or 24 cents a share, ahead of the 22-cent consensus estimate from brokerages.

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“We just completed a very encouraging quarter and year for Yahoo, where we saw our plans to turn round the company gain momentum,” Carol Bartz, chief executive, said.

The company has outsourced search results to Microsoft and adopted a strategy of linking with newer internet companies, such as Facebook, Twitter and Zynga, allowing Yahoo users to interact with outside services while remaining on Yahoo’s pages.

Excluding traffic costs, display advertising revenue increased 16 per cent to $567m in the quarter.

Yahoo has for many years been the leader in display ads but rivals are gaining quickly.

Research firm eMarketer said on Tuesday that Yahoo’s US display revenue share slipped slightly to 16.2 per cent for 2010, while Facebook’s share nearly doubled to 13.6 per cent. Google’s more than doubled to 9.6 per cent.

Yahoo’s page views for the quarter were “about flat” with the same period a year earlier, Tim Morse, chief financial officer, told the Financial Times.

Ad impressions, the number of times ads are viewed, grew by 15 per cent.

Yahoo’s search revenue fell 18 per cent to $388m in the quarter.

Executives said they were disappointed by the revenue generated on each search query and said the numbers should improve in the second half of 2011.

Yahoo’s share price fell by more than 2 per cent in after-hours trading as investors absorbed the company’s modest projections for the coming year.

As part of its drive to improve profitability, Yahoo shed hundreds of employees in December and confirmed a smaller round of lay-offs affecting 1 per cent of staff on Tuesday before the earnings release.

“We’re executing on our clear plan to expand margins,” Mr Morse said.

The company continues to add workers in mobile, social and other key areas and is working to personalise more content for more users. Ms Bartz told investors that Yahoo’s overall headcount would grow in the coming year but labour costs would be flat as it adds staff in developing markets.

“We expect to start seeing revenue growth on a year over year basis, most likely in the second half of 2011,” Mr Morse said.

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