Yahoo predicts ‘upside’ on revenues

Yahoo on Tuesday promised quick results from initiatives intended to squeeze more income from its users as it reported quarterly revenues and earnings that were ahead of expectations.

Terry Semel, chairman and chief executive, said there would be “real upside for Yahoo in the near future” from the moves, which are intended to close a performance gap with the faster-growing Google.

At present, about 11 per cent of the searches on Yahoo result in “clicks” that produce fees from advertisers, compared to the 20 per cent achieved by Google, said Mark Mahaney, internet analyst at Citigroup.

Yahoo is updating its search algorithms in an effort to increase the relevance of its results and boost the “click-through” rate from users, said Sue Decker, chief financial officer. Other initiatives include improving the matching capabilities of the company’s technology so that it can sell ads linked to more search terms, and launching a new “publishers network” to place ads on other websites, she added.

For the latest quarter, Ms Decker pointed to “nicely balanced” growth of search and branded advertising to account for a 42 per cent gain in revenues, excluding traffic acquisition costs paid to other websites. At $932m, revenues were $14m ahead of expectations. Excluding one-off gains in both quarters, earnings rose to 16 cents a share from 8 cents a year before.