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Yahoo Lays Out New Plan as It Nearly Posts Revenue Growth

Portal Looking to Run More Ads on Sites Outside Its Own Network

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Yahoo's business may have finally reached bottom.

In the first quarter of this year, Yahoo came the closest to posting overall revenue growth since the fourth quarter of 2012.

"We believe we've moved from our core business being in decline," said Yahoo CEO Marissa Mayer during the company's earnings webcast on Tuesday. She described business as "stable" and mentioned a new plan to revitalize ad revenue.

Overall revenue dipped 1% to $1.14 billion. After accounting for how much Yahoo spends to drive people to its properties and pays out to sites using its products to run ads -- called revenue excluding traffic acquisition costs -- Yahoo's total revenue inched up 1% to $1.09 billion, beating analysts' estimates. The company reported net income of $312 million for the quarter, down 20% from a year earlier.

Yahoo's core display-advertising business avoided a sixth straight quarter of decline. The segment was flat year-over-year with revenue of $453 million in the first quarter of 2014. Similar in trend to the previous quarter, Yahoo sold 7% more banners than the previous year but on average pulled in 5% less revenue per ad.

Yahoo CEO Marissa Mayer and CFO Ken Goldman
Yahoo CEO Marissa Mayer and CFO Ken Goldman

Display-ad revenue continues to be hampered by the company's cheaper, so-called native Stream Ads. Introduced last April as a way for advertisers to run paid messages within Yahoo's article feeds, Stream Ads are primarily responsible for boosting display-ad volume and undercutting per-ad revenue. Such units now account for 20% of Yahoo's display ads, CFO Ken Goldman said on the earnings webcast. Excluding the lower-priced Stream Ads, Yahoo's average price-per-ad would have grown by 7%, he said.

Yahoo may be looking beyond its own properties to return display revenue to growth. In addition to investing in advertising on its own sites and apps, "we also want to grow our off-network business, which to date has been reasonably small on the display side," Ms. Mayer said. The company plans to run more ads on non-Yahoo properties, specifically through its ad exchange, said Mr. Goldman. The executives did not say whether Stream Ads would be sold on non-Yahoo properties.

Under Ms. Mayer, Yahoo has made a point of touting itself as a mobile business, but the company has yet to break out mobile revenues. For what it's worth, Mr. Goldman said mobile display revenue "approximately doubled" in the first quarter without providing actual figures.

For the first quarter since the end of 2012, search revenue grew. The segment increased 5% year-over-year to $445 million, driven by more people clicking on search ads and advertisers paying more for those placements. The number of paid clicks on search ads rose 6%, while the average price-per-click climbed 8%.

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