Yahoo Revenue Comes in Flat as Mayer's Turnaround Effort Continues

Company Beats Analyst Expectations But Display Ad Revenue Falls

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Yahoo reported third-quarter profit that topped analysts' estimates but revenue that was flat as turnaround efforts by CEO Marissa Mayer continued.

Profit, excluding some items, was 34 cents a share, Yahoo said today in a statement. Analysts had projected earnings of 33 cents, according to data compiled by Bloomberg.

Revenue, excluding the cost of payments to sites that helped drive traffic, was $1.08 billion, down 0.8% from the quarter a year earlier. Display ad revenue excluding traffic acquisition costs fell to $421 million from $452 million. Search revenue excluding traffic costs ticked up to $426 million from $414 million.

Ms. Mayer, who took the helm of the largest U.S. web portal in July 2012, is investing in product improvements to woo more users and marketers amid competition from Google and Facebook. Last month, Ms. Mayer said the company surpassed 800 million active monthly users, an increase of about 20% since she arrived at Yahoo from Google.

"It's finally showing some signs of a rebound," said Martin Pyykkonen, an analyst at Wedge Partners in Greenwood Village, Colo. "It's sounding better."

Yahoo rose as much as 6.4% to $35.50 in extended trading after the report. The stock was down 1.8% at the close in New York and has surged 68% this year after dropping in five of the previous seven years.

Yahoo forecasted sales, excluding revenue passed on to partners sites, of $1.18 billion to $1.22 billion for the fourth quarter and $4.4 billion to $4.45 billion for the year. That's down from a previous estimate of $4.45 billion to $4.55 billion for the year.

While third-quarter revenue and profit fell from the prior year, Yahoo is benefiting from its stake of about 24% in Alibaba Group Holding, China's largest e-commerce company. Alibaba is considering going public next year after investment banks valued the company at as much as $120 billion, more than three times the size of Yahoo.

To infuse engineering talent and innovative products into the company, Ms. Mayer has been on a buying spree, acquiring at least 19 companies. They include mobile-application makers Stamped, Jybe and Summly, the news-reading application created by teenager Nick D'Aloisio. Her biggest deal was blogging site Tumblr, which Yahoo bought for $1.1 billion earlier this year.

Ms. Mayer is also adding new products and updating existing ones. Since last year the company has released new versions of Flickr, as well as its news and sports sites. Ms. Mayer said last month that the company's focus on products is contributing to user growth.

The developments haven't resulted in advertising market share gains. Yahoo's share of the U.S. online ad market will probably drop to 7.7% this year from 8.6% in 2012, according to eMarketer. Google's control will climb to 41.1% from 40.9%, and Facebook's share will jump to 7.1% from 5.9%, eMarketer predicts.

~ Bloomberg News and Ad Age staff ~

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