Yahoo, the biggest U.S. web portal, reported profit and revenue that topped analysts' estimates as CEO Marissa Mayer benefited from gains in web search and prices charged for advertisements.

Fourth-quarter earnings, excluding some items, were 32 cents a share, Sunnyvale, Calif.-based Yahoo said in a statement. Sales, excluding revenue passed to partner sites, increased 4% to $1.22 billion. Analysts on average had projected profit of 28 cents on revenue of $1.21 billion, according to data compiled by Bloomberg.

Ms. Mayer recorded the first annual sales increase in four years in 2012 after collecting higher prices for ads placed on the company's pages and boosting revenue from search-related marketing messages. That helped make up for a decrease in revenue from display advertising, which makes up a larger slice of the total and is an area where Yahoo lags behind Google and Facebook.

"They underperformed significantly vs. our expectations on display and overperformed on search," said Brian Wieser, an analyst at Pivotal Research Group in Portland, Ore., who has a hold rating on Yahoo.

Net income attributable to Yahoo fell 7.9% to $272.3 million, or 23 cents a share, Yahoo said.

Yahoo stock jumped in late trading, after the results were released. The shares had fallen less than 1% to $20.31 at the close in New York, and they've climbed 2.1% this year.

Display decrease

Sales of display ads fell 3% to $591 million. The company is working to improve in display, a market that eMarketer predicts will increase to $17.7 billion this year, by investing more in tools that deliver ad promotions to consumers based on their browsing history, said Kevin Stadtler, president of Stadtler Capital Management.

Yahoo said the number of ads decreased about 10% compared with the fourth quarter of 2011 and increased about 3% compared to the third quarter of 2012. Price-per-ad on core Yahoo increased about 7% compared with the fourth quarter of 2011 and increased about 15% compared to the third quarter of 2012.

"They are really well-positioned because they can provide real-time data to advertisers, who can then pinpoint ads to people who are interested in their products," said Mr. Stadtler, who manages $7.2 million in assets, including Yahoo shares, said in an interview. "That's a really big deal."

Yahoo is working on technology that will personalize content from the web and feed it to people on their mobile devices, Ms. Mayer said in an interview with Bloomberg News last week.

'Social context'

User data will make it possible to create a so-called interest graph to show connections among people and create a personalized internet experience, she said.

"With the web becoming so vast, there's so much content and there's so much social context, and now with mobile, there's so much location context and activity context," Ms. Mayer said. "How do you pull all that together?"

Since Ms. Mayer arrived, Yahoo has continued to cede share in its core business of display advertising. Yahoo's portion of the U.S. market was 9.3% last year, down from 11% in 2011, according to researcher eMarketer Google's stake rose about 2 percentage points to 15%, while Facebook commanded 14%.

Google will retain its lead in the U.S. display-ad market this year with an 18% share, while Facebook will have 15% and Yahoo will slip to 8%, eMarketer estimates.

~~Bloomberg News~~