Sunnyvale, California — Yahoo Inc.’s advertising business exhibited further signs of transformation as the Internet company reversed losses of a year ago and posted its best quarterly net profit on Tuesday since Carol Bartz took over as chief executive of the Internet company.
The Sunnyvale, California-based Yahoo on Tuesday, swung to a profit of $153 million, or 11 cents share, for the fourth quarter, compared to a loss of $303 million, or 22 cents a share, the same period a year ago. In the fourth quarter of 2008, Yahoo had taken more than $500 million in writedowns and charges related to layoffs and its international business.
However, revenue in the fourth quarter, continued to slide around $1.7 billion, down 4% from $1.8 billion a year ago. However, the drop was an improvement over the third quarter, when revenue was down 12% year to year.
Yahoo Chief Executive Carol Bartz, who was hired as CEO a year ago, said the revenue improvement was due to better demand for display advertising and the first sequential increase in search advertising revenue since the third quarter of 2008.
“Our business has positive momentum and we feel good as we head into 2010,” Bartz said in a statement.
The results indicates that an improving advertising atmosphere is giving Bartz some breathing room as she takes steps toward re-energizing the company and its sales.
Bartz had promised to turn back Yahoo’s slump by focusing on a few core products, such as its homepage and Yahoo Mail. Lately, she has also been pushing to offer higher quality ads.
“The better news here is what is going on in revenue,” said Yahoo Chief Financial Officer Timothy Morse, who added that product enhancements like better ad-matching technologies are helping to grow revenue.
Yahoo executives said they were particularly pleased with demand for its display ads, or graphical banner ads. “We are seeing advertisers reach farther into 2010 to book premium Yahoo sites and events,” said Bartz. “So we expect the positive momentum to keep building.”
The company last year signed a search and search-advertising agreement with Microsoft Corp. that is pending regulatory approval and is expected to close early this year. Under the deal, Yahoo will earn revenue from search ads sold using Microsoft technology on its site, saving the company overhead instead of running its own Internet search business.
Analysts and investors are continuing to scrutinize Yahoo’s Internet search business, which is seeing its market share get eaten up by Microsoft Corp.’s Bing search engine. In December, Yahoo’s Internet search share declined to 17.3% of U.S. Internet searches from 17.5% in November, according to comScore Inc., while Microsoft’s rose to 10.7% from 10.3% in November.
Morse said Yahoo has no plans to give up on search, and is growing the number of searches done through its system while continuing to make more money off each search.
Yahoo’s search-advertising and display-advertising businesses each improved from the company’s third quarter. During the quarter, Yahoo posted is biggest headcount increase in several quarters, hiring about 700 new employees. That included about 250 employees from the acquisition of two small technology companies, Maktoob, an Arab online community, and Xoopit, a photo service.
“Like many other business leaders I’m glad it is over,” she said. “Revenue decline of only 10 percent is pretty darn good.”
Bartz also said Yahoo would focus its growth internationally on “where the big Internet populations are coming online — Indonesia, Brazil, India…”
Bartz, a former CEO of software firm Autodesk, took over as Yahoo! chief executive in January 2009, replacing founder Jerry Yang, who stepped down amid criticism over his rejection of a 47-billion-dollar takeover bid by Microsoft.