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Yahoo (NSDQ: YHOO) is cashing in on a rebounding online ad market — reporting a 20 percent increase in sales of display ads on its own sites. That, however, wasn’t enough to make up for a continuing fall-off in the sale of the company’s search ads — and Yahoo’s overall net revenue was down 2.5 percent for the quarter — its sixth consecutive quarter of declining net revenue. The company did however project an up to 7 percent increase in revenue during the second quarter of the year.
In its announcement, Yahoo emphasized the strong sales of its display ads. And, indeed, the increases on the display ad side were stronger than analysts had anticipated.
But the drop-off in search advertising (down 14 percent) was larger than expected — and a sign that despite possibly stabilizing its search share, Yahoo hasn’t been able to convert that into additional ad dollars. Yahoo is, however, in the process of outsourcing most of its search business to Microsoft (NSDQ: MSFT), and it said it had received $78 million in payments from that company during the quarter in order to compensate it for transition costs.
Overall, net revenue for the quarter was $1.13 billion, compared to $1.16 billion during the same period a year ago. On average, analysts had expected net revenue of $1.17 billion. EPS was $0.22, compared to $0.08 a year ago; analysts had expected EPS of $0.09, although Yahoo reported a $0.05 boost from the sale of its Zimbra communications business to VMware during the quarter and a $0.02 gain due to its deal with Microsoft.