Yahoo's revenue climbs 2 percent, though profit sags

Yahoo's revenue climbed 2 percent in the fourth quarter, though its display ad business shrank and profit was down from a year earlier.

Yahoo's revenue for the quarter ended Dec. 31 was US$1.35 billion. Subtracting commissions and fees paid to advertising partners, revenue was $1.22 billion, an increase of 4 percent, Yahoo announced Monday.

Net income declined 8 percent to $272 million, or $0.23 per share, compared with $296 million, or $0.24 per share, in the fourth quarter of 2011, Yahoo said.

CEO Marissa Mayer said she was "proud" of the results. "We achieved tremendous internal transformation in the culture, energy and execution of the company," she said in a statement.

Yahoo signed key partnerships in the quarter with NBC Sports and CBS Television, Mayer said, and improved its mobile apps for Yahoo Mail and Flickr, its photo-sharing service.

The quarterly figures above exclude payments Yahoo received from its sale of shares in Alibaba, a Chinese Internet company. Including those payments, on a pro forma basis, Yahoo reported income of $370 million, a 20 percent increase from the same period a year earlier. Its pro forma earnings per share was $0.32.

Display advertising revenue, after subtracting partner commissions, was $520 million for the quarter, down 5 percent from a year earlier. Search advertising revenue, on the other hand, increased by 14 percent to $427 million.

Looking at the full year, sales for 2012 were flat at $4.99 billion, though they increased by 2 percent after subtracting advertising fees and commissions. It was the first time in four years that Yahoo's annual revenue had increased by that metric, Mayer said.

Yahoo partners with Media.net for publisher ad network

Service is called Yahoo Bing Network Contextual Ads

Yahoo has partnered with Media.net to launch an ad network for Web publishers that will compete against Google's AdSense and similar services.

The service, called Yahoo Bing Network Contextual Ads, will place ads on the websites of participating publishers, choosing the ads based on the context of the Web pages.

Media.net will be in charge of the technology, business operations and relationships with publishers, while Yahoo will do the same for advertisers, the companies said on Thursday.

The service is aimed at websites that publish premium content and, for now, that get most of their traffic from the U.S., Canada and the U.K.

According to the companies, publishers can start running ads "in minutes" via the self-serve platform, which gives them options about the size and "skin" of the ads.

Through the use of keywords, publishers can influence the ads the service picks for any particular Web page, and they can also block certain ads and topics from appearing on their websites.

The ads from the Yahoo-Media.net network can be run alongside ads from other providers, and they can also be optimized for iOS, Android and BlackBerry mobile devices.

Participation in the service also includes service support for publishers.

Yahoo, which generates most of its revenue from online advertising, has been floundering in this market. A wide-ranging, 10-year deal with Microsoft for search advertising signed in 2009 struggled out of the gate and hasn't come close to fulfilling its goal of challenging Google's dominance. Meanwhile, Yahoo's position in display advertising, where it had historically been a leader, has been weakening in recent years, losing ground to Google and Facebook.

In April 2010, Yahoo closed an ad network for small Web publishers, saying that the service had failed to gain enough traction in its five years of operation.

That service, called the Yahoo Publisher Network, provided pay-per-click test ads to participating publishers, which ran primarily lower-traffic websites, such individual blogs.

Juan Carlos Perez covers enterprise communication/collaboration suites, operating systems, browsers and general technology breaking news for The IDG News Service. Follow Juan on Twitter at @JuanCPerezIDG.