With Ad Dollars Elusive, Yahoo's Revenue Falls

SAN FRANCISCO - Yahoo still lags far behind its major Internet competitors, but the company's performance under Marissa Mayer continued to improve.

The Internet portal and web publisher reported fourth-quarter revenue of $1.27 billion on Tuesday, down 6 percent from $1.35 billion in the same quarter a year ago. That was roughly in line with Wall Street's expectations.

But the company was more profitable than expected. Net income for the quarter, which ended Dec. 31, was $352 million, or 33 cents a share, up from $274 million, or 23 cents a share. However, the results were lifted by a $49 million gain from the sale of patents. Using a measure of profits that focuses only on operations, Yahoo's profits declined.

'I'm encouraged by Yahoo's performance in Q4 and 2013 overall. We saw continued stability in the business, and our investments allowed us to bring beautiful products to our users and establish a strong foundation for revenue growth,' Ms. Mayer, who was appointed chief executive in mid-2012, said in a statement.

Yahoo shares, which had gained more than 4 percent in regular trading on Tuesday before the results were released, gave back all of those gains in after-hours trading.

Ms. Mayer has unveiled a host of initiatives in recent months, including digital magazines focused on technology and food, and new mobile apps for the weather, news and email. She has also been on an acquisition spree, including buying the blogging site Tumblr last year for $1.1 billion.

Still, she has acknowledged that the company has been slow to make mobile applications a priority. But she recently predicted that by the end of this year, Yahoo would get more of its revenue and usage from mobile devices than desktop computers.

Yahoo's operating results have long been overshadowed by its share of revenue and income from Alibaba, a fast-growing Chinese Internet company in which Yahoo holds a 24 percent stake. Alibaba is widely expected to sell shares in an initial public offering later this year that could value it at $100 billion or more, and most investors are valuing Yahoo's stock more on its ownership of Alibaba than on its core business.

Yahoo includes its proportional share of Alibaba's revenue and income on its own financial statements, although they are one quarter behind.

Alibaba reported a a 51 percent jump in revenue, to nearly $1.8 billion, for the third quarter. It also swung from a loss in the year-ago period to an $801 million profit during the quarter.

Ms. Mayer, who will discuss the company's results in a live webcast for investors beginning at 5 p.m., is sure to face questions about how she will finally crank up Yahoo's idling advertising engine. Earlier this month, she fired her No. 2 executive, Henrique de Castro, a former Google executive whom she had put in charge of advertising at Yahoo.

Yahoo said revenue from search advertising decreased at a slower rate in the fourth quarter, down 4 percent from the year-ago quarter. Revenue from display ads fell 6 percent. The company sold more ads, but at lower prices.

Yahoo is still the most popular web destination among desktop computer users in the United States, with 195 million unique visitors in December, according to comScore.

But the company has steadily lost ground in advertising against competitors like Google and Facebook. It had 5.8 percent of the United States digital ad market in 2013, according to eMarketer.