Yahoo! profits fall

Yahoo! on Tuesday posted second-quarter net profit that was down from a year ago as growth in its historically strong display advertising business slowed and moves to better compete with Google on search advertising have yet to pan out.

On a conference call after the results were released, Yahoo! executives said revenue for the rest of the year would be lower than previously anticipated because of continued lower-than-expected display ad growth and larger declines in search affiliate revenue than expected. Yahoo! stock dropped more than three per cent in after-hours trade.

Net revenues for the quarter ended 30 June were $161m, or 11 cents per share, down nearly two per cent from $164m, or 11 cents per share, a year ago. It was the sixth consecutive net profit drop for the internet search and media company.

Yahoo! revenue rose 11 per cent to $1.24bn from $1.12bn a year ago, excluding traffic acquisition costs, which are commissions paid to content partners, the company reported.

The results matched adjusted forecasts from analysts polled by Thomson Financial. Yahoo! had warned last month that its revenue would come in at the lower half of its previous guidance of $1.2bn to $1.3bn.

Yahoo! for the first time broke out the revenue it gets from ads on its owned and operated sites versus those on partner sites but said it would no longer provide the revenue from its top 200 advertisers. Sales from ads the company placed on affiliate sites fell five per cent, while ad sales on its own sites rose 18 per cent from a year ago.

Co-founder and CEO Jerry Yang said in a statement: "I am focused on doing everything we need to do to strengthen our business, capture long-term growth opportunities and create increased value for our shareholders."

Elinor Mills writes for CNET News.com