Yahoo Reports Loss as Online Ad Sales Slow

Yahoo, owner of the second-most popular U.S. search engine, reported a fourth-quarter loss yesterday after shrinking demand for online ads led to the company's first sales decline since 2001.

The loss was $303.4 million, or 22 cents a share, compared to a profit of $205.7 million, or 15 cents, a year earlier, the Sunnyvale, Calif.-based company said. Excluding fees passed on to partner sites, sales were $1.38 billion, down 2 percent from $1.4 billion in the year-ago period. Analysts had estimated revenue of $1.37 billion on average, according to a Bloomberg survey.

Carol Bartz, Yahoo's new chief executive, faces the challenge of reviving growth during a recession. The company has lost Internet-search customers to Google and sales are slowing for so-called display advertising, such as banner ads. Bartz took over from Jerry Yang, who stepped down after the rejection of a $47.5 billion takeover offer from Microsoft rankled investors last year.

"When the economy's in a downturn, the big brand advertisers pull their advertising budgets. They tend to go down very quickly," said Jeffrey Lindsay, an analyst with Sanford C. Bernstein & Co. in New York. He expects the stock to perform in line with the market.

Yahoo shares rose 17 cents, or 1.5 percent, yesterday to close at $11.34. The shares fell 48 percent last year.

Yahoo depends more heavily on display ads than search advertising, where Google leads, Lindsay said. Google handled 63.5 percent of U.S. searches in December, while Yahoo had 20.5 percent, according to ComScore in Reston.

The display market should grow about 5 percent this year, compared with 10 percent growth for search ads, according to Susquehanna International Group. Last year, search ads grew 25 percent, while the display market climbed 18 percent.