Yahoo search revenue continues downward spiral

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Yahoo's search advertising revenue plummeted to $467 million for the third quarter, a 44% drop compared to the prior year, the company said on Oct. 18. Yahoo's search revenue has experienced double-digit declines for the past four quarters. The company's display ad revenue declined by 2% year-over-year to $502 million.

Yahoo recorded $1.22 billion in revenue for the third quarter, a 24% decrease year-over-year. Net earnings for the period fell 26% year-over-year to $293 million, and earnings per share declined by 21% to $0.23.

Search and display advertising accounted for 80% of Yahoo's total revenue for the quarter.

Yahoo's search partnership with Microsoft, through which Microsoft provides search technology for Yahoo sites, siphons 12% of Yahoo's net search ad revenue to the Redmond, Wash.-based company.

Yahoo has said in past quarters that the partnership has failed to produce the expected revenue per search (RPS). The company said in its third-quarter earnings statement that it has extended the RPS Guarantee agreement with Microsoft through March 2013 in the U.S. and Canada “in order to create more financial certainty.”

During Yahoo's second-quarter earnings call then-CEO Carol Bartz said that the company had closed “approximately one-fifth of the RPS gap” that existed in April and was “on track to achieve RPS parity by the end of the year.” Asked during the company's third-quarter earnings call whether Yahoo is still on track to close the gap this year, Morse said he didn't know. Morse declined to comment on the company's reported display ad partnership with AOL and Microsoft.

Search queries conducted on Yahoo rose by 1% year-over-year, but search page views declined by 3%.

The company reduced its workforce during the period by 3% to end the third quarter with 13,700 full-time employees.

Yahoo ousted CEO Carol Bartz on Sept. 6 and named CFO Tim Morse her interim replacement.

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