Yahoo! Profits Soar from Ads, Google Stake

Yahoo reported profits for the third quarter that were nearly quadrupled from the year earlier, posting a net income of $253 million for the quarter, compared with $65 million for the same period last year.

While the company saw substantial growth from advertising, more than half of the quarter’s income came from the sale of 25 percent of the stock the company held in rival Google after the latter company’s August IPO, along with associated tax benefits. Excluding that income, Yahoo still nearly doubled profits from the same period last year, at $124 million for the third quarter of 2004. Earnings per share of $0.09 were in line with analysts’ expectations, as surveyed by Thomson/First Call.

Revenue for the third quarter totaled $907 million, up 154 percent over last year’s period. Taking into account commissions paid to some advertising partners, or “traffic acquisition costs,” revenues adjusted $655 million, slightly beating analyst estimates.

“Yahoo began to demonstrate the next stage in the company’s evolution in the third quarter,” said Terry Semel, Yahoo’s chairman and CEO. “Today’s world is moving from mass media to digital media, where the user is in control. We know we must deliver what the user wants, when they want it, and how they want it.”

To reach this goal, Semel said the company must maintain its focus on search, personalization, community and content.

Semel recently spoke at a conference of the Association of National Advertisers (ANA), a group made up of the world’s largest offline brands. There he said those large brand advertisers are concerned they cannot reach their audience through a single medium, and plan to move more of their advertising dollars online.

“The Internet will clearly become a more vital part of their advertising solution,” Semel said. “And when marketers think about buying online, they think about Yahoo”

Marketing services revenue, which encompasses both search and regular online advertising, totaled $765 million for the third quarter of 2004, a 212 percent increase from the $245 million reported in the same period in 2003. Listings revenue for the third quarter rose 15 percent to $37 million. Growth in marketing services and listings revenues were driven both by organic growth and incremental revenue associated with acquisitions.

Fees revenue for the third quarter grew by 31 percent to $104 million, driven by growth in subscribers to Yahoo’s premium services, including fantasy sports products, which were up 90 percent from last year, and bundled content deals with ISPs.

Yahoo released its results after the stock market closed. Yahoo’s shares gained 21 cents to close at $34.23 on the Nasdaq.

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