Yahoo revenue falls on slow ad sales

This was Yahoo's first earnings report since boss Marissa Mayer bought David Karp's blogging platform Tumblr

Internet giant Yahoo continues to struggle, reporting declining ad revenue in the second quarter of 2013.

The results were the first since the company acquired blogging platform Tumblr for $1.1bn (£723m) in June.

Profits were $331m, up 46% from the same time last year. The rise was due mostly to the company's investment in Chinese ecommerce site Alibaba.

Display advertising revenue fell 13% in the quarter, while search revenue was down 9%.

Chief executive Marissa Mayer, who celebrated one year at the company on Tuesday, chose to ignore the continued revenue slide. Instead, she hailed the company's relentless release of new mobile offerings.

"We reached a pace of launching a new product almost every week," said Ms Mayer during a webcast to discuss the company's earnings.

"As you can tell, we've been busy."

Reaction on Wall Street was muted, with shares falling 1.7% on the news.

Problems remain

Although the company's stock has risen more than 70% since Ms Mayer took over, fundamental issues of revenue generation remain.

While digital ad sales are expected to grow overall this year, it is unclear whether Yahoo will be able to get in on the game.

According to research firm eMarketer, Yahoo's share of global digital ad spending is expected to decline to 3.1% in 2013 from 3.37% last year.

In the US, eMarketer estimates that Yahoo's share of US digital ad revenues will decline to 8% from 8.6% in 2012.

Mayer magic?

But Yahoo's turnaround is expected to take longer than one year and Yahoo's board is said to have promised Ms Mayer several years to help revamp the company's fortunes.

She herself has said that her focus at the company would be on its mobile offerings. The earnings release proclaimed the many mobile revamps to its products, such as photo-sharing site Flickr and Yahoo News, conducted under her tenure.

Yahoo has also bought nine technology start-ups in the past quarter, including Tumblr and Summly, bringing the total to 17 acquisitions under her watch.

Yahoo hopes this will diversify its base, attract engineering talent and boost company morale.

Ms Mayer touted the improved environment at the company, noting that in the second quarter, the rate of employees leaving the company declined by 59%.

She also noted that more than 12% of new hires in the past year were boomerangs - that is, people who left Yahoo only to come back.