Attributing its steep decline in search revenue to its agreement with Microsoft, Yahoo announced search revenue dropped $388 million, or 18% in the fourth quarter of 2010 compared with 2009.
“Taking our search alliance revenue share into consideration, we were only down 6% for the quarter and 2% for the year,” said Carol Bartz, CEO of Yahoo, on a conference call. “Whenever you make big changes, it takes some time for the market to adjust, but we are confident that this will turn around this year.”
Yahoo’s display advertising saw more encouraging numbers with an increase of 16%, or $567 million, over the previous year. However, total fourth quarter revenue was also down 4% to $1.2 billion compared with the previous year. Yahoo’s net income was nearly $318 million for the quarter and $1.2 billion for the year.
The 4Q results reflect search operating cost reimbursements totaling $66 million from Microsoft under the joint search agreement. Yahoo projects that search operating cost reimbursements will continue to decline in 2011 as it continues it transition to the Microsoft search platform and underlying transition expenses are no longer required.
Yahoo has announced that its goals for 2011 include a focus on optimizing price-per-click and increasing growth in affiliate traffic. Yahoo also pointed to its strong performance in display advertising as an indicator of positive growth for the company.
