Announcements from Yahoo state that their first quarter earnings doubled. This is the company’s first revenue increase since 2008’s third quarter.  The 1% increase in revenue was below some expectations by analysts, and a 14% drop in search advertising sales restrained Yahoo’s overall revenue gain. The boost in earnings for Yahoo included reimbursement payments from Microsoft as the two companies are taking steps to begin displaying Bing search results on Yahoo.

This quarter was the first reflecting the Yahoo 10-year Internet search deal with Microsoft.  According to recent tracking by comScore, Yahoo’s search engine market share increased slightly to 16.9% (from 16.8% last month), and Microsoft’s Bing rose a little as well to 11.7% (from 11.5%). After this 10-year deal comes to fruition, Microsoft’s Bing search engine will gain control of about 30% of the search market, which is slowly becoming a big competitor for Google. Some analysts are still skeptical of a fully combined Yahoo-Microsoft search being able to compete with Google because they believe there is a lot uncertainty on how the market will play out.  You can learn more about Yahoo and Microsoft’s relationship in this earlier Rise blog post on the Yahoo-Bing Partnership.

Even though Yahoo’s search revenue dropped; their core business (according to IDC research), display advertising, increased by 20% and has been increasing steadily year after year. Yahoo CEO Carol Bartz said in a conference call to analysts that the display market is coming back. “With its comeback, the quality of advertisers is on the rise, and that means the quality of ads is also up. We’re looking for new, creative ways to get in front of consumers” she said.

This increase in display advertising and decrease in search revenue advertising means that Yahoo needs to focus more of its efforts on increasing search volume for the interim period before the Yahoo to Bing transition is complete.  Yahoo was not aggressive enough in the past. Bartz states, “There’s a renewed energy among (Yahoo! employees) around search.”  Toward the end of this upcoming holiday season, Yahoo should be ready for the full transition to have Bing power Yahoo results.

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This entry was posted on Thursday, April 22nd, 2010 at 4:25 pm and is filed under Display Advertising, Paid Search (PPC). You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.