SAN FRANCISCO (AFP) - The quest by Yahoo chief Marissa Mayer to reverse the struggling Internet pioneer's fortunes stumbled on Tuesday as the company reported that profit rose modestly but revenue had slipped.
Yahoo shares fell 3.5 per cent to US$22.95 in after-hours trade after the California company reported net income of US$390.9 million, up 38.7 per cent, but that revenue fell 6.6 per cent to US$1.14 billion in the quarter that ended on March 31.
Earnings per share came in at 35 cents, compared to 23 cents a year earlier.
Display ad revenue dropped 11 per cent from the same period last year while overall search revenue was down 10 per cent after factoring in money paid to partners that route traffic to Yahoo properties, according to earnings figures.
In contrast, the overall US digital ad market grew 14.8 per cent to US$9.64 billion in the first three months of this year, according to industry tracker eMarketer.
"I'm pleased with Yahoo's performance in the first quarter," Ms Mayer said in a release.
"I'm confident that the improvements we're making to our products will set up the company for long-term growth."
Google and Facebook are expected to account for 41.6 per cent and 6.5 per cent of US digital ad revenue this year, respectively, according to eMarketer.
"It's a similar story in the display advertising market," eMarketer said in a release.
While Yahoo reported a decline in display ad revenue, "overall display market spending is increasing far faster, and competitors like Google and Facebook continue to stretch their lead," according to eMarketer.