The bad news? Revenue before traffic acquisition costs fell by 2% to $1.13 billion, short of the $1.17 billion that analysts were expecting. The top line was weighed down by an 11% slide in fee revenue and a surprising 14% dip in search advertising.
The good news? Earnings nearly doubled to $0.15 a share, after backing out the positive one-time items related to Microsoft's
Perhaps the most positive development at Yahoo! is that its display-advertising business rose by 20% during the period, and up a sharp 24% in guaranteed display.
This is huge news. Yahoo! has been shedding some of its fee-generating assets, including the pending sale of HotJobs to Monster Worldwide
In other words, display advertising is going to be the name of the game at Yahoo! in the future, and momentum is clearly working in its favor there. It also has $1.3 billion in cash and another $1.9 billion in short-term securities in case it needs to beef up its organic growth on that front.
Google and Baidu are no doubt singing the praises of paid search, given the companies' impressive margins, but let's not dismiss the potential of graphical ads slapped on content pages as the advertising market bounces back.
Yahoo! and AOL
Is Yahoo! finally back? Share your thoughts in the comments box below.
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Longtime Fool contributor Rick Munarriz owns no shares in any of the stocks in this story and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.