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Google's success gives a boost to Yahoo's profits

Yahoo continued to ride the growth of online advertising in the third quarter, but more than half its profit in the quarter came from the success of its rival Google.

Yahoo reported a profit of US$253 million in the quarter, nearly three times the figure from a year earlier.

Of that, US$129 million came from its sale of Google shares during that company's initial public offering and tax breaks associated with the sale.

Excluding the gain, Yahoo earned US$124 million in the quarter, or US$0.09 a share, the amount that analysts had expected. Its shares increased US$0.74 to US$34.97, after Yahoo's results were released.

Revenue, after deducting payments to companies that run Web sites on which Yahoo sells ads, was US$655 million, up 84 percent, and US$11 million more than analysts had forecast. But much of the increase was a result of acquisitions in the last year. Excluding the new companies, revenue increased 34 percent.

Advertising, Yahoo's largest and fastest-growing business segment, had a 212 percent increase in revenue from a year ago. Revenue from listings, mainly job postings, increased 15 percent. And fee revenue, largely fees related to Internet access, rose 31 percent.

Some investors had worried that the market for Internet advertising, especially related to Web search results, had peaked. Though the summer months are a slow period, Yahoo found that both the volume and the prices of advertisements had increased in the quarter.

"I don't think anything has peaked," said Terry Semel, Yahoo's chief executive, on Tuesday.

"There are so many more people using search, more clicks on search and more ways to use search," he said.

Yahoo, for example, has just introduced a specialized service to help users find local businesses and in turn makes a profit from the large market for yellow-pages-style advertising.

Google is also creating a local search service and other search variants. And investors are awaiting its first quarterly report as a public company on Oct. 21. Google is expected to post revenue growth of 80 percent, far faster than Yahoo, after adjusting for Yahoo's acquisitions.

In a call with investors, Semel highlighted areas in which Yahoo's service is much broader than that of Google, although he did not mention the rival by name.

"The future of Yahoo and the Internet is the powerful combination of search, community, personalization and content," he said. "Because Yahoo is now a leader in all four of these, we believe we are best positioned for the next phase of the Internet."
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