Yahoo Struggles in Display Ad Market

Michael Nelson/European Pressphoto AgencyYahoo’s share of the display advertising market is expected to fall to 7.7 percent this year, while Google and Facebook’s respective market share is expected to grow to more than double that, according to eMarketer.

SAN FRANCISCO — The honeymoon is over.

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Marissa Mayer, Yahoo's chief, with David Karp, the founder of Tumblr. Since Ms. Mayer took the helm of Yahoo, the company has been on a shopping spree, acquiring start-ups like Tumblr, Summly, Stampled and Xobni.

Yahoo unveiled a new logo last month.

More than a year after Marissa Mayer took the top job at Yahoo, the company is still struggling to compete with Facebook and Google in the $17.5 billion United States display ad market, and to lure advertisers back to its service.

In its third-quarter earnings report, released on Tuesday, Yahoo’s display advertising business, which accounts for roughly 40 percent of the company’s sales, fell 7 percent, to $470 million, compared with the same quarter a year ago. The company said revenue fell 5 percent to $1.14 billion from the year-ago quarter.

Yahoo’s share of the display advertising market is expected to fall to 7.7 percent this year, from 8.6 percent share last year, while Google’s share of the market is expected to grow to 17.4 percent and Facebook’s to 17 percent, according to eMarketer.

Yahoo nonetheless remains one of the most visited sites on the Web. “With more than 800 million monthly users on Yahoo — up 20 percent over the past 15 months — we’ve achieved meaningful increases in user engagement and traffic,” Ms. Mayer said in a statement.

And since she took the helm of the company last year, Yahoo has been on a shopping spree, acquiring start-ups like Tumblr, Summly, Stamped and Xobni, in a play for the talent and products that may help persuade users, and therefore advertisers, to linger on the site.

Yahoo also reported a 39 percent slide in net income in the quarter to $93 million, or 28 cents a share, from the year-ago quarter, much of that a result of a $25 million restructuring charge.

The net income was below the expectations of Wall Street analysts, who forecast an average 33 cents a share. Yahoo’s revenue, however, exceeded expectations of $1.08 billion, according to Thomson Reuters.

Yahoo’s search business, which is still operated by Microsoft through a partnership, fell last quarter. Revenue from search, after payments to Microsoft and others, fell 8 percent, to $435 million.

The company’s search revenue is expected to continue to decline even as the overall search ad market grows. Advertisers are expected to spend $19.6 billion on search this year, up 13.2 percent from 2012, though Yahoo’s share of that market is expected to slip to 6.2 percent of the market from 6.6 percent last year; Google’s share is expected to remain constant at 72.9 percent, according to eMarketer.