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Originally published January 28, 2013 at 5:05 PM | Page modified January 28, 2013 at 5:05 PM

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Higher ad prices fuel Yahoo results

The Internet company took advantage of higher ad prices and rising earnings from its international investments to deliver numbers that exceeded analyst forecasts.

The Associated Press

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SAN FRANCISCO — Yahoo got a little healthier during the last three months of 2012 as the long-suffering Internet company took advantage of higher ad prices and more money coming in from overseas investments to deliver numbers that exceeded analyst forecasts.

The results announced Monday covered Yahoo’s first full quarter under CEO Marissa Mayer, who was lured from Google last summer to help snap the company out of a funk that had depressed its revenue and stock price.

Yahoo still isn’t keeping pace with the overall growth of the Internet ad market, but it fared well enough during the fourth quarter to produce its first full-year gain in revenue since 2008. It was a scant increase: just $2.4 million higher than 2011’s total of nearly $5 billion.

Mayer, 37, has raised hopes with her Google pedigree and her pledge to transform Yahoo’s website into a mesmerizing destination that attracts Web surfers and advertisers. During her first six months, she has primarily focused on boosting employee morale and building better mobile and social-networking services so that Yahoo can make more money from two of technology’s hottest trends.

“The future of Yahoo will be about innovation, execution and continued progress on a multiyear march toward growth, delighting users and driving shareholder value,” Mayer told analysts in a Monday conference call.

Investors seem convinced she is headed in the right direction. Yahoo’s stock added 50 cents, or nearly 2.5 percent, to $20.81 in extended trading. The shares are up by more than 30 percent since Mayer joined the company.

Yahoo has been feeding the rally by using part of a $7.6 billion windfall it received from selling half its stake in Chinese Internet company Alibaba Group. The company spent $1.5 billion buying back nearly 80 million of its shares.

Mayer said internal surveys show 95 percent of Yahoo’s 11,500 employees are optimistic about the company’s future. She also touted the potential of a recent redesign of Yahoo’s email, saying the number of daily users has increased by 10 percent since the changes last month.

Yet Mayer’s efforts haven’t made a huge difference in Yahoo’s ad sales, the company’s main way to make money.

For instance, during the final three months of last year, Yahoo’s ad revenue was $1.07 billion, about the same as a year earlier. By contrast, fourth-quarter ad revenue at Google surged by 19 percent from the previous year.

Facebook is expected to post much stronger ad growth Wednesday when it releases its fourth-quarter report.

Overall, Yahoo’s fourth-quarter earnings dipped 8 percent to $272 million, or 23 cents per share, down from $296 million, or 24 cents per share. The earnings would have been higher than the previous year, if not for a charge to close its South Korea operations and other one-time accounting items.

If not for those charges, Yahoo said it would have earned 32 cents per share. On that basis, Yahoo topped the average estimate of 27 cents per share among analysts surveyed by FactSet.

Yahoo’s fourth-quarter revenue increased 2 percent from the previous year to $1.35 billion.

After subtracting advertising commissions, Yahoo’s fourth-quarter revenue stood at $1.22 billion — about $10 million above analyst forecasts.

Yahoo apparently isn’t expecting a big upturn this year. The company predicted its revenue, minus commissions, will range from $1.07 billion to $1.1 billion in the current quarter. That’s slightly below analysts’ average estimate of $1.12 billion.

In an encouraging sign, Yahoo’s average price for display advertising on its website during the fourth quarter rose 7 percent from the previous year. Meanwhile, the average price for Yahoo’s search ads increased by 1 percent from the previous year.

Yahoo still needs to work on increasing the volume of display advertising, which declined by 10 percent from the previous year. The number of revenue-generating search ads, though, increased 11 percent from the previous year. That improvement provided proof that Yahoo is finally harvesting better returns from its Internet-search partnership with Microsoft.

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