Yahoo! is coming back to life with display ads up 26%

Yahoo!, the search engine that we all thought would pack it in just one year ago, has emerged from 2009 victorious with revenues up 10%. How did it come back from the brink?

Yahoo! has reported its fifth straight quarter of falling revenue, but the world’s third most popular search engine did see profits rise as the online advertising market began to show signs of life.

Revenue from display ads such as banners, which are core to Yahoo’s business, climbed 26% over the previous quarter. Online search ads, ticked up 4% – the first increase since the third quarter of 2008.

The results were far from Google’s 17% jump in revenue and a more than 400 percent surge in profits last week. However, Yahoo!’s income is up totaling £93 million, up from a £187 million loss in 2008.

Fourth-quarter revenue was £1 billion, down 4% from a year ago, but up 10% from the previous quarter.

Carol Bartz, the ambitious CEO of Yahoo who took the reins exactly one year ago implemented a wide-ranging company restructure, said that she was now confident about the state of the online ad business.  

She said, “Overall, things seem to be returning to a more normal state in the online ad business. These results are not just the result of an improving economic climate. These are the direct result of hard work that culminated in Q4 and will continue into 2010.”

But Yahoo!’s problems predate the economic downturn and online advertising rut. The company has been bleeding traffic to Google and social networking sites such as Facebook and continues to do so.

In December, Yahoo held 17.3% of the search market in the US, down 0.2% from the previous month, according to comScore’s latest figures. Google and Microsoft’s Bing search tool both continue to gain share, controlling 65.7% and 10.7%, respectively.

Bartz has received praise in light of the latest earnings figures, with some observers hailing her $100 million branding campaign that launched last year a massive success. She has also been accredited with the successful deal to outsource Yahoo’s core search engine technology to Microsoft.

Bartz added, “The fourth quarter marked a strong finish to 2009, which was a transformative year for Yahoo!. Our business has positive momentum and we feel good as we head into 2010.”

Also over the past quarter, Yahoo! launched Ad Interest Manager, which aims to take transparency in online advertising to a new level by providing significantly greater control over users’ interactions with interest-based advertising to improve personal relevance and build trust.