Yahoo Search Ad Revenue Falls By Nearly Half in Q1

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Yahoo’s search advertising revenue has fallen precipitously, according to 1st quarter earnings announced by the company Tuesday.

Although Yahoo posted quarterly earnings that actually exceed Wall Street targets, search advertising revenue is down a dramatic 46% year-over-year to $455 million in the first quarter of 2011.

All told, however, Yahoo reports $223 million in net income (17 cents a share), in the three months ended March 31.

Although Yahoo, the top provider of online display ads in the United States, is facing its fair share of tough competition from social media giants – including search leader Google – Yahoo Chief Executive Carol Bartz says the number of users and time spent on Yahoo sites has spiked during the last twelve months.

Still, Yahoo is coming close to besting its rivals. Google, by comparison, posted a 27% revenue jump and a 17% profit increase last week, despite not topping Wall Street estimates for 1st quarter earnings.

Bartz, however, remained “upbeat” on the earnings call, reports The Wall Street Journal, and illustrated her understanding of the challenges that face the online brand in the future.

“We have a lot of proof points this quarter that highlight very tangible progress,” Bartz says.

Yahoo projects revenue of $1.23 billion to $1.29 billion for its fiscal second quarter of 2011.