Yahoo suffers 28 per cent drop in net income

Revenues fell 24 per cent according to GAAP (generally accepted accounting principles), which are net of traffic acquisition costs.

Yahoo's revenue, excluding traffic acquisition costs, was down 6 per cent to US$1.1 billion. Operating income rose 1 per cent to US$190 million.

Revenue for markets where the search agreement has been effected – the US and Canada – is now reported on a net (after traffic acquisition costs) basis, rather than a gross basis.

Under the agreement, Microsoft retains a revenue share of 12 per cent of the net search revenue generated on Yahoo properties and affiliated sites.

For markets that have not yet transitioned to the agreement, Yahoo reports revenue on a gross basis, with traffic acquisition costs included in the cost of revenue.

Carol Bartz, CEO of Yahoo, said, "We are solidly executing toward our plan for returning Yahoo to sustainable revenue and profit growth.

"During the quarter, we beat the midpoint of revenue guidance while continuing to deliver on the bottom line. We continued to extend our lead as the world’s premier digital media company, with users to Yahoo-branded properties increasing 15 per cent year-over-year, and minutes spent increasing 17 per cent."

The company expects its second-quarter revenue, excluding traffic acquisition costs, to be in the range of US$1.075 billion to US$1.125 billion, with Microsoft taking an approximate US$35 million share of revenue