NEW YORK (CNN/Money) -
Yahoo! reported stronger fourth-quarter earnings on Wednesday, matching analysts' forecasts, with better-than-expected quarterly revenue and an optimistic outlook for the online advertising market in 2004.
The Internet media company reported net income of $75 million, or 11 cents a share, compared with $46.2 million, or 8 cents, a year earlier. Analysts were expecting 11 cents a share, according to earnings tracker First Call.
Excluding traffic acquisition costs (TAC), Yahoo! revenue totaled $511.3 million, a 79-percent improvement over $285.8 million a year earlier. Analysts, on average, expected revenue excluding TAC of $495.5 million.
Including TAC, revenue totaled $663.9 million. TAC refers to money that Internet search provider Overture Services Inc. -- which Yahoo! purchased in October -- shares with its affiliates. Yahoo! said it excluded TAC in its latest earnings report to help investors compare the quarter's results with those of earlier periods.
In its outlook for 2004, Yahoo! said it expected to generate revenue excluding TAC of between $2.12 billion and $2.25 billion. Analysts, on average, expected revenue of $2.17 billion, according to First Call.
In a conference call with reporters, Yahoo! CEO Terry Semel said he expected advertising revenue growth of 25 percent to 30 percent in 2004, noting that the forecast was stronger than the growth of 20 percent expected by "many forecasters" in the online advertising market.
Semel also said he expected Yahoo! to keep most of its largest 200 advertisers, many of whom are increasing their online presence, another sign of growing improvement in the online ad market.
"We have seen this as a trend, certainly over the past year -- many of our larger customers came in putting one toe in water, then they put two feet in, and now maybe they're heading in towards their knees."
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Nevertheless, shares of Yahoo! fell $1.79 to $46.60 in after-hours trading on the Island system, as some traders hoped Yahoo! would actually beat estimates.
"The stock might come under pressure because the 'whisper number' for earnings per share was higher," said Fulcrum Global Partners analyst Imran Khan. "But I'm still bullish on the stock. The business momentum is there."
Yahoo! shares fell 41 cents on Wednesday to close at $48.39. The stock surged 175 percent in 2003, and on Tuesday the stock briefly crossed the $50 barrier for the first time since November 2000. Shares are trading at about 90 times 2004 earnings estimates.
In the fourth quarter, revenue from Yahoo!'s advertising business, which it calls marketing services, surged to $545.5 million, a 178-percent jump from $196.4 million a year ago. Those results include TAC, and the company didn't provide any numbers excluding TAC.
Fee-based business, which includes items like premium e-mail, personals and a DSL partnership with Baby Bell SBC, increased 37 percent to $85.2 million from $62 million a year ago.
In the conference call, Semel said the company had about 5 million customers using such services at the end of the year, compared with 2.2 million a year ago. Semel said his goal of reaching 10 million fee-paying customers was "very achievable in the near-term future."
Revenue from Yahoo's listing business, made up mainly of resume and career search site HotJobs, increased 21 percent to $33.2 million from $27.4 million a year ago.
For the full year 2003, revenue excluding TAC rose 55 percent to $1,472.5 million from $953.1 million a year ago. In 2003, the company earned $237.9 million, or 37 cents a share, matching Wall Street estimates.
The company did not discuss its relationship with Google, the No. 1 Internet search service. Earlier this month, the Wall Street Journal reported that Yahoo! planned to drop Google as its search engine and use its own technology. In the conference call, Semel did note the company's efforts to build its own search capabilities.
Imran Khan owns no shares of Yahoo!, and Fulcrum has no banking relationship with Yahoo!.
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