The reason why Chief Executive Officer Marissa Mayer's fired Chief Operating Officer Henrique de Castro last month have become abundantly clear in its fourth quarter results.
Yesterday she had to announce that Yahoo's overall revenue fell six percent in the last three months of the year to $1.266 billion, marking four consecutive quarters of eroding revenue. The company said that prices for both online display ads and search ads declined in the fourth quarter.
Yahoo online ad prices slid again in the fourth quarter and Alibaba, the Chinese e-commerce giant in which it owns a big stake, saw revenue growth decelerate.
Yahoo's shares were down 3.7 percent at $36.82. What is bad for Yahoo is that the figures should have been for its best quarter which means that its core business is shrinking.
Mayer has been aggressively to trying to improve the company with product makeovers, acquisitions and big media hires. But the ad sales business continues to struggle at a time when rivals such as Google, Facebook and Twitter are posting strong revenue growth.
To be fair, Yahoo's stock has more than doubled since Mayer, a former Google executive, took the helm in July 2012. However, analysts say much of the gain is due to aggressive stock buybacks and the expected IPO of Alibaba, in which Yahoo owns a 24 percent stake.
Yahoo bought back $3.3 billion worth of its stock in 2013, the company said.
The Chinese company's revenue increased 51 percent year-over-year to $1.776 billion. While still robust, that growth rate was slower than the 61 percent clip that Alibaba delivered in the second quarter and the 71 percent growth rate in its first quarter.
Yahoo said that net revenue, which excludes fees paid to third-party websites, would range between $1.06 billion and $1.1 billion in the first quarter.
In the fourth quarter, Yahoo's revenue from display ads was down 6 percent year-over-year, while the price per ad, excluding Korea, fell seven percent.
Yahoo's fourth-quarter net income of $348.2 million rose from the $272.3 million earned in the year-ago period