• by Mark Walsh  @markfwal, July 19, 2011

Slowing display ad growth combined with disappointing results from its search partnership with Microsoft led to falling revenue at Yahoo during the second quarter for the third straight quarter.

Excluding payments made to partner sites, Yahoo Tuesday reported revenue of $1.07 billion, down 5% from a year ago and falling just below analysts' estimate of $1.11 billion.

Display ad sales, minus costs, increased increased 5% compared to a 10% gain in the prior quarter, while search revenue fell 15% compared to an 19% decline in the first quarter.

Second quarter net income rose 11% to $237 million, or 18 cents per diluted share, from $213 million, or 15 cents in the year-earlier period. Profit was in line with Wall Street expectations.

"For the quarter, earnings per share was up by 18% year over year. We made clear progress in search, and saw strong growth in engagement on our media properties," said Yahoo CEO Carol Bartz, in a statement. "We experienced softness in display revenue in the second half of the quarter due to comprehensive changes we have made in our sales organization to position ourselves for more rapid display growth in the future."

Yahoo said net revenue  for the third quarter of 2011 is expected to be in the range of $1,050 million to $1,100 million. The midpoint of that range missed the $1.12 billion analysts had projected.