• by Laurie Sullivan , Staff Writer @lauriesullivan, April 18, 2012

Smaller businesses with fewer executive levels tend to innovate more quickly. That appears to be one strategy behind the recent layoffs at Yahoo. The company's CEO Scott Thompson said Tuesday during the company's Q1 2012 earnings call that he would shutter about 50 properties. The sites were not identified, but the focus on research and development will turn to Yahoo owned-and-operated properties.

For those who missed it, Yahoo posted growth on Tuesday for the first time since 2008, according to Piper Jaffray Analyst Gene Munster. Yahoo reported better-than-expected earnings -- reporting Q1 2012 revenue of $1.08 billion, up from $1.06 billion a year ago. Income rose 28% to $286.3 million -- or 23 cents per share -- from $223 million, or 17 cents, in the year-ago quarter.

Thompson stressed the importance of the company's data and search businesses. Search revenue rose 8% to $384 million in the quarter, helping to offset the 4% drop in display ad sales to $454 million, as a result of weaker-than-anticipated sell-through rates.

The rise in search was driven, in part, by improvement in revenue-per-search (RPS) rather than from any gains in search volume, a quest that began with Thompson's predecessor, Carol Bartz. Microsoft also helped push up RPS for the alliance.

Yahoo continues to work on its alliance with Microsoft to improve performance through adCenter, Microsoft's advertising platform. Microsoft's guarantee of filling in for shortfall helped boost revenue.

"While Microsoft has continued to enhance its algo in paid search technology, the search alliance is not yet delivering what we expected," Thompson said. "I'm personally working with Microsoft to ensure the alliance does deliver going forward and meets our high expectations for user experience, advertiser ROI and revenue for Yahoo."

Microsoft may have offset revenue, but Yahoo continues to see its share of search advertising revenue decline. Research firm eMarketer estimates the company's share of the $15.36 billion search ad market fell to 6.7% in 2011, from a 10.3% share in 2010. This year, eMarketer estimates Google will grab 77.9% of all U.S search ad revenue, but will the remainder go to the combined Microsoft and Yahoo alliance?

Thompson highlighted other quarterly achievements in a blog post. For instance, worldwide visitors to Yahoo properties and branded sites rose 7%; media properties page views, 10%; and minutes spent on communications and communities increased 14% and 8% in media properties, respectively.

A more difficult task will be his promise to turn around the ailing search engine/portal. We'll have to wait and see.