• by Paul Gough , January 15, 2004

Largely on the basis of increased demand for its marketing services, Internet portal Yahoo! finished 2003 with a flourish, posting its strongest quarter on record with $663.9 million in revenues during the fourth quarter, according to financial estimates released late Wednesday by the company.

The Internet portal reported $1.62 billion in revenues in 2003, up 71 percent from 2002 and with the fourth quarter capping three consecutive quarters of record growth. Revenue from marketing services - by far its largest category of revenue - grew 178 percent to $545 million in the fourth quarter and rose 84 percent to $1.19 billion for the full year compared to the same periods in 2002. Yahoo! credited strong performance in particular to search and marketplace properties plus an incremental increase following Yahoo!'s acquisition of Overture in the fourth quarter 2003.

Chairman and CEO Terry Semel Wednesday evening said Yahoo! benefited from its client lists, which not only include high-flying blue-chip advertisers but a wide range of small- and medium-size businesses. Semel said organic growth - not including acquisitions like Overture - accelerated through each quarter of the year, reaching 40 percent for the full year. He said it was not only brand advertising but also results from sponsored search.

Yahoo! retained nearly all of its top 200 customers between 2002 and 2003 and had double-digit increase in year-over-year revenues among its top 200. Semel said Yahoo!'s inventory value increased thanks to more disciplined selling and pricing management, along with what he said was the increasing importance that marketers are placing on advertising on the site. Pay-for-performance migrated into more contextual advertising beyond sponsored search, he said.

Revenue from listings grew 21 percent to $33.2 million in the fourth quarter and 36 percent to $127 million for the full year, benefiting from a pickup in pace in search and marketplace categories and especially a full-year of results from HotJobs, which Yahoo! acquired in February 2002. HotJobs is the largest piece of that category, said Chief Financial Officer Susan Decker.