• April 17, 2001

With its quarterly profits down 87% from a year ago, Yahoo Inc. said last week that it would cut staff and marketing in the face of slowing Internet advertising sales. For the quarter ended March 31, Yahoo reported pro forma net income of $7.6 million on revenue of $180.2 million. Because of falling Internet ad spending, the numbers are far below the same quarter last year, when Yahoo reported a pro forma profit of $60.5 million on sales of $230.8 million. A month ago, company executives had warned Yahoo would break even for the quarter.

Company president Jeff Mallett said during a conference call that Yahoo will cut costs through layoffs, outsourcing, lower ad spending, and by ending slow-growing services. In the next 30 days, Yahoo will cut 12% of its 3,510 employees.

Mallett also said last week that Yahoo would pull all adult-related products from its shopping, auction, and classified pages in response to complaints that it was expanding such sales. Yahoo says the products have been available for two years, and that it merely enhanced the site recently with greater protections against purchases by minors.

Gartner analyst David Marks says the porn association could have spooked key advertisers-especially as Yahoo moves away from dot-com clients and adds more traditional businesses. Rival America Online and other major portals eschew adult entertainment. Marks says he didn't understand why Yahoo was in the business, given the potential backlash.

- Adam Bernard