• by Mark Walsh  @markfwal, July 15, 2014

The second quarter won’t stand as a high point in Marissa Mayer’s turnaround efforts at Yahoo. The company on Tuesday reported revenue, excluding traffic acquisition costs, of $1.04 billion, down 3% from $1.07 billion a year ago.

That continues the pattern of mostly flat or declining growth during Mayer’s two-year tenure as Yahoo’s chief executive.
 
The Web portal reported adjusted earnings of 37 cents a share, up 5% from a year ago.

Wall Street analysts surveyed by Thomson Reuters had expected Yahoo to earn 38 cents a share on $1.084 billion in sales. Yahoo itself had previously project second-quarter revenue in the range of $1.12 to $1.16 billion.
 
In the earnings release, Mayer acknowledged disappointment with the sales results. “Our top priority is revenue growth and by that measure, we are not satisfied with our Q2 results.  While several areas showed strength, their growth was offset by declines,” she stated.
 
Specifically, display ad revenue, minus traffic acquisition costs, fell 7% to $394 million from $423 million a year ago. That comes after a 2% gain in the first quarter that followed four straight quarters of declines. Yahoo said the number of ads sold increased about 24% from a year ago, but the price per ad fell by the same rate.
 
The company’s search business again fared better, posting a 6% gain to $428 million from $403 million a year ago. Sales were boosted by a 3% rise in paid clicks along with a 15% gain in price-per-click.
 
The Interactive Advertising Bureau last month reported that U.S. online ad spending in the first quarter increased 19% from a year ago to $11.6 billion. But Yahoo continues to face increasing competition from major Internet players like Google, Facebook and Microsoft for search and display ad dollars.
 
A new eMarketer report released today, for instance, projects Microsoft will edge past Yahoo this year in share of digital ad revenue worldwide, at 2.54%. Google will continue to dominate with nearly 32% of the estimated $140 billion market, followed by Facebook, at almost 8%.
 
"(We) saw display revenue decline, further highlighting the fact that we need to work faster to ameliorate the negative trends," said Mayer, in her statement. "I believe we can and will do better moving forward."
 
Despite steps she has taken to revitalize the Web giant, from dozens of “acqui-hires” to gain talent and technology to overhauling core Yahoo properties and launching new ad formats, sustained growth has yet to follow. She herself has stated the company’s turnaround will take several years, but investors may grow restless.
 
“Marissa Mayer has now had two years at YHOO since joining as CEO, and while the company has made great strides in messaging to investors and delineating key focus areas/strategies, as of yet there has been little progress in terms of jump-starting growth on the top line,” stated Macquarie Securities analyst Ben Schachter, in a research note.
 
The shortcomings in Yahoo’s core business have been papered over by its investment in Alibaba Group, in which it holds a 24% stake. The China-based e-commerce giant is expected to go public in August, with an estimated valuation of $130 billion.
 
Yahoo on Tuesday announced a deal with Alibaba to reduced the number of shares it’s expected to sell in the upcoming IPO from 208 million shares to 140 million shares. Analysts characterized the move as a positive step for Yahoo investors.
 
The company’s stock closed Tuesday at $35.61 a share, roughly flat with Monday .