My Life and Times

Yahoo Gains Users and Sales as Profit Soars
By SAUL HANSELL

Yahoo, the big Internet portal, said yesterday that its profit doubled in the first quarter, as its audience grew rapidly and advertising sales grew even faster.

Yahoo reported that 372 million people visited its network of sites in the quarter, up 36 percent from a year ago. Yahoo asserts that 13 percent of time spent online is spent on its search, e-mail and other services.

As a result, the company has been a primary beneficiary of the increased interest among advertisers in using the Internet, both for text ads on Web searches and in more elaborate graphical advertising.

Yahoo earned $205 million in the first quarter, up from $101 million a year earlier. That comes to 14 cents a share, including a penny a share from investment sales and legal settlements. Analysts had expected Yahoo to earn 11 cents a share.

Yahoo's total revenue was $1.17 billion, up 55 percent from a year ago. Analysts like to look at Yahoo's revenue after deducting the payments it makes to sites that carry its ads, like Microsoft's MSN search service. On that basis, Yahoo's revenue was $821 million, higher than the $797 million that analysts expected.

The company's international growth was especially vigorous. The company's revenue outside of the United States was $355 million, up 124 percent. Its domestic revenue was $819 million, up 37 percent.

Yahoo's advertising revenue, after deducting the payments to other sites, was $672 million, up 50 percent. While the company does not break out the sources of its advertising, Safa Rashtchy, an analyst with Piper Jaffray & Company, said he believed Yahoo benefited especially from an increase in spending by major national brands on graphical advertising.

"They are catching up with Google on search," Mr. Rashtchy said. "And they are especially strong in branded advertising."

Yahoo released its results after the close of normal trading. In after-hours trading, its shares increased by $1.64, to $34.86. In regular trading, shares rose 67 cents, to $33.22.

Yahoo's fee-based business - like enhanced e-mail service and its dating service - grew even faster than advertising, posting $149 million in revenue, up 61 percent. Yahoo has 8.9 million paying customers, 53 percent more than a year ago. It said it expected 11.5 million to 12 million paying customers by the end of the year.

Over the rest of the year, Yahoo will introduce a series of activities meant to expand its fee income, said Terry Semel, Yahoo's chief executive. It will introduce a new music service and will vastly expand the services it offers through mobile telephones, especially outside of the United States.

"For Yahoo there is a great opportunity to connect to users beyond what they do on the PC," Mr. Semel said in a telephone interview.

Yahoo's cash balance increased to $3.9 billion, up $110 million. And that does not include $751 million in other investments, largely its holdings of stock of its rival Google. The cash balance increased even though Yahoo bought $315 million of its stock and spent $54 million in cash on acquisitions.



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