Yahoo ekes out Q3 revenue gain, ad business continues to struggle

Display advertising revenue declines 5% in the third quarter

Yahoo Inc reported a modest increase in revenue during the third quarter, exceeding lackluster Wall Street targets, as the Internet company's online display advertising business continued to struggle.

Shares of Yahoo rose 1.1% to $40.61 in extended trading on Tuesday.

"This is a continuation of what we've seen for most of the last two years," said Pivotal Research Group analyst Brian Wieser, citing the ongoing weakness in the display advertising business.

Yahoo's revenue, excluding fees shared with partner websites, was $1.094 billion in the three months ended Sept. 30, a 1% increase from $1.081 billion in the year ago period.

Analysts polled by Thomson Reuters I/B/E/S were looking for adjusted revenue of $1.045 billion.

For the first time Yahoo disclosed its mobile revenue, which it said was more than $200 million in the third quarter. Yahoo said it expects that gross mobile revenues for the full year will exceed $1.2 billion.

Yahoo's revenue growth has stalled in recent years as its once-hot Web portal and email service have lagged rivals such as Google Inc and Facebook Inc. Chief Executive Marissa Mayer has revamped many of Yahoo's products and acquired a string of companies during the past two years, but she has been unable to revive the company's revenue growth.

Yahoo said that it's display advertising revenue, which accounts for roughly 40% of Yahoo's total revenue, declined 5% in the third quarter. Revenue from Yahoo's search business rose 4% year-on-year to $452 million.