Yahoo still needs to work on increasing the volume of display advertising, which declined by 10 percent from the previous year. The number of revenue-generating search ads, though, increased 11 percent from the previous year. That improvement provided proof that Yahoo is harvesting better returns from its Internet-search partnership with Microsoft Corp. The alliance has allowed Yahoo to lower its expenses by relying on Microsoft's technology for most of its search results, but the arrangement had been producing disappointing returns on the advertising front until recently.
Yahoo is still benefiting from its remaining holdings in Alibaba, as well as a roughly 35 percent in Yahoo Japan. Yahoo's fourth-quarter income from its investments increased 17 percent from the previous year to nearly $149 million. Because of a lag in how Yahoo books income from international revenue, the company's results still don't fully reflect the reduced stake in Alibaba. That will occur this year, reducing Yahoo's overseas earnings.