Dotcom failures hit record-setting Yahoo

Yahoo announced record third-quarter results yesterday, beating analyst estimates, but the company still saw its share price dip amid fears that a chunk of its advertisers were running out of cash.

On the face of it the portal announced impressive results, with operating profit up from $20m to $67m and revenue increasing by 89 per cent from $155m to $296m. The net results were significantly boosted by investment income, which jumped from $10m to $28m.

However, the number of advertisers booking space on Yahoo's sites fell from 3675 to 3450, although advertising revenue still increased. Internet companies, whose advertisement spending helped fuel Yahoo's early growth, are running short of cash, investors and analysts have warned.

Yahoo said the fall in numbers was due to recent difficulties among dotcom businesses, and that it had been prudent in not taking advertising from companies it considered to be financially weak.

In addition, the portal warned that it would have to spend more on marketing and product development in the future - between 33 per cent and 37 per cent of revenues compared with the current range of 33 per cent to 34 per cent.

The group's share price fell by 2.2 per cent in New York on the day to $83.87, and 10 per cent in Germany to 88 euros.

Traffic on the network increased by 100 million page views quarter-on-quarter to 780 million, and reached 41 million page views per day in Europe.

Meanwhile, Yahoo has added access to emails and web content over the phone for US users, but there are no immediate plans to implement the service globally.

The portal has signed deals with technology providers Speechworks International for web content, and Net2Phone for email, to run the service. Users require a touch-tone phone and have to listen to "a few seconds of advertising" first.

Some analysts welcomed the service. Robert Fagin, of Bear Stearns, said: "It will make the customer base more sticky and loyal."