Yahoo’s Internet advertising revenue crumbled further during the first three months of the year, renewing doubts about the company’s turnaround efforts despite a surge in earnings.

The results released yesterday seemed to dim some of the aura surrounding Yahoo CEO Marissa Mayer, who was lured away from a top job at Google Inc. nine months ago to revive revenue growth at a company that has been mired in a malaise for years.

Mayer, though, assured analysts that her plans are falling into place. She characterised her strategy as a “series of sprints” that will eventually produce a “chain reaction” of more appealing online services, more engaged users and, eventually, more advertising sales.

She cautioned it will be several more years before Yahoo grows anywhere near the rate as other major Internet players such as Google and Facebook.

“We are on course to do what we said we would do: stabilise and grow with the market,” Mayer said during a conference call yesterday.

There have been signs of encouragement since Mayer’s arrival, most notably the first increase in Yahoo’s annual revenue since 2008. Although the 2012 gain was just 2 per cent, it raised hopes that growth would accelerate this year.

Instead, Yahoo’s total revenue shrank by 7 per cent in the latest quarter from the same time last year.

The weak spot was in one of Yahoo’s former strengths, display advertising. After subtracting the commissions that Yahoo pays its partners, the company’s display advertising revenue fell by 11 per cent from last year to $402 million.

That development suggests that Yahoo is losing more ground in a key area of Internet advertising to Google Inc., which already dominates search advertising, and Facebook Inc., whose online social network is becoming a more powerful marketing magnet.

Yahoo’s revenue from ads appearing alongside search results rose 6 per cent from last year, excluding commissions.

But that wasn’t enough to prevent a 3 per cent decline in Yahoo’s total ad revenue, minus commissions.

On the plus side, Yahoo’s first-quarter earnings climbed 36 per cent to top analyst estimates. But much of the higher profit flowed from investments such as Yahoo’s 24 per cent stake in Alibaba Group, a rapidly growing Internet company in China.

Yahoo’s earnings from its investments totalled nearly $216 million in the first quarter, outstripping its operating income of $186 million.

“They are making more money (as) an investment house,” BGC Financial analyst Colin Gillis said.

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