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Yahoo! downbeat on revenue growth after profits crash 38%

NEW YORK - Yahoo's latest quarterly results show a 38% drop in profits to $155m (£83m) despite a 19% growth in revenues to $1.58bn (£844m), as the company warns of an advertising slowdown.

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The internet giant had already told investors last month that profits would be hit by tougher conditions in markets such as car advertising, prompting an 11% fall in its shares.

Chief executive Terry Semel came out yesterday with a downbeat assessment of the company's ad revenue prospects for the next quarter, though he talked up its product development efforts.

"I am not satisfied with our current financial performance and we intend to improve it," Semel said. "We are not exploiting our considerable strengths as well as we should be and we are committed to doing better."

He admitted that the company's display advertising revenue growth was being hurt by the inventory available on rivals such as MySpace and YouTube and would only be line with the overall market in the fourth quarter, while search advertising revenue would grow only 5%.

But Semel said search would improve early next year when he expects Yahoo's delayed upgrade of its search advertising system, known as Project Panama, to be introduced.

Semel also banged the drum for Yahoo's social media products such as photo-sharing site Flickr, which has 20m monthly users, and the Yahoo Answers fact-finding service, which has 60m monthly users.

Yahoo was last week criticised by analysts for being outmanoeuvred by Google. They compared Yahoo's slow progress in negotiations to buy social networking site Facebook, believed to be valued at $1bn, with Google's quick acquisition of video sharing site YouTube for $1.65bn.

Semel said he did not regret missing out on YouTube due to "grave concern" about its potential to be sued for copyright violations.

Today it emerged that the first lawsuit is being served on a video-sharing site with Universal Music taking action against Grouper.com and Bolt.com.

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