Revenues dropped to $1.6bn (£980m) in the three months to 30 June, from $1.8bn (£1.1bn) in the same period last year with the company citing the “the challenging economic environment”.
Advertising revenue from owned and operated sites slipped 16% to $858m (£525m), hit by a 15% decline in search advertising and a 14% drop in display revenues, while affiliate revenue declined 9% to $520m (£318m).
The decline in revenues helped push operating income down 25% to $101m (£62m).
Carol Bartz, chief executive officer, says it is “confident” the company will achieve growth and profitability long term.
“Our new homepage is a perfect example of our efforts to create innovative products aimed at increasing user engagement while offering the most compelling advertising proposition in the industry,” she says.
Yahoo! is to launch its overhauled home page in the UK later this week, with an emphasis on the ability to add third-party sites.
Its strategy to open up its homepage to popular websites is being dubbed as both “bold” and “massively significant” by observers, if it can convince consumers and advertisers that it is the new “content hub”.
In the most significant change it has made to its homepage since 2006, Yahoo! will allow users to access content from across the web on sites such as eBay, Facebook and Twitter, under a customised My Favourites section.
When the user hovers their mouse over the application it will pop up and allow them into that site. Significantly for advertisers, new ad inventory will be available for them to buy within that application.
Damian Mitchell, Glue head of development says the effect will be that a lot of people will stay on the Yahoo! homepage longer and for an advertiser, this “is a dream”.
“It’s massively significant and is quite a bold step to allow users to configure and install apps on their homepage,” he says.
Vizeum MD Grant Millar, adds that the industry is experiencing another stage in the on going “arms race” between the major online platforms to become the definitive aggregation point for all web services and content.
“Google via iGoogle is already an established player in this field. Yahoo! will be hoping to bring all of their current users with them and win more along the way,” he says.
The development comes as AOL chief executive, Tim Armstrong, also announced plans to overhaul its strategy in a bid to claw back market share from rivals Google, Microsoft and Yahoo!
He is expected to reveal a move to grow editorial and video content, while reducing the volume of ads served per page.
Meanwhile, speculation persists that Yahoo! is set to sign a search advertising deal with Microsoft.