Yahoo’s Marissa Mayer Is Disappointed In Ad Revenue

But she's happier with holding onto bigger Alibaba stake

CEO Marissa Mayer is not happy with ad revenue at Yahoo, as the display advertising business shrank last quarter. But there was also good news: the company is hanging on to a little more of China's Alibaba Group, which has become a cash cow for Yahoo.

The company released its quarterly report today and the core ad business is still struggling after two years under Mayer as CEO. "Our top priority is revenue growth and by that measure, we are not satisfied," Mayer said in today's announcement.

While advertising was down, the Alibaba angle helped lessen the sting. Yahoo owns about 20 percent of Alibaba Group, the e-commerce giant that is going public soon. Yahoo was set to sell almost half its stake in the upcoming public offering, but today said it plans to sell much less.

"We have entered into an amendment to the share repurchase agreement with Alibaba, reducing the number of shares that Yahoo is required to sell at the IPO from 208 million shares to 140 million shares," said Yahoo CFO Ken Goldman.

Yahoo wanted to limit the amount of Alibaba shares it would sell because it hopes to see the value rise after the company goes public.

Shareholders, who may have been wary of the ad slip, have been told that the company will give at least half the cash from the Alibaba stock sale to them.

As for the advertising, Yahoo reported that display sales dropped 8 percent year over year to $436 million last quarter. The number of ads sold rose 24 percent year over year, but the price per ad was down 24 percent.

Search revenue, for which the company has a deal with Microsoft, rose 2 percent to $428 million.