Total revenue for the three months ending June 30 declined 23 percent year on year to US$1.22 billion, Yahoo announced Tuesday. Subtracting the advertising commissions and fees it pays to partners, net revenue came in at $1.07 billion, down 5 percent from 2010's second quarter and below the $1.11 billion consensus estimate from analysts polled by Thomson Reuters.

Yahoo blamed the revenue shortfall on a variety of factors, including its search-advertising sharing agreement with Microsoft, which isn't yielding the results it expected; its divestiture of HotJobs; broadband deferred revenue amortization; and certain fee rate reductions.

Perhaps of more concern is the company's acknowledgement that its display ad business didn't perform as well as expected.

Yahoo has been a leader in display advertising since the late 1990s, but lately has faced tough competition from Facebook and Google, both of which are making strong runs in the market.

Display ad revenue, minus partner fees and commissions, grew only 5 percent year on year to $467 million. Search ad revenue was down 15 percent to $371 million.