Yahoo profit doubles

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its second-quarter outlook. Yahoo now expects to earn between $855 million and $895 million.

Yahoo CFO Sue Decker said that average pricing in the paid search business was subject to volatility, however. Analysts downgraded both Yahoo and Google earlier this year based on fears of a slowdown in paid search. Factors affecting pricing can include seasonality in ad spending and advertisers turning to a mix of new keyword inventory, as opposed to pushing prices higher on stock keywords.

Still, Semel said the company is best positioned to capitalize on brand advertising and growth in paid search. Yahoo hopes to expand the number of advertisers using paid search, as well as get a bigger commitment from those advertisers, he said. The CEO added that there is a "major increase" in demand for rich media advertising, such as video, by marketers taking advantage of broadband households. He called this an important trend toward brand advertising on the Internet.

Semel said that the next phase of Yahoo's growth will be driven by consumers' depth of usage of its network. Roughly 372 million people used Yahoo in the first three months of 2005, and 176 million were habitual users. The company has 8.9 million "paying relationships" with those visitors, up by more than 3 million year over year, he said.

For the quarter, Yahoo reported total revenue of nearly $1.2 billion, a 55 percent rise over the same period of 2004. It reported an operating income of $345 million, up 64 percent from $211 million in the comparable period of 2004.

In answer to questions about the threat of click fraud to the company's paid search revenue, Dan Rosensweig, Yahoo's chief operating officer, said it is something the company "takes seriously." But, to date, the commercial search arm at Yahoo has managed to contain it, he said.

Decker added, "We have a number of algorithms that filter this out."

Shares of rival Google, which is expected to report earnings Thursday, were up more than 4 percent to $199.60 in after-hours trading.