Updated from Jan. 18

Yahoo! ( YHOO) posted a strong fourth quarter Tuesday, citing strong gains in its core online advertising market.

The Internet media giant offered first-quarter and full-year 2005 guidance that was generally more bullish than Wall Street had been expecting.

Early Wednesday, Yahoo! rose 35 cents to $37.53. Shares in Google, meanwhile, fell $1.89 to $202.01, after closing Tuesday at a 52-week high. The previous all-time high for Google, which went public in August at $85, had been $203.64.

For the fourth quarter ended Dec. 31, Sunnyvale, Calif.-based Yahoo! earned $373 million, or 25 cents a share. That's up from the year-ago $75 million, or a nickel a share. Excluding a gain on the sale of an investment -- a stake in rival Google ( GOOG), to boot -- Yahoo! earned $187 million, or 13 cents a share, 2 cents ahead of the Wall Street analyst consensus estimate.

Revenue jumped 54% from a year ago to $785 million. Those numbers, one should note, are net revenue numbers that exclude traffic acquisition costs for Yahoo!'s Overture Services unit -- that is, the money that Overture collects from advertisers but pays to third-party Internet publishers for the privilege of running Overture's ads on their sites.

"Yahoo! has obviously had a phenomenal year," CEO Terry Semel said on a conference call with analysts.

Operating income before depreciation and amortization for the fourth quarter of 2004 was $327 million, well above the $308 million target.

Marketing services, Yahoo!'s largest revenue segment, grew 57% from one year ago to $618 million for the quarter. Fees revenue, driven by growth in premium services, grew 52% to $121 million.

Excluding the impact of acquisitions, fourth quarter marketing services revenue grew 45% year-over-year. That expansion reflected growth in both paid search advertising and traditional online branded advertising; Semel declared as fact that Yahoo! was growing faster than the online ad industry in general and thus gaining share.

International markets were another source of growth. Excluding traffic acquisition costs, international revenue grew 126% from the fourth quarter of 2003 to $184 million. Domestic revenue, excluding traffic acquisition costs, grew 40% to $601 million.

Ignoring acquisitions and changes in exchange rates, international revenue, ex-TAC, grew 66%, the company said.

"Yahoo!'s strong fourth quarter performance completes our third consecutive year of delivering strong organic revenue growth, expanding operating margins, and generating substantial free cash flow," said finance chief Susan Decker. "We are attracting more and more users to Yahoo!'s network of services and driving their usage deeper with more relevant products and services. This deeper usage is the real magic behind the surpassing of our financial objectives."

Looking ahead, Yahoo! provided guidance that was generally more positive than analysts' current expectations.

For 2005, Yahoo! forecasts that revenue excluding traffic acquisition costs will be in the range of $3.37 billion to $3.57 billion. Analysts surveyed by Thomson First Call had been forecasting revenue of $3.39 billion.

Oibda for the year, says Yahoo!, will fall in the range of $1.39 billion to $1.49 billion, compared to the consensus expectation of $1.39 billion.

For the first quarter of 2005, Yahoo! predicts revenue ex-TAC in the range of $765 million to $805 million, more optimistic than the $773 million analysts' mean.

But Yahoo! isn't quite so optimistic on the oibda front. The company predicts first-quarter oibda in the range of $290 million to $310 million. Analysts have been forecasting $321 million. Decker indicated that first quarter operating cash flow margins would be affected by factors including the seasonal impact of payroll taxes and an undisclosed marketing services project.

The phenomenal rise in Google's stock has benefited Yahoo!, since Yahoo! is a Google shareholder. In the fourth quarter, Yahoo! sold part of its Google holdings at an average price of $186 per share, netting $303 million.