Updated from Oct. 12

Yahoo!

(YHOO)

shares perked up Wednesday after the company matched third-quarter earnings targets Tuesday on strong sales of online ads. The company also nudged fourth-quarter guidance higher.

In premarket trading, the stock was up $1.12, or 3.3%, from its Tuesday close at $35.35.

For its third quarter ended Sept. 30, the big Internet company earned $253 million, or 17 cents a share, on net revenue of $655 million. Net revenue excludes traffic acquisition costs, or the money that Yahoo!'s Overture services pays to other Web publishers for the privilege of running advertising on their sites.

Excluding a one-time gain in the latest quarter, earnings were $124 million, or 9 cents a share. That's in line with the Wall Street analyst consensus estimate, which called for earnings of 9 cents a share on net revenue of $644 million. A year ago, the Sunnyvale, Calif., Net media giant earned a nickel a share on sales of $357 million.

Earnings before interest, taxes, depreciation and amortization hit $260 million in the latest quarter, ahead of the $253 million Thomson First Call analyst consensus estimate.

"Yahoo! has continued its run of exceptional growth," CEO Terry Semel told analysts on a conference call with analysts.

Net advertising revenue, again exclusive of traffic acquisition costs, amounted to $513.8 million for the quarter. That's up 10% sequentially from the second quarter, which in turn was up 9.2% from the first quarter. The trend indicates continuing solid growth in online advertising, the closely watched core of Yahoo!'s business.

Financial chief Sue Decker indicated that search advertising (via Yahoo!'s Overture Services unit) and traditional branded advertising suffered seasonal weakness -- branded advertising more so than search. The company indicated it did a higher volume in search than previously anticipated, and greater than year-ago levels. Both revenue per search and search volumes increased from the second quarter, the company indicated.

Traffic acquisition costs grew 13% from the second quarter, reflecting a larger network of sites running Yahoo!'s pay-per-click advertising, the company indicated, rather than a greater percentage of revenue paid to other publishers.

The number of users who pay Yahoo! for various services, including co-marketed Internet access and content packages, will likely end the year between 8.2 million and 8.3 million, the company says, ahead of the prior forecast range of 7.5 million to 8 million. The new number includes 200,000 subscribers to be added from the MusicMatch music service, of which Yahoo! expects to complete its acquisition around the middle of the fourth quarter.

Paid subscriptions got a boost this quarter from the launch of an access/content deal with Canadian cable operator

Rogers

(RG)

and fantasy sports leagues.

The organic growth rate in advertising -- excluding the effect of companies Yahoo! has bought over the past year -- amounted to 38% year over year in the third quarter, Yahoo! said. The company's overall net revenue, including fees and listings revenue, grew 34% on an organic basis.

Looking ahead to the fourth quarter, Yahoo! provided forecasts straddling analysts' expectations. The company says fourth-quarter net revenue will be in the range of $710 million to $760 million, compared to the First Call consensus of $730 million. EBITDA, says Yahoo!, will come in the range of $285 million to $315 million, compared to the consensus of $297 million.

Bumping up full-year forecasts, Yahoo! is estimating net revenue will fall in the range of $2.515 billion to $2.565 billion. That's somewhat more optimistic than the First Call consensus of $2.53 billion. EBITDA, says Yahoo!, will come in in the range of $980 million to $1.01 billion, on the high side of the analysts' forecast of $985 million. The revised figures, Yahoo! said, reflect its impending acquisition of the MusicMatch music service.

Ahead of the announcement, Yahoo!'s shares rose 21 cents Tuesday to close at $34.23.

Yahoo!'s shares have risen more than 35% since early August, approaching the 52-week high they hit right before second-quarter results helped knock the wind out of the stock.

The news comes as investors continue to seek out signs that the company hasn't run out of growth prospects. Over the past few weeks, Yahoo! has been dropping hints that it has such prospects.

On Monday, Yahoo! is rolling out its latest variation on pay-per-click search-engine advertising: job listings at the Yahoo! HotJobs employment site. That introduction follows Yahoo!'s official rollout,earlier this month, of Yahoo! Local, a search service designed to tap into the $15-billion-or-so off-line yellow pages market.

Yahoo!'s move demonstrates the dynamic nature of search advertising, the fastest-growing portion of the fast-growing online advertising business. It's an area in which Yahoo! goes head-to-head with the newly public

Google

(GOOG) - Get Report

and awaits further moves by

Microsoft

(MSFT) - Get Report

, which is spending heavily to build up its own search business.