Yahoo!, the company widely regarded as the bellwether of internet stocks, has announed a third-quarter net loss of £16.6m.

At the same point last year, the company was making a quarterly profit of £32.9m.

Net earnings also tumbled, down 44% on the previous year to £114.5m.

Yahoo!'s chief executive, Terry Semel, blamed the downturn in the advertising market, particularly in Europe, and the US terror attacks for the latest drop in revenue.

"We remain focused on opportunities that will strengthen our leadership position, provide essential services to our users and partners and drive profitable growth," he said.

"Although there is limited visibility into the future, Yahoo! intends to manage through this period and emerge from it an even stronger leader." Despite a drop in advertising revenue - which Yahoo! relies upon for most of its income - user figures reached record levels during the last quarter.

Yahoo!, which claims to be the number one website worldwide, increased its global audience to 210m unique users, up 44m on September 2000.

The website's traffic increased to a record level, averaging 1.25bn page views a day in September.

Analysts said the results were in line with, or marginally better than, expectations and left the internet giant well placed to take advantage of the market when it recovers.