Yahoo Inc. is merging the two main parts of its U.S. advertising business after veteran sales executive Wenda Harris Millard resigned, the latest in a string of executive departures.

The restructuring of top U.S. sales management follows the company's warning last week that a nearly year-long slowdown in its display ad business -- the online banner ads and other methods -- would lead to weaker second-quarter results.

Bank of America analyst Brian Pitz said Millard's departure could have a negative impact on Yahoo's display/branded advertising business.

She has been critical to Yahoo's efforts to move offline advertising dollars online, said Pitz, who advises investors buy Yahoo shares, in a note to his clients.

Millard is becoming the president of the media business of lifestyle media company Martha Stewart Living Omnimedia Inc's, effective July 16.

The consolidation of Yahoo's two advertising arms -- display and Web search advertising -- reflects growing demand by customers for campaigns that combine both types of ads, with newer types of video advertisements, said recently elevated Yahoo President Susan Decker in a phone interview.

David Karnstedt, currently senior vice president of Yahoo's Search sales business, will lead the unified organization as Head of North American Sales. He will continue to report to Gregory Coleman, executive vice president of global sales.

Yahoo is reacting to the shift by consumers to social networking sites where users feature share writing, photos and video rather than spending as much time on Yahoo's own media properties, Decker said.

The restructuring of its advertising sales team follows six months of moves to consolidate Yahoo's display and search businesses and comes a week after Chairman and Chief Executive Terry Semel was replaced as CEO by co-founder Jerry Yang. Semel will remain nonexecutive chairman of the board.

Since the reorganization of the company in December, there has been a steady stream of executive departures, including Farzad Nazem, head of Yahoo's technology operations, in May.

Considered one of Madison Avenue's most influential executives, Millard is charged with beefing up Martha Stewart's Web operations as well as running publishing and broadcasting activities.

In a phone interview, Millard said Yahoo had offered to make her head of international sales, but that she saw greater personal opportunity in taking the job with Martha Stewart, which she had been considering since early this year.

Last Monday, Yahoo warned that slower growth in display advertising would offset a better-than-expected performance from its recently upgraded search advertising operations.

As a result, it said it expected second-quarter revenue to land in the lower half of its previously stated outlook which, excluding the cost of payments to advertising partners, was projected in April at between $1.2 billion and $1.3 billion. Ad marketing generates more than 80 percent of Yahoo revenue.

Karnstedt's career in online advertising stretches back to 1996, when he worked for Softbank Interactive Marketing, which functioned as Yahoo's early outside advertising sales force. He also was an executive at Wired Digital/Lycos and AltaVista.

The plan to unify Yahoo's two sales organizations has been in motion since February, Millard and Yahoo executives agreed. Karnstedt said completing the process will take two quarters.

(Additional reporting by Robert MacMillan in New York)

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