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BURLINGAME, Calif. -- Beleaguered Internet portal Yahoo! reported first-quarter earnings of $118 million, or 8 cents per share, a decrease of 78% from the year-ago period.

In an effort to cut costs further, the portal expects to lay off 600 to 700 people, 5% of global employees, in the next two weeks.

On a conference call with analysts, Yahoo! ( YHOO - news - people ) CEO Carol Bartz said the company would invest in businesses "that generate the majority of our traffic" and discontinue less-popular offerings, rather than simply making across-the-board staff cuts. Candidates for more investment include the Yahoo! home page and functions like e-mail and Web search, she said, as well as mobile-phone programming and specific Web-content areas like news, sports and entertainment.

Bartz said that "brand advertising is not going to go away," and Yahoo! wants to position itself to take advantage of the economic recovery when it eventually arrives. The recession has walloped most companies' ad budgets, which has hurt Yahoo!'s bottom line.

The company generated revenues of $1.58 million, a decrease of 13% from the first quarter of 2008. Without currency losses, revenue would have declined 8%. Marketing revenues declined to $872 million from $966 million, and were driven by a 3% decline in search-advertising revenue.

Revenues based on fees from online services, partnerships and music downloads decreased 20%. Net income per share was in line with Wall Street estimates, compared with 37 cents in the first quarter of 2008. Earnings in the year-ago quarter, however, were bolstered by a one-time, $401 million gain.

On the conference call, Bartz didn't shed light on whether she is actively pursuing a Web-search deal with Microsoft ( MSFT - news - people ), an alliance many analysts think would benefit both companies. She reiterated, however, that search is "absolutely critical to Yahoo! It's critical to our customers and partners."

Expect to see more digital sweepstakes and virtual sheep on Facebook pages soon.

The Palo Alto, Calif.-based company, which is facing increasing competition from other social networks and the iPhone, is fueling Web-application development on its platform, doling out more than $1 million to entrepreneurs Tuesday night.

The funding is prize money for the company's second developer competition, which received 600 applications. Facebook's fbFund picked five grand prize winners who will receive $250,000 each and 20 runners-up who already received $25,000 apiece.

"We started fbFund to encourage innovation on Facebook platform and remove some of the challenges of starting a company," said Mark Zuckerberg, Facebook's founder and chief executive.

With the economy worsening, developers say they need all the help they can get. "One thing that is tough right now is funding, so this is a real boost for us," said Victoria Ransom, chief executive of Wildfire, one of the five grand prize winners. Wildfire's application helps businesses run interactive promotions, sweepstakes and coupon giveaways.

"For us, this money allows us to grow in an organic manner and not jump the gun on the venture model," said John Anderson, chief executive of GroupCard, another grand prize winner. GroupCard's app allows users to send around an e-card for all to sign and send to celebrate any occasion.

The other grand prize winners were Kontagent, HitGrab and WedSnap.

BURLINGAME, Calif.--Amid the uncertainty of the financial markets, private equity giant Blackstone Group is getting into clean tech. Its first investment: Coskata, an Illinois start-up that says it can make next-generation ethanol from non-food sources for approximately $1 a gallon.

Coskata, which announced the investment Friday, did not disclose how much it raised in its third round of financing, but the company is said to have raised $40 million from Blackstone (nyse: BX - news - people ) and other investors.

Blackstone made its investment through its newly formed clean-tech fund. A spokesman for Blackstone said the company can't comment on the fund because it is still in the fundraising process. But Blackstone announced in August it was creating a clean-tech energy group headed by James D. Kiggen, formerly of investment manager AllianceBernstein (nyse: AB - news - people ).

"We are thrilled to have an investor the caliber of Blackstone working with us," Coskata CEO Bill Roe said in a press release. And lucky, too. The credit crisis dramatically slowed the pace of investment in Coskata, which began its fundraising roadshow in late June and had been hoping to announce the deal with Blackstone two months ago.

Roe added in an interview with Forbes.com that the onset of the credit crisis made the fundraising "a white-knuckler." "We were happy to get [the financing] closed because it was getting more and more difficult," he said. "Several people who were in the book had to get out of the book because they couldn't make a cash call" to come up with the money by the deadline for the fundraising. The problem: the seizing up of the financial markets. Interest is still high in the future of next-generation ethanol, despite the drop in oil prices to $42 a barrel, Roe said.

Coskata is about 80% of the way through building a commercial demonstration plant outside of Pittsburgh. The company hopes to open the plant within six months and aims to have a full commercial-scale production plant up and running by the end of 2011. By then, Roe expects oil demand will return to normal with prices in the $70-a-barrel range.

Most of the so-called cellulosic ethanol companies that Coskata is competing with are pursuing a biotech approach, using enzymes to break down plant mass into fermentable sugars. Coskata, however, is pursuing an approach that doesn't use enzymes. Instead, the plant matter (also called biomass) is gasified, then sent to a proprietary bioreactor where micro-organisms consume carbon monoxide and hydrogen and spit out ethanol.