During Yahoo’s Q4 earnings call, CEO Carol Bartz talked up the quality of the company’s search offering—noting that consumer usage had “stabilized,” and reminding naysayers that Microsoft’s Live Search was a distant second in terms of query volume and market share. But there are signs that Yahoo (NSDQ: YHOO) is facing strong headwinds when it comes to paid search:

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—While Q4 search revenues were up 11 percent year-over-year, they were down $2 million sequentially
—Recent vendor reports found that Yahoo’s lead over Microsoft in terms of advertiser share had narrowed to just 3 percent, an indication that Microsoft is picking up new advertisers and greater percentages of their budgets at a faster pace

And according to Search Engine Land’s Danny Sullivan, Yahoo has been making changes to advertisers’ campaigns—including adjusting the keywords they bid on and creating ad copy—without the marketers’ express consent. Some outspoken search pros say they’ve shut down their YSM accounts completely as a result, and others say they’ve shifted their budget to Microsoft (NSDQ: MSFT).

Sullivan says the main problem is that the campaign optimizations are opt-out—not opt-in—and the changes are driving up advertisers’ costs without delivering a solid ROI. Yahoo posted an official response, arguing that the changes have only affected a small percentage of accounts, and that they’re designed to benefit small-to-medium-sized advertisers that can’t afford SEM support, in particular. Still, with Yahoo trying to revitalize its brand under Bartz, and fend off Microsoft as paid search competition, Sullivan notes the obvious: “Yahoo can’t afford to alienate advertisers right now.”