UPDATE 2-Martha Stewart quarterly loss widens

* Q3 loss $0.22/share vs $0.07 a year earlier

* Q3 revenue $49.8 mln vs Wall St. view of $51.3 mln

* Upbeat on Q4 publishing, Internet advertising

* Shares fall 4 percent (Adds comments on Q4)

NEW YORK, Nov 4 (Reuters) - Martha Stewart Living Omnimedia Inc (MSO.N: Quote, Profile, Research) reported a wider third-quarter loss on a bigger-than-expected slump in revenue due to weaker magazine advertising and merchandising sales, dragging its shares down 4 percent.

The company, which publishes Martha Stewart Living and other lifestyle magazines, reported a net loss of $12.1 million, or 22 cents a share, compared with a loss of $3.7 million, or 7 cents a share, a year earlier.

Revenue fell to $49.8 million from $66.5 million a year earlier, it said on Wednesday. Analysts on average had expected revenue of $51.3 million, according to Thomson Reuters I/B/E/S.

The company attributed the weaker sales to the recession's impact on advertising. The 39-percent decline in merchandising revenue was partly due to weaker royalty revenue from retailer Kmart, whose relationship with the company is ending soon.

Executive Chairman Charles Koppelman said that the company was seeing improvement in its publishing business, as well as strong Internet advertising in the fourth quarter.

Martha Stewart shares fell 21 cents, or 4 percent, to $5.07. (Reporting by Ritsuko Ando and Robert MacMillan, editing by Gerald E. McCormick)