Yahoo today predicted a slowdown in online advertising growth, prompting
a sell-off of technology stocks including its own. CEO Terry Semel,
speaking at a Goldman Sachs conference in New York, pointed to
automotive and financial services as particularly weak growth areas.
The Yahoo warning runs contrary to present research indicating a robust
online ad market. U.S. online advertising spending is expected to reach
$8 billion this year, up from $7.2 billion last year, according to
e-commerce-analysis firm eMarketer.
Yahoo now expects third-quarter sales to come "in the bottom half" of
$1.1 billion to $1.2 billion estimates given in July, according to
Yahoo Chief Financial Officer Sue Decker.
"We are starting to see some advertising weakness in some of
the most economically sensitive categories,'' Yahoo said in a
regulatory filing released Tuesday afternoon. "Growth is still
positive, but it is slower in Q3 than it was in the first half of the
Bad day for category
By midday, shares of Yahoo were down
nearly 13% at $25.10 from $29.09. Rivals, who themselves rely heavily
on ad revenue, were also hit hard. Shares of Google were off by 4%, and
InterActiveCorp traded down 1.8%. Worse still, CNET Networks shares
suffered a nasty 7.4% hit. In July, Yahoo said it expected third-quarter revenue between $1.11
billion and $1.22 billion, excluding commissions paid to marketing
partners. Analysts at the time were projecting revenue of about $1.2
billion for the quarter.
It's been a rough year for Yahoo investors. The company's
shares -- down 35% this year from a 52-week high of $43.66 -- plummeted
in January after Yahoo's fourth-quarter profit missed analysts'
expectations. Then in July, the internet giant postponed the release of
much-anticipated improvements to its search-advertisement system.
Dominance over MySpace
In August, about four in 10 online
display ads were placed within Yahoo Mail, according to
Nielsen/NetRatings AdRelevance. That's nearly three times the ad volume
pulled in by its closest challenger, MySpace. And who's buying that ad
space? Nielsen reported that financial-services companies were the
largest online advertisers last month, accounting for 28% of online
The internet's share of global online-advertising budgets is
expected to rise to 8.3% in 2012 from 3.7% in 2005, Merrill Lynch &
Co. Analyst Justin Post wrote in a Sept. 12 report.