Yahoo Web Ads Slide Sets off Tremors

21 September 2006

SUNNYVALE, California: Internet search giant Yahoo has warned that slower than expected online advertising sales will hit third quarter revenues.

Ceo Terry Semel says spend on automotive and financial-services web ads is increasing but "they're not growing as quickly as we might have hoped at this point in time".

Based on recent trends, cfo Susan Decker predicts Yahoo's revenue - excluding commissions paid to the company's advertising partners - will fall to the lower end of management's July estimate of $1.12 billion (€833m; £594m) to $1.23bn, just slightly below the average analyst estimate of $1.18bn.

Decker believes it is too early to tell if the ad malaise will spread to other industries. But there have been some warnings that large companies in troubled sectors are reigning-in ad budgets.

In July, online agency Digitas said its earnings in the second half would be less than expected because two of its major clients, General Motors and Delta Air Lines, were cutting back adspend.

John Aiken, an analyst with Majestic Research, said if there was any weakness in the market, it was in display ads, an area where Yahoo is the leader, and not in search advertising.

Executives at many other internet firms claim they have not seen the same trends that Yahoo is experiencing.

Jeffrey Bewkes, chief operating officer of Time Warner, calls ad sales at its AOL unit "very robust". While Andrea Riggs, a spokeswoman for IAC/InterActiveCorp, says the company has not seen a slowdown in sales at its search engine unit.

Data sourced from Wall Street Journal Online; additional content by WARC staff