Yahoo sees revenues weakening

NEW YORK - Web megastar Yahoo said today it expects third-quarter revenue at the bottom half of its forecast range due to weakness from two of its biggest advertising segments, sending shares down as much as 13 per cent.

Chief Financial Officer Susan Decker told investors at a Goldman Sachs media conference that Yahoo has seen "a little bit of weakness in the last few weeks" in auto and financial services advertising.

"It's a new trend. It's been two to three weeks and we don't know yet if it's an indicator of a broader slowdown," Decker later told reporters at the conference.

"We're seeing it enough to say something," she said. "I don't want to overplay it either."

Yahoo expects to deliver third-quarter revenue excluding traffic acquisition costs "at the bottom half of the range of financials" previously forecast, Decker said.

On July 18, Yahoo had forecast third-quarter revenue of US$1.12 billion to US$1.23 billion ($1.70 billion to $1.87 billion) excluding traffic acquisition costs. Traffic acquisition costs refer to the cut which affiliated websites take of Yahoo revenue for running Yahoo advertising on their own sites.

Yahoo's comments also ignited concern for other internet companies who rely heavily on advertising, including Web search leader Google Inc, on the prospect the spending weakness would be felt across the industry.

Automakers in particular have moved a large portion of their advertising to the Web in the last three years, but industry leaders like General Motors and Ford Motor Co have been slashing billions of dollars in total costs as they grapple with losses in the North American market.

"It feels and smells like a macro" problem, rather than something specific to Yahoo or the internet industry, said Martin Pyykkonen, an analyst with Global Crown Capital LLC.

"It would be naive to say that advertisers would continue to pour ahead on online advertising and cut back only on traditional advertising in the face of economic weakness," he said. Pyykkonen rates Yahoo as an "outperform" but holds little hope of hitting his US$45 share price target in the near-term.

Yahoo shares were down US$3.52, or 12.1 per cent, to US$25.48 in early afternoon trading on Nasdaq after going as low as US$25.11 a share. Google shares were down more than 4 per cent at US$397.45.

- REUTERS