Yahoo Sees Decrease in Ad Growth; Shares Tumble

Yahoo, the Internet behemoth, on Tuesday warned investors that it expects to see a decrease in advertising growth in some areas, including within the automotive and financial services industries, sending its shares down more than 10 percent and sparking a sell-off of technology stocks across the board, The Wall Street Journal reports.

Susan Decker, Yahoo’s chief financial officer, said it is currently unclear whether the slowing ad growth will reach additional areas outside automotive and finance, according to the Journal.

Yahoo Chief Executive Officer Terry Semel told investors that advertising from those two areas is still important to the firm, the Journal reports. “They’re still growing, but they’re not growing as quickly as we might have hoped at this point in time,” Semel said, according to the Journal.

Yahoo, Google and other firms that offer ad-based services have seen a boom in business in recent years, as advertisers started slowly switching their investments to the Web instead of traditional ad mediums, the Journal reports.

Yahoo’s shares plunged on the executives’ comments, down 12 percent, or $3.49, to $25.51 on the Nasdaq, according to the Journal. The Nasdaq Composite was also affected by the news, and it was down more than 1 percent in afternoon trading on Tuesday, the Journal reports.

Decker said the slowing growth over the past month or so would likely lead the firm to file third-quarter financials “in the bottom half” of its previously predicted range, according to the Journal. Yahoo estimated in July that it would deliver third-quarter revenue between $1.11 billion and $1.22 billion, not including amounts paid out to marketing partners, the Journal reports.

In 2006, Yahoo stock plunged some 35 percent to date, according to the Journal. In January, its stock price took a hit on news that the firm missed analysts’ predictions for its fourth-quarter profit; and in July its stock dropped more than 20 percent on news that the firm wouldn’t release its new ad placement system on schedule, according to the Journal. The system’s debut is currently slated for early 2007, according to the Journal.

The ad placement system initiative is currently dubbed “Panama,” and Yahoo says it will better enable the company to place advertisements based on a number of considerations, including pertinence to a specific page’s content, the Journal reports.

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