GigaTeam was visiting GooglePlex today, meeting with a few executives. If there was anyone at Google who was worrying about an online advertising slowdown, we did not run into them! Jokes aside, the sharp decline in Yahoo’s stock, about 13% for the day, following CEO Terry Semel’s comments that online advertising was losing momentum, showed up on our feed readers, and gave us a bit of a pause. After all, Yahoo had already tamed expectations back in July, and hinted that it sales and profits would not be as high as Wall Street expected. So this indeed was a shocker.
Semel’s proclamations of course are enough to chill everyone (including us) whose business model revolves around advertising. But is this a problem that highlights the plight of Yahoo or is it symptomatic of a larger slowdown. Or is it the case of ad-supported consumer Internet hitting a big, gut-wrenching air pocket? Just maybe, the old media dons, and new age rivals (read MySpace) beginning to chip away at Yahoo’s bread and butter banner advertising business?
I suspect it is a combination of all those factors, but I might be in minority, because experts clearly think otherwise.

“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. [via Reuters]

Yahoo attributed its revenues miss on a sharp drop off in automobile and financial services advertising, a view echoed by Barry Diller, chairman of IAC Media, though he restricted his comments to slower ad-spending by the financial sector.
Yahoo’s fortunes are very heavily reliant on Yahoo Finance, one of its most popular properties. Hitwise says that it is currently the market leader by a wide margin, with over 34% market share. Most people use it to follow their stocks, and it remains a popular bulletin board destination. (Back in July, a redesign had many Yahoo BB users up in arms.)
As a consequence, the company has been able to attract big spending financial advertisers such as Ameritrade, ETrade and ScottTrade. If you look at the chart for all the major financial/online brokerages, and compare it with Yahoo, you see a pattern. They sneeze, and a soon after Yahoo catches a cold. (Paul Kedrosky points out that the slowing housing market is reflected in Yahoo’s warning.)

Now lets take the other sector getting the blame – automobiles. EMarketer, a New York-based market research firm forecasts automakers’ online advertising spend for 2006 at about $1.95 billion, and is forecasted to grow to about $2.67 billion in 2006. Given the current state of Auto industry, that number looks highly unlikely.
Ford Motors has been laying off people by thousands, shutting down plants. General Motors is in a similar predicament. In other words, things are tough in Motown, which means that the automakers would be looking to get more bang for their buck, and will become more result-oriented in their advertising efforts. Perhaps when Google earnings come out, we should expect the other shoe to drop (or not.) (Take our poll.)
Hindsight is 20/20, but Yahoo’s miss might be a symptom of a deeper malaise at the company. The company’s much vaunted, next generation advertising platform is woefully late. The stock has been meandering for a while, making the company vulnerable to loss of talent.
Updated: If you take a look at Linked In, you can find some astonishing names with an interest in “career opportunities.” They have updated their LI profiles, so no need to point to those links. Okay maybe that is a bit of a stretch, But still it is hard to ignore some of the whispers in the Valley; start-up CEOs calling Yahoo is the farm team of Silicon Valley. There are those who say that Yahoo continues to lose ground to its rivals such as Google. These are clearly tough times for Yahoo, and it would need some serious mending for the company to get its mojo back.
Looking beyond Yahoo, if the bigger macroeconomic slowdown is looming ahead, it is time to start thinking about alternatives. And that means sleepless nights!