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September 20, 2006

The Yahoo Guessing Game

Investors, snalysts and advertising types alike are playing the guessing game this morning about what's behind (and what's ahead of) Yahoo's announcement that auto and financial advertising is growing at a slower pace.

Henry Blodget says to prepare for Google denials, and our own Danny Sullivan provides one such denial -- though Danny doesn't single out Google but rather says search in general will be insulated. Truth is, Yahoo CFO Sue Decker said yesterday that the slower growth rate is category-wide and affects both display and search ads.

Gary Stein meanwhile points out that Internet media is highly nimble compared with outdoor, TV and other traditional channels. It's much easier to pull a little money out of the pot today, and put it back in next week or next month, making it a natural cutting room for quick budget slimmings.

Gary also wonders at the sudden reality of a media suplus in the auto category, when we've been hearing for years that portals and auto sites are completely sold out pretty much all the time. That is curious, and makes me wonder if we've been hearing the truth all along about the scarcity of that inventory.

Overall, the analysis yesterday and this morning points to continued strength in online media and an overreaction by investors, like so many nervous cattle, against Yahoo's stock and Internet stocks in general. So what else is new. That said, the ad business is cyclical and economic weakness will eventually hurt Internet marketers, buy side and sell side. It's a "when not if" thing. But the when is way, way up for debate, and not even worth guessing at based on one portal coming in at the low end of guidance. (They're not even missing!)

Posted by Zachary Rodgers at September 20, 2006 11:12 AM

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