If Yahoo has a lot going for it, is the advertising slowdown something that's affecting everyone? Not judging from figures recently released by the Interactive Advertising Bureau and PricewaterhouseCoopers. The half year figures for 2006 show that US companies spent $7.9 billion on Internet advertising. The field is growing more quickly than the 30 percent that these two companies forecast last year. David Silverman, a Partner in Entertainment and Media Practice at PricewaterhouseCoopers, pointed to search advertising as still being the most important area of Internet advertising in terms of revenues.
On the other hand, eMarketer believes that online advertising will slow down in the second half of 2006, and is revising its own estimates downward. It believes the area will grow 26.8 percent - quite good in and of itself, but slower than the first half of the year. Amazon and eBay have seen their stocks go down when they delivered similar growth rates, because they weren't growing fast enough. Only in a market like this can a 26.8 percent growth rate be considered "not fast enough"!
Indeed, these high expectations have hurt Yahoo, and the appearance of its own portal - if you know what to look for - doesn't help. Yahoo has been running a larger number of house ads on its sites in banner positions than you might expect. Anyone who runs a site supported by advertising can tell you that you never run a house ad when you can line up someone who will pay for that space. So Yahoo clearly has more inventory than it can currently sell.
Speaking of ads, let's return to that issue I mentioned all the way back in the first section: the slowdown in ad spending in the financial and automotive sectors hitting Yahoo hard. Apparently the company isn't sufficiently diversified in its clientele. That's hurting it now, and it will definitely hurt it down the line if it doesn't work to fix it. People search for all sorts of things; concentration in just a few areas is not going to help it in the long run.
Sadly, Yahoo is also taking a step that at least one observer has described as "one of the top ten worst signs for the health of a company." It is closing its US offices for the last week of the year (between Christmas and New Years) as a cost-cutting measure - and employees will not be paid for that week unless they choose to use vacation days to make up for it. One has to wonder, though, if the amount of money saved is worth the risk of alienating its employees - talent that Yahoo needs to hold on to in this cutthroat market.
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