Yahoo! made Wall Street freak out this morning when, during Goldman Sachs’ Communacopia Conference, CFO Sue Decker predicted that the company’s Q3 revenues would fall at the low end of guidance due to advertising growth slow-down, particularly in the automotive sector. Decker said that “we have seen a little bit of weakness in the last few weeks” in the automotive and financial services sector, which would bring Yahoo! down into the lower end of its revenue forecast of $1.12 to $1.23 billion for Q3 06.
(Detroit’s weakness has also been felt by traditional publishers. The New York Times’ David Carr had this piece yesterday on Time Inc.’s downward spiral, which mentions the impact of decreased automotive advertising on high-profile magazines such as People and Time.)
Within the space of an hour, Yahoo!’s stock had plummeted 11% and was continuing to drop. (see chart).
The rest of the discussion was noteworthy for its lack of news. CEO Terry Semel did continue the Internet giant’s backpedaling from the notion that it would pioneer the creation of original video content. “Having exclusive content is always exciting but let’s just go back to the recent history,” he said. “We did not have any of the video content relevant to the Winter Olympics or the Summer Olympics but if you go back to the Internet and find who had the largest audience for these events, it was Yahoo! Sports.”
Yahoo! did cut a deal to sell subscription NFL game packages overseas, so exclusive content is still an important element in the company’s mix of services. “I think the balance is most important,” Semel said, referring to the blend of original or exclusive video content and content syndicated or made available by others.
Semel also hinted that Yahoo! is working with its telco partners on the creation of services beyond just the co-branded portal it sells to AT&T, BellSouth and others. “We look at other opportunities in such things as wireless and IPTV” with the phone company partners.
Update: Yahoo! filed a form 8-K with the SEC immediately following the Goldman Sachs’ talk in which the company elaborates a bit.
—Over the last few weeks, we are starting to see some advertising weakness in some of the most economically sensitive categories.
—This is having an impact on our expected Q3 results, leading us to believe we are likely to report results in the lower half of the business outlook ranges we provided in our earnings release on July 18, 2006 (furnished on a Current Report on Form 8-K on July 18, 2006).
—It is too early to tell whether the advertising weakness is due to an economic issue or specific issues in advertisers’ client businesses. Growth is still positive, but it is slower in Q3 than it was in the first half of the year.
Update: Investors are not only scared about Yahoo!, but the news issued by Decker has spooked the market on other tech players, including Google, eBay and Amazon, all of which depend to varying degrees on advertising (Google, of course, being number one). But, the knee jerk reaction of investors doesn’t take into account that these other businesses are not nearly as dependent on automaker advertising as Yahoo! and more traditional media are.
Cynthia Brumfield at 12:03 PM|Comments(0)
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