Gartner Says Yahoo Is OK

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Gartner Says Yahoo Is OK

By: David Utter
2006-09-26

Weakness in the financial and automotive advertising markets led Yahoo to announce it will hit the lower end of its third quarter forecast.

Presuming that weakness will extend beyond Yahoo (YHOO) to the rest of the online advertising world would be incorrect, according to analysis from Gartner. Yahoo's slowdown is just a speed bump on the way to the predicted billions the online advertising market will generate.

The advertising dropoff is not indicative of Yahoo's overall business. "On the supply side of audience metrics, Yahoo Sites continue to lead all Web properties in terms of reach, page views and usage statistics, according to comScore Media Metrix," Gartner's Andrew Frank wrote.

He further justified optimism in continued online ad spending for three reasons:

• A continuing rise in broadband penetration and usage, globally;
• Online channel marketing efficiency, which lowers per-lead and per-sale costs dramatically compared with other media;
• and growth of online advertising market capacity through online media auctions and performance networks.

Frank cited Yahoo emphasis on brand campaigns as part of the reason for the lowered expectations. "That makes it more sensitive to shifts in high-spending industry brand categories than search-engine-oriented competitors such as Google, whose revenue comes primarily from high-volume, low-cost text ads," he wrote.

He also perceived trust and privacy issues as important to Yahoo going forward:

The principle long-term challenge that Yahoo faces is not the risk of a turn-around in online advertising. Rather, it's in developing meaningful linkages and opt-in privacy protection platforms that tie these services together and form the basis of trusted long-term relationships with consumers and advertisers.

Publishing 2.0 blogger Scott Karp offered the opinion that Yahoo's travails could be indicative of broader online ad industry concerns. He cited another report on the Goldman Sachs conference where Yahoo CFO Sue Decker announced the revised forecast:

From MarketWatch - There were suggestions at the same conference that Yahoos recent ad weakness may not be an isolated problem.
Earlier, Barry Diller, chairman of IAC Media, said his company has experienced a slowdown in financial advertising. Shares of IAC stock traded down 1.8% to $27.91.
The ad slowdown comes as a bit of a surprise. Thats because U.S. online advertising spending is expected to reach a record-setting $8 billion this year, up from $7.2 billion last year, according to eMarketer, an Internet marketing specialist.

"These forecasts are of course just educated guess subject to a margin of error, although theyre typically directionally correct " until the trend suddenly reverses direction," Karp wrote.

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Tag: Yahoo

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