Yahoo Shares Drop 10%

The Wall Street Journal published today an article announcing that Yahoo Inc. executives warned online advertising growth appears to be slowing in some categories. According to Yahoo this has pushed shares to plunge more than 10% and triggered a large sell off of technology stocks.

by BizReport

The two industries mentioned on the article were ads from automotive and financial services companies.

According to the Interactive Advertising Bureau, spending on online ads has increased from $6 billion in 2002 to 12.5 billion in 2005 and is set to create a new record this year.

Yahoo Chief Financial Services officer, Susan Decker, says that whether this is temporary or whether this spills over into other categories, is still unknown to the company. But, she cited “budget adjustments” among advertisers in the auto and financial categories. These industries are being faced with shrinking market share and declining profit margins. GM, Ford and the Chrysler Group are in the midst of restructurings and have recently announced production cuts and layoffs.

Nevertheless, Yahoo continues to be one of the top internet destinations. It relies heavily on advertisements that run alongside search results, supplementing it with fee-generating businesses, personal ads, job listings and fantasy sports.