Yahoo! Will Be Hurt By Online Ad Trend

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Barron’s looks at research from Pacific Crest showing that online ad revenue growth will slow to 25% in Q3. The figure includes both search text ads and display. The firm’s previous forecast was 30% for the period.

Since Yahoo! (YHOO) gets the majority of its advertising from display and that portion of the market is growing more slowly than search, the company faces a challenge to do well this quarter. But, as second blow, Pacific Crest points out "While Panama is working operationally, we believe that the limited search volume relative to Google (GOOG) leaves [advertisers] unmotivated to spend more on Yahoo.”

It would not be surprising to see several brokerages lower their Q3 expectations for Yahoo!.

Douglas A. McIntyre