Watch out for online advertising downturns at Yahoo and Google
We should hear Yahoo report Q3 earnings at the end of the day today, and Google's Q3 earnings on Thursday. In both cases, we expect to see the companies report some softness in online advertising revenues and earnings.
Why so negative on online? Isn't it growing like gangbusters?
Yes, and that's the problem. As the Wall Street Journal notes today, nearly everyone in Silicon Valley a is launching businesses dependent on advertising, so there's a glut of online advertising supply. And at the same time, our most recent report of US business marketing spending shows that companies have cut back dramatically on their online investments over the last six months. The result? Let's just put it this way: Oversupply and decreasing demand is not going to be good news for the companies dependent on advertising revenues for profits.
In May, we predicted that this glut of media types competing for limited consumer attention was going to have a negative effect on most media companies. We also tapped Google as one of the few survivors because of its single-minded focus on branded content as an advertising vehicle. But that doesn't mean that the decline in advertising prices is going to be fun for the companies involved, Google included. And with the whole Web 2.0 bubble being fueled by Google's willingness to blow $1.7 billion on a company with no significant revenue stream, I see the froth still building in new media markets. Don't be surprised if this week's earnings from Yahoo and Google start popping some of those bubble valuations.
Full disclosure: I have no positions in either Yahoo! or Google.
Why so negative on online? Isn't it growing like gangbusters?
Yes, and that's the problem. As the Wall Street Journal notes today, nearly everyone in Silicon Valley a is launching businesses dependent on advertising, so there's a glut of online advertising supply. And at the same time, our most recent report of US business marketing spending shows that companies have cut back dramatically on their online investments over the last six months. The result? Let's just put it this way: Oversupply and decreasing demand is not going to be good news for the companies dependent on advertising revenues for profits.
In May, we predicted that this glut of media types competing for limited consumer attention was going to have a negative effect on most media companies. We also tapped Google as one of the few survivors because of its single-minded focus on branded content as an advertising vehicle. But that doesn't mean that the decline in advertising prices is going to be fun for the companies involved, Google included. And with the whole Web 2.0 bubble being fueled by Google's willingness to blow $1.7 billion on a company with no significant revenue stream, I see the froth still building in new media markets. Don't be surprised if this week's earnings from Yahoo and Google start popping some of those bubble valuations.
Full disclosure: I have no positions in either Yahoo! or Google.
Technorati Tags: Advertising, Google, Internet, Marketing, Media, New media, Yahoo
posted by Carl Howe at
9:57 AM
| View blog reactions
| 
