Yahoo Bends Under Economic Winds

January 31, 2008 10:56 AM
by findingDulcinea Staff
Yahoo’s failure to take full advantage of search advertising has left the company prone to bearish markets.

30-Second Summary

Yahoo Chief Executive Jerry Yang said the company will lay off 1,000 employees and begin “an aggressive investment posture.”

The company’s shares fell 11 percent in after-hours trading on Jan. 29, with a price-per-share decline of 45 percent since October. Its revenue is down 23 percent from the end of 2006.

According to the Financial Times, the drop reflects the company’s failure to tap fully into paid-search advertising.

In 2007, Yahoo collected only 9 percent of search ad revenue, a result dwarfed by Google’s two-thirds share of the market.

Although Yahoo is still the leader in display advertising, “that’s the kind of feel-good ad spending that many fear will get cut first in a recession,” Forbes’ Brian Caulfield writes.

While some companies have slashed advertising expenses during periods of economic uncertainty, there has been an increase in allocations for paid-search advertising, Forbes reports.

“If the economy gets any worse, marketing is always one of the first to go, except that which is provable, and with search you can do that,” says Russ Mann, chief executive of Covario, an interactive marketing consultant.

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