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Yahoo expected to point to advert drop-off

Yahoo expected to point to advert drop-off

Yahoo could reveal the first signs of an expected industry-wide slump in online display advertising today in a third-quarter results announcement.

The Silicon Valley company earns about half of its revenues from display advertising, giving it greater exposure than rivals such as Google, which depends mainly on search-related advertising.

In a report yesterday, analysts at RBC Capital Markets lowered their price target on Yahoo from $27 to $20, saying they had heard it had been offering steep discounts to its rate card since the middle of the third quarter.

The Internet Advertising Bureau reported this month that growth in online display advertising had fallen from 14 per cent in the first quarter to 5 per cent in the second. RBC said it believed industry growth could be flat in the second half and potentially turn negative in 2009.

Yahoo launched initiatives last month to increase its display advertising and shrink its costs.

Jerry Yang, chief executive, announced Apt at the Advertising Week event in New York. The online advertising platform is designed to increase the reach and revenues of Yahoo and its partners, including more than 600 US newspapers.

Yahoo expects it to help build revenues from $5.1bn in 2007 to $8bn in 2010. But that projection is under threat from recession and an end to growth in online advertising.

Mr Yang also announced last month that management consultants Bain & Co had been appointed to review Yahoo's expenses and recommend ways of improving efficiency.

He said the company was actively looking for efficiencies through "process and structural changes."

In the run-up to the third- quarter earnings announcement, there has been widespread speculation that major job cuts will be implemented, with more than 1,000 being shed from Yahoo's workforce of 14,000.

With the Bain review still in process, Mr Yang may not reveal specific numbers or measures today, but action is expected before the year-end.

The chief executive is under pressure again following a collapse of Yahoo's share price that has again raised questions about his resistance to a Microsoft takeover earlier this year.

Yahoo shares were trading at $12.74 at midday in New York yesterday, down 45 per cent this year and well below the $33 offered by Microsoft before it withdrew its bid in May.

Microsoft said last week it had no interest in acquiring Yahoo.

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