The Cowen and Company report downgraded Yahoo to Neutral from Outperform after it included that Yahoo's recent drop in marketshare--attributed by Yahoo to an industry-wide drop in banner ads and paid search--was a Yahoo-only situation.
"While we were initially concerned that the online ad market growth is slowing, checks with advertisers and publishers indicate that Yahoo's problems are unique to the company," the advisory said. "We continue to believe that Yahoo is one of the primary beneficiaries of the secular growth in the online ad market. However, we believe near- and long-term expectations are too high and the potential for upside surprise is low."
Cowen also saw AOL and MySpace eating away at Yahoo's ad revenues and it further didn't like rumors that Yahoo might buy Facebook?following Google's purchase of YouTube?because "the market has fully realized the value of social networking sites and we are concerned that Yahoo could acquire growth at the expense of returns."
Don't mean to pile on, but another report today?from eMarketer, which tracks Web ads?also pours HTML unhappiness unto Yahoo's yodel. The eMarketer report gives Yahoo nemesis Google control of 25 percent of all U.S. online ad spending in a calendar year, which is the first time any company has controlled that big a slice of the Web ad market, according to a story in Marketwatch.com.
An author of the eMarketer report, David Hallerman, said Google's reputation is making it the initial choice for newcomers to the Web advertising space, which is a very bad sign for Yahoo. This gap has come about very suddenly. "In 2005, Yahoo and Google had virtually the same amount of U.S. ad revenues," Marketwatch reported. "Yet by the end of 2006, Google is expected to pocket almost twice the amount of U.S. ad revenues as Yahoo."