Yahoo! hit by advertising slowdown

Shares in Yahoo!, the US's most popular website, dived yesterday when executives let slip that it has picked up less advertising than expected from car makers and finance companies.

The finance director, Susan Decker, told attendees at a technology conference in New York that the company's latest quarterly profits will come in at the bottom end of the predicted range.

That sent Yahoo! shares down 13 per cent in the hours after her remarks, and Wall Street traders fretted that she may have highlighted a trend affecting other internet companies. Shares in Google, the search engine which gets almost all of its revenue from advertising, were initially down 5 per cent.

Terry Semel, Yahoo!'s chief executive, also told the conference of weakness in advertising from financial firms and car manufacturers, two of the most important categories of advertiser and - until recently - among the fastest growing.

Ms Decker added: "Whether this is temporary, or whether this spills over into other categories, we just don't know." She cited "budget cuts" by car makers.

The slowdown comes as Yahoo! is struggling to boost its income from online ads. It gets more money, the more its users click to advertisers' websites, but has had to delay the introduction of a system that will better match ads with Yahoo! users' search queries.