A superstar Internet analyst expects a tough third quarter for online advertising media, notably America Online and Yahoo!.
Henry Blodget at Merrill Lynch said he expects overall online ad spending from July through September to be flat, down from the second quarter. He thinks increasing online spending by Fortune 500 companies will be offset by the negative effects of the ongoing dot-com consolidation.
"The dot-com shakeout and focus on profitability are continuing to cause dot-coms to scale back marketing spending," Blodget wrote last week. He added the trend is deepened by advertising "agencies are using the environment as a negotiating tool to try to get better terms on behalf of their clients, which is causing slight delays in contract signing."
As a result, AOL and Yahoo! "will post good but not great advertising and commerce revenue results, up single-digit percentages" quarter to quarter, Blodget said.
He said AOL is on track for a strong third quarter, with ad revenue of US$640 million, 5 percent higher than the second quarter and seems to be running ahead of his estimate of 1.1 million new subscribers in the third quarter. Yahoo! can expect only a "solid but not spectacular quarter," Blodget said. Revenue should rise 4 percent from the second quarter, to US$280 million, but probably not exceed estimates by much, as the company has in the past.
The good news, he said, is that the problems should settle out by the beginning of the fourth quarter, in October. Investors should become more optimistic as fall approaches, Blodget said. He expects "steady, if more moderate, growth through 2001."
