Regional differences
Meanwhile, other factors such as language, telecommunications regulations, the lack of flat-rate pricing and socio-economic differences make each region separate from others. Some regions have more advanced online spending behavior, while others continue to be viewed as potentially lucrative markets.That may leave marketers more reluctant to spend their advertising budgets online because consumer habits have not been converted to the Internet in many areas. In addition, most consumers in developing countries cannot afford a PC, leaving the growth of a certain market limited to more educated, wealthier individuals.
"I think we're recognizing that marketers internationally are spending less to reach these people, and several markets are way behind the US," said John Corcoran, an equity analyst at CIBC World Markets. But Corcoran added that Yahoo has made the most significant inroads abroad out of any US Internet company.
Hits taken from the advertising slowdown will not spell the end of Yahoo, analysts say, although that may hasten its transition from dot-com darling to mature media company.
Yahoo owes much if not all of its success to date to the Internet boom. On the way up, it was able to take advantage of its online reach and prestige to score lucrative advertising and sponsorship deals aimed at scattering ad banners across the Web's most frequently visited sites.
Now, on the way down, those deals are harder to come by. Venture capitalists have pocketed their wallets, leaving many start-ups with big ad budgets out to dry. That eventually hit the Internet portals hard, many of whom depended heavily on these VC-funded ad budgets. As more start-ups died, so did the ad dollars.
Now the pressure is on to offset these dot-com losses and lure more mainstream advertisers. More importantly, Yahoo needs to shed its dot-com skin and step into the clothes of a major media company, according to Jordan Rohan, an analyst at Wit SoundView.
That means beefing up its sales force and relying less on its former clout as a "must buy" for online ad spending, be it in the United States or abroad.
"It's just a very different game now," Rohan said. "Yahoo's competitors in the US and Europe are now Disney, News Corp., Viacom and AOL Time Warner. Not Infoseek and Excite."
