Many analysts argue that the carnage in sub-prime mortgages is just a teeny-weeny, irrelevant disturbance in a corner of the mammoth online ad business–so don’t worry be happy! We still say, “Be afraid.” Our concern here is not that the mortgage sector in and of itself will crush the performance of Yahoo, Google, et al, but that the reeling mortgage sector is just one symptom of a fast-spreading disease that will ultimately weaken most of the economy.
For example, we have argued that troubles in the mortgage sector could eventually affect not just Countrywide and other mortgage companies, but the broader financial services sector. Announcements and predictions in the past few days would seem to bear this out:
Do these announcements guarantee that these and other financial elephants will reduce advertising spending in future quarters? No. Citigroup CEO Prince, for example, cheerfully reports that Citigroup’s business has already bounced back to “more normal” levels (translation: worse than usual) and that the future looks bright. (But bear in mind that in July Prince announced that there was only smooth sailing ahead).
What these announcements do show, however, is that sub-prime troubles are flowing through into other sectors. We still think there is a good chance that the damage won’t stop here.
OpCo “cautiously optimistic” about mortgage mess. We’re cautiously pessimistic.
How Bad Could Mortgage Mess Get for Google, Yahoo, et al
Will mortgage crisis hurt web ads? Sure looks that way.