Google, Yahoo Shares Slip on Analyst’s Ad Warning

Google Inc. and Yahoo Inc. shares fell Thursday after an analyst said prices for advertisements linked to Web search results had fallen 10% or more so far this quarter.

Falling demand for Internet ads in 2005 compared with the last three months of last year is driving down prices, New York-based RBC Capital Markets analyst Jordan Rohan wrote in notes to clients.

Retailers may have bid up the price of search-linked ads during the fourth quarter’s holidays, Rohan wrote. The decline in prices may reflect a seasonal drop or longer-term slowing growth in the market, he said.

Shares of Mountain View, Calif.-based Google, the most-used Internet search engine, fell $5.06, or 2.6%, to $188.89 on Nasdaq. Shares of Yahoo, based in nearby Sunnyvale, fell 64 cents, or 2%, to $31.48.

Rohan trimmed his profit forecasts for the companies and downgraded Google to “sector perform” from “top pick” and Yahoo to “sector perform” from “outperform.”

Rohan said he expected Google to earn 87 cents a share on sales of $685.8 million this quarter, down from his earlier estimate of $1.01 in per-share profit on $729 million in sales. Analysts generally had expected Google to earn 91 cents a share on sales of $730.1 million, according to a survey of 25 analysts by Thomson Financial.

Rohan projected that Yahoo would earn 10 cents a share on sales of $792 million, compared with his earlier estimate of 11 cents on sales of $828.5 million. Analysts surveyed by Thomson expected Yahoo to earn 11 cents on sales of $798.2 million.

Shares of some other companies dependent on Web advertising also fell. Search site Ask Jeeves Inc. slipped $1.48 to $21.77. FindWhat.com Inc., an Internet ad service, plunged $2.50, or 19%, to $10.95 after the company said first-quarter profit would miss analysts’ forecasts.