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Yahoo Wilts. Prepare for Won’t-Affect-Google Denials

Yahoo’s Semel and Decker dropped the bomb this morning at a Goldman conference: Yahoo!’s Q3 is wilting.  Nothing serious yet–just revenue at the “low end of the range”–but still eerily similar to the early warnings from Yahoo 6 years ago, when Yahoo!’s Q3 started looking sluggish in mid-September and then weakened further by the day.  If memory serves, the company just made that quarter (Q3), but severely reduced guidance for Q4 and then bombed Q1.  And the rest of the economy wasn’t far behind.

True, Yahoo’s revenue is more diversified than in 2000, and there aren’t a few hundred retailers about to start reneging on $30 million portal deals, but still: When the economy slows, advertising is one of the first expenses to go, and even the top dogs aren’t immune.

Get ready, however.  In coming days, a parade of analysts will eloquently explain why the trends that are hobbling Yahoo! won’t affect Google–Google’s revenue is pay-per-click, Google is a “must buy” for advertisers, Google has a much stronger market position, etc.  Listen politely, but don’t believe it.

Google is now a $7 billion global business with one primary revenue stream: advertising.  Google may do better in a recession than, say, a television network, but that doesn’t mean it will do well.  $7 billion is a significant chunk of not only online advertising but all advertising, and if all advertising slows (or, worse, shrinks), Google’s revenue will, too.

Back in 2000, the theory was that, as the dotcom shakeout progressed, the dominant players would slow for a quarter or two but avoid most of the damage.  Yes, it’s different now, in some ways, but one lesson from that period should be clear.  Even No.’s 1 and 2 drink from the same stream as everyone else.

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