UBS Turns Sour on Advertising, Even Online - GigaOM

Om Malik, Thursday, October 9, 2008 at 4:26 PM PT

It has been a summer of discontent for publicly traded Internet companies, whose shares have nosedived in tandem with the broader market. And the group — led by Google and Yahoo, both of which saw double-digit declines in the last month — is not going to be dancing in the streets any time soon.

Or at least that is what Ben Schachter, Internet analyst with UBS, thinks. In an astoundingly sobering note to his clients this morning, he cut his estimates on his entire portfolio of coverage:

we are also lowering our estimates and price targets across the board to reflect a deteriorating macro-economic environment that we expect will inevitably impact the online advertising market and consumer spending, likely continued unfavorable foreign currency fluctuations (at least in the near-term), as well as other company-specific factors.

In a rather brutal assessment, he wrote, “[W]e see no business model based on advertising or consumer spending that will be immune to a downturn. Specifically for the advertising names, as corporate profit forecasts come down, we expect planned advertising spending will be delayed and/or cut.”

UBS also had the following thoughts on the third quarter of 2008:

  • September was difficult.
  • Google held up better than others, though Schachter still thinks that results might be below expectations.
  • Stronger dollar is going to cause issues for guys like Google.
  • More cautious on 3Q results from Yahoo and ValueClick