• by Wendy Davis , Staff Writer @wendyndavis, September 20, 2006

As of this morning, Yahoo stock still hasn't recovered from yesterday's 11 percent tumble caused by CEO Terry Semel's announcement at a conference that automotive and financial services ad growth had slowed in the last several weeks.

Obviously, Wall Street wasn't happy to hear the words "advertising" and "slow" in the same sentence. Yet, the dramatic drop in price seems to reflect the volatility of the market more than any actual news out of Yahoo.

Consider, even though Yahoo growth is slowing, the company still expects to meet its previous forecast. Semel and chief financial officer Sue Decker specifically said that the company will turn in third-quarter results in the bottom half of its previous estimate of $1.12 billion to $1.23 billion.

Given that Yahoo anticipates meeting its forecast, Wall Street's response seems irrationally panicky, based more on unrealistically high expectations than any kind of financial analysis. But the Yahoo sell-off isn't the first time Wall Street has hammered online companies that demonstrated anything short of spectacular growth. In fact, it's not even the first time this year. When Google in January came out with fourth quarter results showing 86 percent year-over-year revenue growth, the stock price fell 12 percent because, as high as Google's ad sales were, they weren't high enough for investors.

With all the talk about whether the economy's seeing a tech bubble, and memories of the earlier dot-com crash still fresh in many minds, it's probably not surprising that investors are a little jittery. Still, some researchers have been saying for a while that online ad growth will inevitably slow, though continue to remain strong. Jupiter Research predicted this summer that online ad growth would climb by 21 percent this year--which sounds high until compared to 40 percent for 2005.

If Wall Street's going to go into a frenzy every time growth slows--as it inevitably will--Web companies should prepare for a bumpy ride.