The announcement sent the Internet portal's stock down 11.2 percent and led a broader Nasdaq decline of 13.38 percent.
Speaking at a Goldman Sachs media conference, Yahoo CEO Terry Semel said ad revenue in those categories was still growing, "but not growing as quickly as we had hoped it would at this point in time."
Yahoo Chief Financial Officer Susan Decker said the weaker ad market would result in the company's third-quarter numbers being in the lower half of the forecast range.
In a July 18 conference call, Yahoo had said it expected revenue excluding partnership costs to be between $1.12 billion and $1.23 billion for the third quarter. Partnership costs refer to the revenue share that affiliated Web sites take for running Yahoo ads on their own sites. Yahoo predicted bottom-line earnings of $445 to $505 million for the third quarter.
Decker said the dip in ad revenue in the auto and financial services segments was a new trend, emerging in only the last three or four weeks. But she added: "It's hard to tell if it's a sign of anything broader."
Following the conference, Piper Jaffray issued a research note pointing out that the slowdown in new car launches in the second and third quarters could have a modest impact on Yahoo's third-quarter revenue.
But the firm said it expects a "significant increase" in new car launches in the fourth quarter of 2006 and first quarter of 2007, based on discussions with a major auto advertising services firm. Piper Jaffray maintained its "outperform" rating on Yahoo.
Financial services accounted for 28 percent of all online ad impressions in August--the largest proportion of any industry category, according to Nielsen//NetRatings Ad Relevance. Automotive, by contrast, made up only 2 percent of ad impressions. The Ad Relevance data doesn't include specialized ad placements such as sponsorships, text-only and performance-based campaigns.
Separately, Semel said that Yahoo would continue to rely on a blend of third-party and original content rather than focusing mainly on original programming. He noted that Yahoo Sports was able to generate signficant traffic during the Olympics and the World Cup by providing ancillary news and information rather than offering extensive video coverage. "There are many other ways to build large, loyal audiences," he said.
Decker also reiterated that its delayed Panama search platform would roll out in the first quarter of next year. Semel added that the new search system is still being tested, and that the company would provide another update on its progress during the upcoming third-quarter earnings conference.
Piper Jaffray's research note said that Yahoo may have lost some ground in search monetization during the third quarter as engineering resources were pulled away to work on Panama. But it expected that improvements in monetization would resume with the new platform's release early next year.