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New Item 9/21: Google (NASDAQ:GOOG) reports anecdotal advertiser cutbacks from mortgage crisis (though not on Google). This is the first acknowledgment by a major media company that some advertisers are cutting back. Earlier last week, CBS (NYSE:CBS) and Viacom (NASDAQ:VIA) said they had seen no signs of cutbacks. Timeline of data points below.

Summary. We continue to believe that we may be in the first stages of a cyclical downturn for advertising and the Internet sector--one that will affect not only start-ups and second-tier players but majors like Google (GOOG), Yahoo (NASDAQ:YHOO), AOL (NYSE:TWX), et al. Such downturns do not begin suddenly, and they are not instantly obvious (except in hindsight). Rather, as with the housing market, the environment changes gradually, over many months, with early signs slowly becoming a steady torrent of bad news.

For the past two months, we have been tracking and analyzing data points that we believe could be early warning signs (along with some offsetting, positive ones). Taken together, we believe these signs paint a clearer picture of the changing environment. It's always possible that this will be a "blip," but these cycles usually take years, not months, to play out. So we think it's smart to expect tougher times ahead.

Recommendations/Ramifications

Sep 18: VC Fred Wilson: The Coming Downturn
Aug 17: Dear Internet Industry: Brace for harder times
Aug 17: What happens to Yahoo, Google, et al, in recessions?
Aug 1: The market's crashing: Are you recession proof?

Timeline

Sep 20: Google reports anecdotal ad cutbacks from mortgages (though not on Google)

Sep 14: First online ad estimate cut for mortgage crisis.
Sep 13: Countrywide gets life support, but we still worry about online ads.
Sep 12: Ad network Burst Media reports cancellations from "budget constraints"
Sep 11: Mortgage giant Countrywide fires 12,000, WaMu sees "perfect storm"
Sep 11: TNS reports two quarters of decline in US ads--first since 2001.
Sep 10: Online mortgage ads remain strong in August: Good sign or false signal?

Sep 6: Countrywide crumble and stock foreshadows Yahoo, Google, et al?
Sep 5: OpCo "cautiously optimistic" about mortgage mess. We're not.

Aug 30: How Bad Could Mortgage Mess Get for Google, Yahoo, et al
Aug 29: Will mortgage crisis hurt web ads? Sure looks that way.
Aug 29: Bankrate CEO call provides more reason to worry about online ads.
Aug 27: Cracks in Manhattan's commercial real-estate market?
Aug 22: JupiterMedia CEO Meckler says every Internet company now for sale.

Aug 17: Dear Internet Industry: Brace for harder times
Aug 17: What happens to Yahoo, Google, et al, in recessions?
Aug 16: About that crashing stock market
Aug 3: Bankrate confirms online ad market strong, print weak
Aug 1: The market's crashing: Are you recession proof?

July 20: Google blows up the stock market

Source: Internet Recession Watch: Google Reports Ad Cutbacks