Internet stocks sank in 2008
06 Jan 2009
The year 2008 saw internet stocks sink, while Google and Yahoo were wounded by slowdowns in retail sales and online advertising growth.
Two factors that helped the sector weather the dismal economy were cash reserves, which alleviated concern they would succumb to credit troubles and - despite growth that was not as speedy as in 2007 - online advertising.
As the financial crisis worsened, banks and lenders reduced access to credit, making it harder for companies to fund operations. But Internet companies like Google and Yahoo had built up large cash reserves over the years - Sanford C. Bernstein analyst Jeff Lindsay estimated that Google had $11 billion in cash and Yahoo $3 billion in cash by the end of 2008.
While some analysts and investors may have preferred companies use the money to acquire other businesses or buy back stock, having that extra cash on hand created a great deal of comfort.
Another helper was online advertising, which companies like Google, Yahoo and IAC/InterActiveCorp depend on heavily for revenue. While the advertising market took a hit overall in 2008, comparatively the online advertising market has held up.
According to a November report from the Interactive Advertising Bureau, online advertising revenue totaled $17.3 billion in the first nine months of the year, compared with $15.2 billion in the year-ago period.
For Internet search and advertising leader Google's stock, the year started off strong with shares hovering above $690 - slightly below its all-time high of $747.24 reached in November 2007.
Throughout 2008, the company's stock dropped 56 per cent, partly because of fears that its revenue growth would slow.