Wall Street analysts have discounted fears a profits warning from Yahoo! will herald a downturn in the online advertising market, suggesting instead the company is suffering as it loses market share to rivals.

Fears that online advertising could be seeing the beginnings of a cyclical downturn across the sector were stoked last night when Susan Decker, chief financial officer of Yahoo!, told investors that profits for the third quarter of the year would be at the lower end of expectations.

"We are starting to see some advertising weakness in some of the most economically sensitive categories," Ms Decker said, adding that she had "seen a little bit of weakness in the last few weeks" in car and financial services advertising.

The statement sent Yahoo! shares down 11 per cent at the New York close last night, to levels last seen in August 2004, and prompted a wider sell off among internet stocks. The stock was flat, at $25.69, in deals in New York today.

However, in a review of the online advertising sector published after the Yahoo! warning, Credit Suisse analysts said they believed the latest weakness was "company specific rather than the result of an industry slow down".

According to comScore, the internet researchers, year-on-year page view growth in the Yahoo Finance and Automotive categories have lagged their corresponding segments for the overall internet.

Credit Suisse added: "As a result, we believe that Yahoo has been losing some share to both niche-content providers and larger competitor’s sites like Google Finance. In fact, overall page view growth at Google has outpaced that of Yahoo by nearly 30 per cent over the same time period."

The bank added that according to its own figures, prices for online advertising for cars and financial services remain robust, suggesting demand remains firm.

Yahoo! now expects revenue to come within the bottom half of the range that it announced previously. Yahoo! told investors on July 18 that it expected revenue for the third quarter to be between $1.12 billion and $1.23 billion, with operating profit before expenses of $445 million to $505 million.

The latest warning marked the third time Yahoo! has disappointed investors this year. Share in the group began to slide in January after the group missed forth quarter earnings expectations.

In July the stock, which has lost a third of its value this year, slumped once more after it announced delays to Project Panama, an online advertising platform designed to place Yahoo! on an equal footing with Google, the sector leader.

Little doubt remains that online advertising will become increasingly exposed to the state of the wider economy. But Safa Rashtchy, an analyst with PiperJaffray, said that Yahoo could also have been recently hit by a pause in car advertising as auto makers prepare for new car launches later this year.

Merrill Lynch today cut its third-quarter adjusted earnings per share estimate for Yahoo to 15 cents from 16 cents and cut its third-quarter revenue estimate on Yahoo to $1.14 billion from $1.19 billion. The broker said that although a slowdown in internet advertising was a risk, it believed rival Google’s third quarter remained on track, partly because of broader advertising base.

Yahoo is due to report earnings on October 17.

• After seeing its shares slump overnight, Yahoo! today set out to prove it is forging ahead with projects designed to boost advertising revenues by announcing an online television deal with Current TV, the channel founded by Al Gore, the former US presidential candidate.

  The Yahoo Current Network will carry professionally produced content alongside offerings from amateur filmmakers. Its launch comes just a day after Microsoft signalled its intention to go head-to-head with YouTube, the current leader in online video, by launching Soapbox, a service that allows users to upload and share video content on the web.

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