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Wall Street's dwindling patience for efforts to remake Yahoo appeared exhausted last week after the company said it would take even more time - and money - to find a fix.
With some of the company's few remaining Wall Street supporters heading for the exits, including analysts at Citigroup and Oppenheimer, the shares dropped another eight per cent. After little more than six months at the helm, Jerry Yang, chief executive officer, is finding the goodwill with which he was greeted is fast drying up.
At the heart of Yahoo's latest fall from favour was Yang's assertion last week that Yahoo would have to spend heavily this year in its latest attempt at an overhaul.
He intends to spend an extra $300 million this year to try to revive the company, according to estimates by Mark Mahaney at Citi - but he has done little to date to explain how the money will be spent.
If investors have lost patience, it is easy to see why. Former chief executive Terry Semel asked for Wall Street's understanding three years ago as he set out on Project Panama, an expensive fix for Yahoo's search advertising system that was meant to close the gap with Google.
"The Street bought this argument in 2005; it was ready to give Yahoo a chance," says Sandeep Aggarwal, internet analyst at Oppenheimer.
Panama has at least moderate returns, even if the improvements showed signs of moderating in the latest quarter.
However, the headwinds against which Yang now struggles seem daunting.
Yahoo's earnings before interest, taxes, depreciation and amortisation is projected to fall to 32 per cent of revenues this year. That is down sharply from a margin of 38 per cent in 2007, with only a promise at this stage that this will finally set the stage for a profit recovery in 2009.
Yang's struggle is being fought on two fronts. First, the business model on which Yahoo was founded - to form a portal to attract a large audience to deliver to advertisers - has weakened as internet users have turned to social networks and other new sites as the internet has fragmented.
Much of the investment Yahoo now plans is designed to reinforce its position as a major "gateway" to the internet, boosting core services like its home page, search engine and email system.
Yet Yang is still criticised for failing to focus his resources clearly enough.
"They've grown into a conglomerate," said Todd Dagres, a partner at venture capital firm Spark Capital.
The second problem flows from changes in the online ad market. Yahoo's premium advertising rates have fallen as it has been forced to try to distribute advertising to a far more fragmented internet audience.
In this world, advertising rates are lower and other advertising networks compete fiercely for the same business.
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